With years of deep discounting and almost ubiquitous distribution, handbag and accessories retailer Coach is ready to move to a different level. Victor Luis, who took over as chief executive three years ago, makes no secret of his intention to grow the company through mergers and acquisitions.
Luis strengthened his management team with the appointment of Joshua Schulman, former head of Jimmy Choo, as the new head of the Coach brand; and the promotion of Ian Bickley from head of international operations to the new post of global business development. he also tapped singer/actress Selena Gomez to be the face of the Coach brand.
Luis amassed nearly $2 billion earmarked for acquisitions to go with shoe brand Stuart Weitzman, purchased two years ago for $574 million, and acknowledged several upscale accessory, footwear, leather goods and outwear brands that would fit well with the company when discussing Coach’s latest quarterly financial performance with Wall Street investors and analysts in May.
The analysts he spoke to, who cited such fashion conglomerates at LVMH and Kering as models for what Luis wants to accomplish, were quick to cite potential takeover candidates including Jimmy Choo parent JAB Holdings, Kate Spade and Burberry Group. The Spade deal came first in a $2.4 billion buyout in May.
“Fashion comes and goes,” HSBC Holdings analyst Erwan Rambourg noted in examining Luis’s ambitions. “A multi-brand strategy makes a lot of sense if you’re exposed to the fashion industry because it brings less volatility, more consistency. This can hedge your fashion risks.”
Coach is in the position of being a buyer as a result of healthy returns, including four consecutive quarters of increasing same-store sales, nine straight quarters of debt reduction and especially good sales in its primary business. The company has weaned customers away from discounts and toward full price; a year ago, handbags costing $400 or more accounted for 40 percent of sales. They currently account for 55-60 percent.