Analysis: Coach and Kate Spade brands must remain distinct
The past couple of years have been busy ones for Coach. The company has undertaken a turnaround of its main brand, successfully bringing back a premium edge to what had become a ubiquitous and devalued name. Coach has also integrated the Stuart Weitzman business by both extracting operating efficiencies and creating new sales opportunities.
While these initiatives have not yet run their full course, they are reaching maturity. As such, the growth they will deliver over the next few years will become more limited – especially in North America where Coach does not want to make the same mistake of overexpansion that plagued it prior to the brand reinvention.
Given this backdrop, we believe that the company’s desire to make an acquisition is both prudent and logical.
Coach has recently run the rule over a number of businesses including Burberry and Jimmy Choo. However, it has now plumped to buy Kate Spade for $2.4 billion. In our view, this is a sensible deal both in terms of the brand fit and the premium that Coach is paying.
As a business, Kate Spade has significant potential mainly because it is in the early stages of developing its own lifestyle brand, mostly by expanding into new product areas. Current management has made good progress, but we believe that Coach can add further value on the sourcing and distribution side, as well as some fresh thinking on the design front. It can also bring its experience of reinvigorating a brand to some aspects of Kate Spade’s operation which, over recent quarters, have become too reliant on discounting and promotions. There will be reasonable scope for synergistic savings which, in addition to the sales benefits, will help Coach to generate a good return on investment.
Although there is some overlap between the Coach and Kate Spade customers this is not significant, and Kate Spade’s focus is on a younger consumer that Coach has some difficulty in attracting. This means the deal will allow Coach to expand, at a stroke, its customer base. The purchase also prevents the Kate Spade brand falling into the hands of a rival like Michael Kors; while this is not the prime driver of the acquisition, it is nonetheless a helpful side benefit.
As much as we are positive about Coach’s move on Kate Spade, we believe successful execution will require a degree of separation between the two businesses. The brands must remain distinct, which means the creative thinking and strategy of both businesses cannot become too intertwined. It is also the case that the main Coach brand, while in much better health, still needs much nurturing and care in a very tough environment. As such, the company will need to keep a dual focus on both its new and established businesses.
Ultimately the aim for Coach is to become a business with a portfolio of distinct and compelling luxury brands. Today’s announcement is the solid step on that journey.
Staples names former HP security exec to lead cyber-security
An office supplies giant is taking steps to tighten up its data security strategies.
Staples named Brett Wahlin as its chief information security officer (CISO), responsible for global enterprise-wide information, product and data security. He will report to chief technology officer Faisal Masud, who leads Staples Digital Solutions, a new organization within the company that combines its traditional IT and digital organizations.
Wahlin’s position will be key in the digital transformation of Staples’ business. The chain remains mindful that as customer needs continue to adopt technology, especially with an acceleration into online and mobile, security threats will continue to increase. Wahlin’s role expands beyond traditional cyber security into product development, connected devices, fraud and loss prevention.
Wahlin has nearly 30 years of experience spanning information security architecture, policy, operations and development. Most recently, he was VP and CISO for Hewlett-Packard Enterprise (HPE).
Here, he was responsible for all aspects of information security, including security operations and intelligence, security architecture, cyber risk and governance, product lifecycle security, business security and transformation, industry next security and cyber service delivery. He built world-class, extensible security capabilities that protected HPE’s assets and workforce, enabled and extended business capabilities, and showcased its security solutions at work.
Before HPE, Wahlin served as chief security officer (CSO) for Sony Network Entertainment International and CSO at McAfee. He has also worked as CISO at Los Alamos National Laboratory, VP of security architecture for Wells Fargo, and held various positions in security with Intel. He began his career as a counterintelligence agent in the U.S. Army.
Specialty retailer exploring long-term capital restructuring
Nine West Holdings is taking action to deal with its debt.
The company, which has about $1.5 billion in debt resulting from its 2014 buyout, announced that it has retained Lazard as its investment banker to proactively evaluate a long-term capital structure solution. In its statement, Nine West said it has no near-term debt maturities (next maturity date is 2019), is in compliance with the indentures and other agreements governing its indebtedness for borrowed money, and has ample liquidity ($160 million in liquidity as of December 31, 2016) to continue to operate its business in the ordinary course.
"We are pleased to be working with Lazard to proactively address our 2019 debt maturities,” said Ralph Schipani, who has served as interim CEO of Nine West Holdings for more than a year. “Lazard's engagement will have no impact on our day-to-day business operations, which will continue as usual."
Schipani has served as interim CEO of Nine West Holdings for more than a year. He is a turnaround and restructuring expert at Alvarez & Marsal Inc.
Nine West Holdings operates a portfolio of brands that includes Nine West, Anne Klein, Gloria Vanderbilt, and l.e.i. The company is a wholesale partner to major U.S. retailers, operates its own stores, and has international licensing arrangements covering more than 1,200 points of sale around the world.