Coach snags rival in $2.4 billion acquisition
Coach has acquired a brand with a strong following among millennials.
The luxury handbag company on Monday announced that it will acquire Kate Spade & Company for $18.50 per share in cash, which represents a premium of 9% to Kate Spade’s closing price on Friday. The deal, which has a total transaction value of $2.4 billion, is expected to close in the third quarter of 2017 and add to adjusted earnings in fiscal 2018.
Last week, Coach reported better-than-expected third quarter earnings amid rumors that it was considering buying not only Kate Spade but also luxury shoe maker Jimmy Choo in a move to accelerate growth.
In buying Kate Spade, which operates the kate spade new york and Jack Spade NewYork brands, Coach gains ownership of a brand with a strong following among younger consumers. Kate Spade also has a growing lifestyle business and has expanded to such other categories as bedding and kitchen accessories.
(The company also owns Adelington Design Group, a private brand jewelry design and development group.)
“Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials,” stated Coach CEO Victor Luis. “Through this acquisition, we will create the first New York-based house of modern luxury lifestyle brands, defined by authentic, distinctive products and fashion innovation. In addition, we believe Coach’s extensive experience in opening and operating specialty retail stores globally, and brand building in international markets, can unlock Kate Spade’s largely untapped global growth potential.”
The deal has been unanimously approved by the boards of both companies. Coach said expects to generate $50 million in annual savings in synergies within three years of the deal closing.
“These cost synergies will be realized through operational efficiencies, improved scale and inventory management, and the optimization of Kate Spade’s supply chain network,” said Kevin Wills, Coach’s CFO. “At the same time, to ensure the long-term viability and health of the Kate Spade brand, and similar to the steps Coach has itself taken over the last three years, we plan to reduce sales in Kate Spade’s wholesale disposition and online flash sales channels.”
Retail real estate’s wunderkind buys another center
Four more and he’ll match his age.
Twenty-four-year old Joel J. Gorjian, a VP at Great Neck, New York-based Namdar Realty Group, has made his 20th retail center purchase in the past 12 months, this time a mall in suburban Chicago.
“We are currently pursuing additional acquisition opportunities in the Midwest, in particular in Illinois, Indiana, Ohio, Michigan, and Iowa,” said Gorjian, who pursues retail properties on behalf of both Namdar own real estate investment firm, Gorjian Acquisitions.
This week’s acquisition was the 181,169-sq.-ft. Matteson Town Center in Matteson, Illinois. The mall is anchored by OfficeMax and Chuck E Cheese’s and counts FootLocker and Check ‘n Go as tenants, but is only 50% leased. “The mall’s 91,000-sq.-ft. vacancy represented an opportunity to us,” Gorjian said.
Gorjian also saw opportunity in a traditionally healthy retail climate in Matteson. Within a one-mile radius of Matteson Town Center are centers hosting Sam’s Club, Target, The Home Depot, PetSmart, and Marshalls.
Online giant launches grocery service in Germany
AmazonFresh is expanding its breadth in one of its biggest markets outside the United States.
The online retailer on May 4 debuted deliveries of fresh groceries to Amazon Prime members in Berlin and neighboring Potsdam. Customers can order from a selection of 85,000 items. These include fresh fruit and vegetables, meat and fish, milk and refrigerated products, fresh bakery products, as well as 6,000 organic products, a wide range of gluten-free, lactose-free or vegan products, and a range of baby, health and beauty products and pet supplies.
Amazon is also partnering with more than 25 stores in Berlin as a means of adding another several hundred products to its AmazonFresh menu.
“The local retailers are a core element of AmazonFresh,” says Florian Baumgartner, director AmazonFresh Germany.
The service will cost 9.99 euros per month, with an unlimited number of free deliveries for orders with a minimum of 40 euros. While the program just launched, Amazon is already considering its next steps.
“We start with an extensive range in a limited area and will take the time to improve the service continuously based on our experience and feed-back from our customers,” explained Ajay Kavan, VP of AmazonFresh. “We are working methodically and very specifically on how to extend this offer to include other post code areas.”
Online grocery sales have not made any inroads in Germany, accounting for only 1% of sales, because the country has a high density of food stores and the dominant discounters, Aldi and Lidl, have been slow to go online, Reuters said.
The online giant launched its AmazonFresh food delivery services in Seattle in 2007, and has since expanding to other U.S. cities, including Chicago, Dallas, Northern Virginia, Boston, Baltimore, New York, Philadelphia, Stamford, Trenton, and seven regions across California. Last year, Amazon introduced the service overseas in London.