Rumors began to swirl in December that American women's lifestyle brand Kate Spade might be exploring a sale, and on Thursday the brand finally confirmed those rumors — well, pretty much. In its full-year and fourth-quarter earnings report, the company expressed that it is "conducting a process to explore and evaluate strategic alternatives to further enhance shareholder value." It also said that there's no definitive timetable for this, and "there can be no assurance that this review process will result in a transaction or other strategic alternative of any kind." CEO Craig Leavitt essentially reiterated this during a conference call, during which there was no question-and-answer session. In other words, Kate Spade is most likely in talks with potential buyers.
Now who might those buyers be? Bloomberg reported most recently that competitors Coach and Michael Kors had both expressed interest, as well as luxury companies outside of the U.S. Coach and Michael Kors have both said they are looking for acquisitions; the former last acquired Stuart Weitzman, its CEO saying more than once that it wants to become a "house of modern luxury brands."
Kate Spade's investors clearly like the idea, judging from the 10 percent surge in shares. The news also follows complaints from investors that profits weren't high enough compared to peers, meaning they held less value for shareholders — hence the company's confirmation that it's working to remedy that.
And at the end of 2016, Kate Spade was not in bad shape. For the fourth quarter and the full year, comparable sales in its own stores were up 9 percent (compared to a 6 percent decline at Michael Kors and a 3 percent increase at Coach). Overall sales rose about 10 percent for the quarter and 11 percent for the year. Gross profit as a percentage of net sales was 59.2% for the fourth quarter of 2016, compared to 60.2% for the fourth quarter of 2015.
UPDATE, March 27, 8:15 a.m.: According to Business of Fashion, sources inside both Kate Spade New York and Coach are reporting that Coach will be announcing its acquisition of the brand within weeks. However, there is a second bidder — believed to be Michael Kors — also looking to scoop up the brand, which could be worth more than $2 billion.
UPDATE, May 8, 8:05 a.m.: It's official: Coach has acquired Kate Spade New York for $2.4 billion, as announced by the company on Monday. The acquisition is the latest step in Coach's evolution as a "customer-focused, multi-brand operation."
"Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials," says Coach Inc. 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."
According to Kevin Wills, Coach’s Chief Financial Officer, the company plans to expect a run rate of about $50 million within three years of the transaction's closure, which is expected by the third quarter of this year.
UPDATE, July 12, 9:43 a.m.: Now it's really official: As of Tuesday, Coach completed its acquisition of Kate Spade & Company for $18.50 per share in cash for a total transaction value of $2.4 billion, as previously announced. According to a release, Kate Spade now expects to report is fourth-quarter financial earnings next month, on August 15, 2017, so we can see how the brand has fared — fiscally, at least — then.