The rumor mill was put to rest this morning when Coach Inc. announced it was acquiring Stuart Wetizman for $574 million, beating out other bidders Advent International Corp. and Brown Shoe Co.
It’s the first ever acquisition for New York-based Coach, and while market watchers are generally optimistic, some have questions about the deal in the immediate future.
Oliver Chen, analyst for Cowen and Co., said Weitzman’s experience with footwear, sourcing and wholesale would be good lessons for Coach, while Coach’s experience managing extensive brick and mortar retail and omni channel development could benefit the Weitzman business.
“It’s a powerful long-term deal,” he said. “Coach is focused on the long-term lifestyle play…It’s a good jump start.”
Bu Chen noted that it’s Coach’s “first time at the party,” and the acquisition is bound to leave some investors cautious as the company continues to face challenges.
Coach has been remaking itself in the past several seasons under Stuart Vevers, artistic director, who has promised to take the American brand abroad and make it appealing again to a younger audience.
Ike Boruchow, analyst at Sterne Agee, said he was surprised by the move.
“Under normal circumstances, a leading American handbag brand acquiring a leading American footwear brand would be a reasonable strategy, but Coach might have too many balls in the air right now. With U.S. operations continuing to struggle, negative cash flow, a potential $1 billion in debt moving onto the balance sheet and a new acquisition to integrate into the global business, management has their work cut out for them,” he wrote.
Still, Boruchow and others were positive on what both brands can bring to the table.
Weitzman, for instance, has relationships with names like Gisele Bunchen, Kate Moss and others. The brand’s Nudist sandal and 50/50 boots are among the favorites on the red carpet and with celebrities, giving it an edge.
“There are synergies here,” said Barbara Wyckoff Siris, an analyst with CLSA America. “Stuart Weitzman is scalable, and both [brands] fit an “aspirational luxury” price point, which is underserved.”
While Coach beat out other major business players, footwear analyst Steve Marotta reflected on the acquisition from the Brown Shoe Co. perspective. Based on the valuation and sizing of the deal, he said it wouldn’t have been an ideal fit.
“Brown is very disciplined company,” he said. “They would not have stretched for something they couldn’t have handled or would have been too big a challenge.”