Will Coach Become The Next LVMH?

According to the world clothing shoes and hats net,

In the field of Commerce, a common practice of the media is to claim that "XXX" will become the next "ZZZ". Of course, the "ZZZ" here must be the frequent headlines of famous names, such as ZARA, Chanel and the secrets of Vitoria.

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Boss.

When yesterday released Coach's big news for us $2 billion 400 million acquisition of Kate Spade, the title was "Coach pays luxury price to catch up with with" - this title trampled two misconceptions:

First, the price paid by Coach is not "extravagant". The total price of $2 billion 400 million, or $18.5 per share, is much lower than the $23-25 expected by analysts and the $30-35 that the Kate Spade board had hoped for. The reason is that the latest quarterly bulletin of Kate Spade is not ideal (the same store sales decline for the first time in the past 8 years), and also because of the lack of strong competitive rivals.

Second, it is even more urgent to say that Coach wants to catch up with LVMH.

Coach is not in the same galaxy as LVMH in terms of sales scale, brand and business structure.

Sales: LVMH total sales in 2016 37 billion euros; Coach only 4 billion 500 million dollars.

Brand and business composition: LVMH has five main lines of business (wine, fashion leather, beauty cosmetics, jewelry watches, and special retail shops made up of duty-free shops and beauty makeup chains). It has about 60 brands, mainly European luxury brands (Louis Vuitton, Fendi, Bulgari, etc.), while Coach positioning is light luxury lifestyle. Besides the high-end shoe shoe brand Stuart Weitzman purchased in 2015, the main sales are still the main brand Coach of the main leather products.

Having said this, but from another perspective, Coach has no need to struggle to become the next LVMH group.

The formation of LVMH has its own complicated historical origin. Starting from the acquisition of debt laden Dior parent company by 1 francs in 1984, Bernard Arnault has built up the first luxury empire in the world in 30 years by virtue of its superb technology and foresight. However, history is hard to repeat itself, and the "pure luxury" brand with a long history is becoming scarce.

The Qatar royal family, which is rich and powerful, is holding only three well-known brands of Valentino, Balmain and Pal Zileri, and has a long way to go.

JAB, a consumer goods giant in Germany, has given up the dream of building luxury goods and sold its Jimmy Choo and Bally to the coffee and catering sectors.

For Coach, a rare luxury brand that has grown up in the United States, it has already defined the strategy of developing the brand from a single leather brand to an all-around and globalized Lifestyle lifestyle brand, employing designers from European luxury brands to enhance product design, diversifying product lines, reducing dependence on traditional leather products, improving brand recognition through logo, reducing discount promotions to enhance brand image, and expanding China and European markets to reduce dependence on the US market, especially department stores, which deteriorates the retail environment.

In order to enjoy the synergistic advantage of multi brand combination and avoid the uncertain risks of single brand development, Coach group has indeed decided to buy more brands as one of the next development strategies. This acquisition of Kate Spade is also due to the influence of this colorful and creative brand in the younger generation and the fashion lifestyle concept presented by the brand.

The integration of the acquired brand has never been a simple matter. I believe that Coach group is planning how to improve the sales performance of Kate Spade. By using Coach's international experience, the proportion of overseas sales of the latter is increased by 19% (Coach's overseas sales exceed 47%), and at the same time, it has a better synergy with the existing brands of the group and saves operating costs.

It is really good if the stock price goes up! As for whether we can become the next LVMH, I am afraid only the busy passers-by will care about it.

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