Coach spending $2.4B to buy rival Kate Spade

Both premier brands have been vying to lure millennial shoppers.

Coach will spend $2.4 billion for Kate Spade, tying together two premier brands in the luxury goods sector that have fought to snare younger shoppers.

Noting that crucial demographic, Coach Inc. CEO Victor Luis said in a statement Monday that Kate Spade has a “strong awareness among consumers, especially millennials.” Coach executives say that 60 percent of Kate Spade customers are in that group.

Coach has made an aggressive push to polish the image of its namesake brand, scaling back on its distribution in department stores and relying less on the discounts it had used to get shoppers to buy the brand. But to power future growth, it has begun to build an empire of luxury brands.

The company bought shoe maker Stuart Weitzman in 2015 in a deal valued up to $574 million, but the Kate Spade brand is its biggest acquisition yet. It comes as the overall luxury business is being challenged by affluent shoppers who have lots of online options to buy status goods.

“The acquisition of Kate Spade is an important step in Coach’s evolution as a customer-focused, multi-brand organization,” Luis said in a statement. “The combination enhances our positon in the attractive global premium handbag and accessories, footwear and outerwear categories.”

Last month, the company hired Joshua Schulman, who had been president of Neiman Marcus’ Bergdorf Goodman division and the former CEO of Jimmy Choo, and put him in the new position of president and CEO of the Coach brand. Analysts saw that as a step toward a new company structure with a number of distinct brands under one umbrella, with each brand chief reporting to Luis. Schulman begins his job on June 5.

Coach executives said the company will not be looking at any other major acquisitions for now and will limit any purchases to smaller ones.