Coach and replica Michael Kors have both shown an appetite for acquisitions, and that’s not necessarily a good thing.
With Coach having recently bought Kate Spade and Michael Kors outlet in the process of acquiring Jimmy Choo, “two consolidating forces have emerged,” William Blair analyst Dylan Carden wrote Monday. The two handbag retailers still seem interested in amassing fashion brands — especially as the handbag market sags. Even after announcing the Jimmy Choo deal, Kors management spoke of “investing in infrastructure” to “pursue and integrate acquisitions.”
Burberry and Tory Burch are among the most replica handbags logical targets. While Burberry has reportedly spurned offers before, Carden thinks Tory Burch could be open to a deal, after nixing the idea of an IPO in the past. Either of these acquisitions would give Coach or Kors more exposure to apparel and footwear.
Nonetheless, he notes that the recent deal-making fever smacks of weakness, which is why the replica handbag brands should make sure that acquisitions will pay off financially and not just create bigger companies. Kate Spade and Coach were each once part of failed brand houses, he notes.
“The current consolidation wave is not being done from a position of industry strength, Carden writes. “More is not necessarily more here, and execution remains key on top of capacity to shore up or maintain strength of core brands.”