The news that Coach Inc. is buying Kate Spade & Co. for some $2.4 billion -- a substantial 27.5 percent premium over Friday’s closing share price -- had us wondering what could justify such a price.
Wall Street analysts have long suggested that Coach is looking to acquire new and younger consumers. Coach’s deal last year to make singer Selena Gomez the face of the brand is one such millennial-focused tactic. Buying Kate Spade, analysts say, is another.
The data confirms that theory.
A look at cross-purchasing behavior among buyers shows that there are few consumers who are both Coach and Kate Spade buyers.
Of shoppers who bought at least one Coach item online in the 12 months ending in March, just 15 percent of them also bought a Kate Spade item, according to Checkout Tracking E-Commerce.
Other data also hints at the wisdom of a Coach-Kate Spade tie-up.
Sales of smaller purses and similar accessories are on the rise.
Among the new style of post-aspirational shoppers, handbags are the quintessential “signature” item: the rare purchase upon which Millennials are willing to invest both time and money.