Kate Spade would offer Coach and Michael Kors greater pricing power with department stores as well a younger clientele.Coach has been seeking to diversify its business beyond handbags, and it paid $574 million for designer footwear company Stuart Weitzman in 2015.Michael Kors, which sells apparel, handbags, watches and other accessories, said in its most recent earnings call it was “actively looking” at potential acquisitions and that it probably would not do small deals. The company has been focused on a turnaround by improving its outlets and stores.Kate Spade has been under pressure from a small New York-based hedge fund Caerus Investors. Caerus sent a letter to Kate Spade’s board in November, stating it was “increasingly frustrated” by the inability of the retailer’s management to achieve profit margins comparable with industry peers.Separately, investor Barry Rosenstein’s activist hedge fund Jana Partners LLC has revealed a 0.85 percent stake in the company. (Reporting by Lauren Hirsch and Greg Roumeliotis in New York; Editing by Cynthia Osterman)
Kate Spade, which has a market capitalization of $2.9 billion, declined to comment. Michael Kors also declined to comment, while Coach did not immediately respond to a request for comment.Affordable luxury brands such as Michael Kors and Coach have suffered after they expanded their retail presence too quickly and sold too heavily in outlet stores, diluting the exclusivity that once caused shoppers to line up for the next hot handbag.These brands have been hurt as fewer shoppers in malls have led to fewer handbag sales, while a stronger dollar has made it difficult for them to maintain their popularity with tourists visiting the United States.