Coach, Inc. (NYSE:COH), one of the leading and prominent designer of high-quality accessories and gifts, aims to acquire one of its competitors in the industry.
According to a report from Dana Mattioli and Annupreeta Das of the Wall Street Journal, Coach, Inc. (NYSE:COH) offered an acquisition deal to Tory Burch LLC, a luxury lifestyle brand of clothing, shoes, handbags, and accessories.
People familiar with the situation cited that Coach, Inc. (NYSE:COH) proposed an acquisition price of around $2 billion to $3 billion. Its main objective in pursuing the transaction is to boost its growth and leverage its expertise in the supply chain amid increasing competition in the industry.
According to sources at the Wall Street Journal, Coach, Inc. (NYSE:COH) became serious about making an acquisition last year when it initally approached Tory Burch LLC. Its proposal to acquire the designer of luxury clothing and handbags was close to the valuations of investments byGeneral Atlantic LLC and BDT Capital Partners LLC. However, Tory Burch did not accept the offer.
People knowledgeable with the situation said that Coach, Inc. (NYSE:COH) is still looking for opportunities to make an acquisition. The company’s last acquisition was Mark Cross. It purchased the small leather-goods company 20 years ago.
Coach, Inc. (NYSE:COH) was establish in 1941. For years, it dominated the handbag market in the United States and it is considered the must-have brand for women in the luxury segment. It lost some of its customers to other emerging labels, including Michael Kors Holdings Ltd (NYSE:KORS), Fifth & Pacific Companies Inc (NYSE:FNP), and Tory Burch. Its growth in North America has declined in previous quarters.
Coach, Inc. (NYSE:COH) has a $16.7 billion market capitalization. Over the past year, its stock value declined by 13 percent. Shares are down by nearly 1 percent to $59.18 per share after trading hours on Monday. On the other hand, Michael Kors Holdings Ltd (NYSE:KORS) has $12.3 billion market cap and its shares increased by 51 percent in the same period. Its stock price is up by 1.03 percent to $60.08 per share.
Last month, Coach, Inc. (NYSE:COH) reported solid financial results for the third quarter of fiscal 2013 with $1.19 billion sales, up by 7 percent and $0.84 earnings per share, an increase of 10 percent compared with $1.11 billion in sales and $0.77 EPS in the same period a year ago. The company’s strong financial performance was driven by its success in China as consumers in that country have a growing appetite for Western luxury brands.
Sales of Coach, Inc. (NYSE:COH) in China increased by 40 percent in the third quarter. Sales in North America climbed by only 7 percent, which is significantly lower compared with the 70 percent sales increase of Michael Kors Holdings Ltd (NYSE:KORS) in the region during the third quarter.
Coach, Inc. (NYSE:COH) ended the period with a strong balance sheet of $928 million in cash and cash equivalents. Last February, the company declared a quarterly dividend of $0.30 per share.