Coach is ringing in the New Year by acquiring luxury footwear brand Stuart Weitzman for $574 million–the 73-year-old bag maker’s first ever acquisition.
Coach will pay Stuart Weitzman’s former owner, private equity firm Sycamore Partners, $530 million in cash. If Stuart Weitzman hits specified revenue targets after three years following the close of the transaction, Coach will shell out up to $44 million more.
It’s only been a year since Sycamore Partners bought Stuart Weitzman, as part of its acquisition of the Jones Group, which gave the firm Nine West and Jones New York as well.
The acquisition comes on the heels of a period of financial woes for Coach–the company’s sales dropped last quarter and gross profits fell in 2014. In 2013, in an effort to resuscitate the company, Coach hired a new creative director, Stuart Vevers, and a new CEO, Victor Luis. Their approach to transforming the company has been centered around evolving Coach into a full-fledged lifestyle brand, offering not just handbags but shoes and outerwear. They’ve also focused on gaining back prestige as a fashion-focused “modern luxury” company as opposed to an “accessible luxury” company.
The Stuart Weitzman acquisition strategically serves both of these ends. In contrast to Coach’s own flagging gains, Stuart Weitzman has seen steady sales growth, with a 10% increase overall in the past five years and $300 million in revenue from September 2013 to September 2014. Kate Moss and Gisele Bundchen are among the company’s spokesmodels, and its bestsellers include $795 Highland suede boots. “Stuart Weitzman is a leading American luxury designer footwear brand with a solid growth trajectory and further significant domestic and international development potential,” Victor Luis, Coach’s chief executive, said in a statement. Founder Stuart Weitzman will maintain his role of CEO and creative director at the eponymous company. The transaction is expected to close by May.