Coach adds luxury shoes to offerings with Stuart Weitzman buy

Tue Jan 6, 2015 1:04pm EST
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By Yashaswini Swamynathan

(Reuters) - Coach Inc (COH.N: Quote) will buy women's luxury footwear company Stuart Weitzman Holdings LLC, as it looks to expand its high-end offerings to better compete with fast-growing rivals such as Michael Kors Holdings Ltd (KORS.N: Quote) and Kate Spade & Co (KATE.N: Quote).

Coach, known for its Poppy handbags, said it would buy Stuart Weitzman Holdings from private equity firm Sycamore Partners in a deal valued at up to $574 million.

Analysts, however, called Coach's first ever acquisition unnecessary and distracting, saying the deal could shift its focus from fixing its core handbags business.

Any distraction will complicate matters during a critical turnaround phase, Stifel Nicolaus analysts wrote in a note.

Coach is "paying a premium for a distraction," shelling out nearly twice Stuart Weitzman Holdings' revenue over the past 12 months, Topeka Capital Markets analysts wrote in a note.

Stuart Weitzman Holdings had revenue of about $300 million in the year ended Sept. 30.

New York-based Coach's shares were down about 1 percent at $36.48 in afternoon trading on the New York Stock Exchange.

Companies such as Michael Kors and Kate Spade have eaten into Coach's market share in North America with their affordable and trendier handbags and accessories.   Continued...

A shopping bag from the luxury brand Coach is seen along Rodeo Drive in Beverly Hills, California, May 21, 2013. REUTERS/Fred Prouser