Coach to buy Stuart Weitzman for $574M

Coach (NYSE:COH) has agreed to buy designer shoe company Stuart Weitzman for $574 million. The move is part of Coach's larger plan to revamp its image in the face of declining sales and increased competition.

The designer brand will acquire the footwear company from private equity firm Sycamore Partners, and will immediately add to the company's earnings.

"Stuart Weitzman is a leading American luxury designer footwear brand with a solid growth trajectory and further significant domestic and international development potential. Importantly, the size, scope and vibrancy of the Stuart Weitzman brand, along with the continuity of its management team, allows for a seamless transition to Coach ownership, as we continue to focus on Coach's brand transformation," said Victor Luis, CEO, Coach. "Over the medium term, we look forward to advancing the Stuart Weitzman brand's global development, especially by leveraging Coach's international infrastructure and expertise in handbags and accessories."

Stuart Weitzman currently has its own retail stores in the United States and Europe and also distributes its brand in department stores in 70 countries. The brand had revenues of approximately $300 million for the 12 months ending Sept. 30, 2014.

Stuart Weitzman has grown sales at a 10 percent compounded annual rate over the last five years.

Coach will make an initial cash payment of $530 million to Sycamore Partners and an additional $44 million in contingent payments will be paid when it achieves selected revenue targets over three years. The deal is expected to be completed in May.

Stuart Weitzman will continue as creative director and executive chairman of Stuart Weitzman Holdings and Wayne Kulkin, CEO, will remain in his current position.

When 2014 began, Coach reported the lowest same-store increase in sales in 13 years, and last summer the brand announced it would close around 70 underperforming stores in fiscal 2015. At that time, Luis acknowledged that the company was at a crossroads and would undertake a number of major initiatives during the next 12 to 18 months, including reducing promotional levels, introducing new advertising, shuttering stores and changing its product offerings.

For more:
-See this Coach press release

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