Coach buys Kate Spade for $US2.4 billion; men and Gen Y more likely to over-spend on credit cards; Coty's net revenues top $US5billion for first 9 months of fiscal year; and who buys natural beauty products and who doesn't.
Coach buys Kate Spade for $US2.4 billion
The US luxury brand has been itching to get out its corporate cheque book for months. In a bid to create the first New York-based house of modern luxury lifestyle brands, Coach's first major acquisition is Kate Spade. Analysts are describing the $US2.4 billion buy-out price as a "bargain".
Coach enjoys strong sales in Asia and believes that Kate Spade's growth potential as a global, multi-channel lifestyle brand remains untapped. The brand is especially popular with Millennials, a key expansion market for Coach. Expect to see more Kate Spade boutiques opening worldwide, backed by its new owner's expertise in speciality retailing and brand building in most major markets.
Michael Kors Holdings had indicated an interest in Kate Spade. Following a downturn in sales after recent expansion, Michael Kors now has the most to fear from the newly-created NYC powerhouse, especially in Asia. According to Adrienne Yih, analyst with Wolfe Research: "When you have three key players and that is reduced to two, the third one will naturally be at a disadvantage".
Men and Gen Y more likely to over-spend on credit cards
Australia's collective credit card debt on 16 million credit cards has climbed to $32 billion, says Finder.com.au. Last year, 82 per cent of Australians belonged to at least one loyalty program and research has revealed that loyalty members spend up to 40 per cent more in-store than non-members.
A new study from Galaxy Research, conducted on behalf of Fox Symes, Australia's leading debt solutions provider, discovered that 67 per cent of respondents have blown their budgets – over a third because a credit card provider offered to increase their credit limit.
Younger people frequently give in to temptation – with 42 per cent of Gen Y admitting to racking up more debt. But the "winner" demo was Gen X, as 48 per cent said they over-used credit in comparison to 31 per cent of Baby Boomers.
Deborah Southon, Director of Fox Symes, points out the obvious: "When we are young we often don't think about the future nor do we consider how the consequences of what we do now will affect us later. Not all young people understand that building a strong financial foundation is based on financial discipline and restraint from an early age is the key to financial freedom and wealth".
In a myth-busting finding, the study found that 41 per cent of Australian men compared to 34 per cent of their female counterparts have over-spent or are tempted to do so because of offers of increased credit limits and the ease of acquiring multiple credit cards.
Coty's net revenues top $US5billion for first 9 months of fiscal year
The multinational's much-written about acquisitions are paying off. Now the third largest global beauty player, the "absorption" of P&G's beauty business, ghd and a 60 per cent chunk of Younique, the online cosmetics retailer, Coty's net revenues for Q3 rose to $US2.03 billion.
The consumer division (Bourjois, Rimmel, CoverGirl etc.) made the largest contribution, of course, with net revenues of $US988.6 million for the period. The luxury division (Marc Jacobs, Gucci, Hugo Boss, Chloe and more key fragrance licenses plus philosophy) performed strongly, bringing in $US634.6 million, as did the professional beauty category with $US408.9 million. The results pushed Coty's net revenues for the first nine months of fiscal 2017 to $US5.409 billion.
Who buys natural beauty products and who doesn't
The facts are undeniable. In survey after survey, nearly every age group, especially Millennials, claim to have a strong preference for natural/organic products and the barely-there makeup look. The natural personal care market has morphed into a multi-billion dollar sector driven by beautifully-formulated products and high-tech innovation. But not everyone is a step away from going au naturel.
According to a US study by Mintel, there are three key reasons why many women don't buy natural and organic personal care. Nearly 80 per cent of non-buyers surveyed said that they avoid the category because of the higher cost compared to mainstream products. Nearly half – 47 per cent – said they didn't want to replace their favourite existing products.
More worryingly, 43 per cent of non-buyers said they believed many of the claims of natural/organic products were simply marketing schemes. Even a sizeable proportion of the very young (aged nine to 21) 20 per cent are sceptical and believe that natural/organic claims are just a means for brands to charge higher prices.
There's a silver lining, though. In Australia and the US, more than 80 per cent of new mothers are Millennials. The oldest cohort are in their 30s and they are responsible, says Mintel. According to other findings in the study, 55 per cent of people who are parents buy natural/organic personal care products, compared to 34 per cent of non-parents. The gap is wide in all categories in favour of parents – Haircare (50% vs 34%), facial skincare (51% vs 32%) and body cleansing (48% vs 34%). In major markets such as the US and the UK, facial skin care is far and away the biggest category in natural/organic personal care – 49 per cent of the British market and 43 per cent in the US.
Snippets from the wires
- Rising concerns about skin cancer and premature ageing continue to drive the global suncare market, says Transparency Market Research. Worldwide sales of suncare reached $US15.83 billion in 2015 and are tipped to rise to $US24.91 billion by 2024.
- Big is beautiful for Lush, says Paul Wheatley, Global Property Director for the brand. Large format stores such as the London flagship at 3300 square metres have been key to Lush's financial turnaround over the past three years.
- Products that prevent hair loss and fall-out have become a multi-billion dollar global business. Unilever Ventures, the private equity arm of the multinational, has become the lead investor in Nutrafol, one of the fastest-growing nutraceuticals for hair loss and prevention for both sexes.
- The past few years have not been kind to Abercrombie & Fitch. The US youth-oriented brand has slashed its number of US stores by 20 per cent and the share price has slumped 61 per cent over the past 18 months. The brand has faced intense competition from Zara and H&M and online sales. A&F have hired investment bank Perella Weinberg Partners to flush out prospective buyers and is rumoured to be in deal talks with at least two interested parties.
Image: Kate Spade
