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Burberry and Coach potential merger talks see shares jump

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and shares rose sharply after financial blog Betaville said, citing sources, that was working with investment bank Evercore on a potential merger with Burberry.

Burberry and Coach potential merger talks see shares jump
Burberry has been plagued with declining sales, saying that wholesale revenues from sources like department stores dipped 14 per cent overall, down 25 per cent in the US market alone

Burberry shares rose nearly 5 per cent last week and by 1315 GMT they were up 3.51 per cent at 1,501 pence valuing the British company at 6.43 billion pounds ($7.84 billion).

Earlier this year, the Financial Times reported that Burberry asked its advisers at Robey Warshaw to help prepare a defense for a possible bid.

Most Burberry efforts in the past two decades have gone in the direction of elevating the brand and moving it into mega-brand price territory, rather than squarely into accessible luxury, unlike Coach.

Experts feel that even though the merger could be promising in the short term, in the long run, it would increase the risk of brand trivialisation, compromise growth and valuation multiples.

Burberry has been plagued with declining sales, announcing earlier that wholesale revenues from sources like department stores dipped 14 per cent overall, down 25 per cent in the US market alone.

READ MORE: Burberry’s UK sales pick up on back of Brexit, a weak pound

Coach, too, has struggled to retain its brand image, announcing this summer that it planned to scale back offerings at mid-tier department stores in an effort to move toward a more high-end image.

According to Glossy, Burberry isn’t the only retailer experiencing challenges in the market — shares in global luxury goods are continuing to drop, down 13 percent in the last year, according to Bloomberg Intelligence.

In July, luxury conglomerate LVMH sold Donna Karan International, the owner of DKNY, to G-III Apparel Group after several years of poor sales, indicative of continued industry challenges.