Burberry/Coach would “primarily be a merger of problems,” Exane (neutral on Burberry) says in note.
- M&A history in luxury has shown mergers “don’t obviously help in regaining brand traction and desirability,” while cost efficiency in the face of declining brand momentum are“just a way to run in order to stand still”
- Contrary to Coach, most of Burberry’s focus in past 20 years has been toward elevating the brand and moving it into “mega-brand” price territory instead of into accessible luxury
- A more aggressive commercial strategy could be running Burberry “harder;” would raise risk of future “brand trivialization” and compromise long-term growth
- Appears “perplexing” that Coach moves on Burberry as stock has rebounded significantly on a devalued GBP
- Earlier: Burberry Gains; Betaville Says Coach Said to Eye Possible Deal
- Stock up as much as 5.9%, tops Stoxx 600, vol. 1.6x 3-month daily avg.
- Stock has risen 11.2% month-to-date vs a -0.6% fall in the Stoxx 600 Personal & Household Goods index; is up 28.4% YTD vs a 1.3% rise in the SXQP index