Companies must be careful about brand makeover moves

In a number of our posts, we have highlighted the increased activity in America’s economy with regard to mergers and acquisitions. It also appears that this trend will continue through the end of the year.

There are a number of different reasons for these transactions. Some companies believe that merging with another business or buying a component is essential to their long-term health. Others believe that such acquisitions are needed to change their respective brands. A prime example of this is Coach’s acquisition of shoe maker Stuart Weitzman. The $500 million purchase was supposed to recharge Coach’s lagging brand identity and “immediately” add to its earnings. 

While the change in branding remains to be seen, Coach reported that its earnings thus far have exceeded Wall Street’s expectations, even though overall sales are down 12 percent compared to the same period last year. Additionally, revenue over the past year has dropped 13 percent and earnings per share fell from $3.10 to $1.92.

Moreover, a recent poll suggested that customers are not noticing anything different from the company. Researchers who questioned 500 women aged 22 to 55 found that a large majority said that Coach’s offerings were “unchanged.”

While Coach remains optimistic about its 2016 forecast, this story should be a cautionary tale for those companies that seek to merge with another company or purchase a competitor in order to remake their brand. In the marketplace, few corporate changes are immediate, and consumers can be unpredictable and fickle when it comes to brand identity. 

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