Kate Spade & Co. Big Changes
The company plans to close the Kate Spade Saturday business and absorb it into the Kate Spade New York business.
The company plans to close the Kate SpadeSaturday business and absorb it into the Kate Spade New York business. This means the 16 company owned and three partner Saturday stores will close in the first half of the year. The e-commerce business will remain open temporarily as well. The Jack Spade label is also getting a facelift. The brand will shutter 12 company owned stores in the first half of 2015. The Jack Spade business will focus on e-commerce and its wholesale business and aim to be a more complete lifestyle brand focused on tailored clothing,sportswear and bags.
«A key tenet of our roadmap for growth is ensuring that we are disciplined and forward-looking with our investments, putting our resources behind targeted initiatives that will maximize profitability and shareholder value in the near, mid and long term,» saidCraig A. Leavitt, Chief Executive Officer of Kate Spade & Company. «We continue to focus on two axes of growth – geographic expansion and product category expansion. We are early in our journey as Kate Spade & Company, and we see a clear path to becoming afour billion dollarbusiness at retail. By taking these actions, we will be able to accelerate the fulfillment of our lifestyle brand vision, expanding our product categories and reaching customers in all facets of their lives, better positioning us to deliver on kate spade new york’s full potential.»
Mr. Leavitt continued, «We are committed to our men’s heritage and believe this category is an important part of our growth story and a complement to our thriving women’s business. With this new approach to distribution, Jack Spade is now better positioned to grow as we broaden our customer target.»
The new business model will provide Jack Spade with a focused path to grow the brand with controlled investments and through expanded distribution in two channels, its strong retail partners and its growing eCommerce platform. The collection will evolve to include tailored clothing and dress furnishings, in addition to sportswear and bags, as we progress toward becoming a more complete lifestyle brand. As a result of this positioning and expanded consumer target, the Company’s standalone locations are no longer as relevant, and it will close its 12 Company-owned and operated stores during the first half of 2015. The brand’s retail partner and eCommerce presence will continue with no interruptions during the process.
As a result of these initiatives, the Company expects to incur cash restructuring charges of$25 to $30 millionassociated with the assignment or termination of leases and other contracts, severance and other associated activities and non-cash asset impairment charges of$7 to $9 million.
As part of its focus on geographic expansion and partnered approach to margin expansion, Kate Spade & Company separately announced this morning that it has formed joint ventures withWalton Brown, a subsidiary of The Lane Crawford Joyce Group,Asia’spremier fashion retail and brand management group. The newly formed joint ventures are focused on scaling and accelerating Kate Spade & Company’s growth inGreater China. The partnership will leverage the expertise ofWalton Brownand the global demand for Kate Spade & Company products to establish a strategic network of stores in key cities, enhanced by a robust organizational and marketing platform acrossChina,Hong Kong,MacauandTaiwan.
The company also updated 2014 fiscal year guidance and expectations for 2015. The firm expected to report $1.13 billion to $1.14 billion in DTC sales. Analysts expected revenue to be $1.1 billion. For 2015, the company forecasted sales of $1.2 billion to $1.28 billion, below the $1.39 billion analysts expected the company to bring in.
Kate Spade & Company designs and markets accessories and apparel under two global, multichannel lifestyle brands: kate spade new york and Jack Spade. With collections spanning demographics, genders and geographies, the brands are intended to accent customers’ interesting lives and inspire adventure at each turn. The Company also owns the Adelington Design Group, a private brand jewelry design and development group that markets brands through department stores and serves jcpenney via exclusive supplier agreements for the Liz Claiborne and Monet jewelry lines. The Company has a license for the Liz Claiborne New York brand, available at QVC, and Lizwear, which is distributed through the club store channel.