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Twenty years ago, Kate Spade launched her company, Kate Spade New York, with a collection of nylon bags. The design of that boxy nylon handbag was the beginning of a successful company. Kate, her husband Andy and partners, Pamela Bell and Elyce Arona, sold the brand to Neiman Marcus in 1999. In 2006 Liz Claiborne Inc. (now called Fifth & Pacific Inc.) bought the company. In 2007, the founders cashed out, and a new management was installed. Craig Leavitt, CEO, and Deborah Lloyd as president and creative director took the helm in 2008.
Under Leavitt and Lloyd’s leadership, Kate Spade fashion apparel and accessories have been striking a cord with men (Jack Spade) and women. Sales growth has risen dramatically in the last five years from $91 million to $462 million, a 410% increase. There is now talk of reaching $1.2 billion by 2016. This includes wholesale sales, which on a retail basis would equate to about $2 billion. At the end of 2012 there were 205 Kate Spade New York stores in 20 countries plus 12 Jack Spade stores in 4 countries. This included 171 full price stores and 46 outlet stores. The company projects that by 2016 Kate Spade New York will reach 475-550 company-owned and partnered owned stores worldwide with 250-300 in North America.
As stated in the company’s 2012 10K, at the end of 2012 there were only 50 full price stores and 31 factory outlet stores in the United States. In 2013, 30 full price stores and 10 outlet stores will be opened in North America. In 2014, 30 to 40 full price store openings are planned with 30-50 new outlets in 2014 through 2016. Management sees the potential for 130 -170 full price Kate Spade New York stores in North America by 2016, and a longer term potential of 125+ outlets. While the original store on Thompson Street in New York’s SOHO district still draws customers, a new flagship store will open in May 2013 on Madison Ave in New York. Kate Spade also has a strong wholesale business in the United States selling merchandise in upscale stores like Nordstrom, Neiman Marcus, Bloomingdale’s and Lord & Taylor.
Kate Spade has been very successful in ecommerce and digital marketing. The company is very proud of its store-to-web and web-to-store cross development making it almost impossible to read the growth of one channel without the other. I am impressed that items ordered as late as 9 PM can be delivered the next day--a tremendous customer service. The company views its e-stores as its ultimate flagship with the broadest assortment representing the world of Kate Spade. Currently, over 20% of sales come from ecommerce channels, a top tier performance in the industry.
Kate Spade New York is a global company. The company expanded first into Asia, with a flagship store opening in Tokyo in 2004. In 2010 the first store in opened London. In 2012 Kate Spade New York opened two stores in Germany (KadeWe and Alster Haus). It will open in Galeries Lafayette in Paris later this year. Expansion globally has its challenges since the customer’s preferences and sizing differs significantly. The company bases its global strategy on five pillars:
1. Brand consistency – brand comes first ensuring long term growth
2. Growth in existing markets – growth will come by increasing market share through additional door rollouts, comp sales, and launching new categories like watches
3. Product – prioritizing initiatives including Asian fashion fit and creating special products to celebrate holidays like Chinese New Yearundefined
4. Business development – pursuing new regions like India, Russia and Mexico where Kate Spade New York does not yet have a presence as well as select new Asian and Latin American territories.
5. Business model by region – a variety of business models are used including wholly-owned subsidiaries, distribution agreements, joint ventures, and wholesaling. Model is chosen to maximize profits and brand growth
New merchandise introductions are frequent. To celebrate the company’s 20th anniversary in 2013 a Bow Bag will be featured in the fall advertising campaign. Beyond handbags, other accessories are constantly being updated and expanded with new classifications such as the addition of watches, and the expansion of jewelry and fragrances with the launch of Live Colorfully in April.
In an effort to reach the millennium customer a third division is being created – Kate Spade Saturday. More casual, affordable fashion merchandise in represented by this brand extension that should appeal to a younger consumer. The first Kate Spade Saturday store opened on March 2, 2012 in the very fashionable area of Harajuku, Japan. In the US the brand will be distributed exclusively online with an occasional pop up store front lending support.
Kate Spade is clearly a brand with stylish products and a great identity. Even the first daughters, Sasha and Malia Obama, like it. They both wore Kate Spade apparel to their father’s second Presidential inauguration. Wall Street is also noticing the success of the rejuvenated company. Currently Kate Spade is a division of Fifth and Pacific Inc., Inc., but it is rumored that the company may be spun off as a freestanding public company. I think it would be exciting to see this company expand and create value for shareholders by pursuing its solid blueprint for growth.
