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Kate Spade is ready for its shot at the big time.
This story first appeared in the March 18, 2013 issue of WWD. Subscribe Today.
Craig Leavitt, chief executive officer, told analysts at an investment meeting Friday that the fun and quirky brand is charting aggressive growth on several fronts. Over the next four years, he expects to drive its total retail sales up to $2 billion.
And that is just the start.
“Our brand is a story,” Leavitt said. “These early chapters will tell the story of a once niche brand that has grown to be an accessible luxury player, with nearly $800 million — in [current] retail footprint — on its way to $4 billion.”
Last year, the brand logged revenues of $461.9 million for its parent company, Fifth & Pacific Cos. Inc.
That figure is slightly more than half the current retail sales figure cited because some of Kate Spade’s volume comes from wholesale accounts, such as Nordstrom, Bloomingdale’s and Neiman Marcus. Factoring that in, the $2 billion target will boil down to $1.2 billion in revenues for Kate Spade by 2016.
That’s $300 million more than Wedbush Securities analyst Corinna Freedman projected. The analyst was at the conference and was impressed by what she saw.
“It seems like it could be a bigger opportunity than J. Crew,” she said.
J. Crew drew sales of $1.85 billion in 2011 and saw growth of 20 percent through the first nine months of last year.
“I think they have a bigger runway,” said Freedman, noting Kate Spade’s international push and its move into home goods. “They’ve done a great job at positioning and marketing the brand. You can get tired of shopping at J. Crew and all your usual haunts. It’s the new kid on the block.”
Kate Spade — which is celebrating its 20th anniversary — is really just coming into its own. And it’s positioned well in the most-profitable segment of the fashion market.
Handbags and small leather goods make up 70 percent of Kate Spade’s volume, although 11 other categories have been added, including legwear, watches, tabletop and stationery.
Kate Spade New York has 205 stores in 20 countries, e-commerce, 12 Jack Spade stores and roughly 400 wholesale doors.
“With our foundation secure, Kate Spade is poised for rapid growth and bursting with potential — from a product, sales, channel, geography and brand perspective,” Leavitt said.
The brand is now in the “scaling and leveraging” phase, growing at home and abroad through full-price stores and outlets, and the Jack Spade and Kate Spade Saturday brands.
“By the end of 2016, we expect to have three growing, profitable and increasingly global lifestyle businesses in our Kate Spade brand portfolio,” Leavitt said.
As the brand grows, it plans to become more of a force in apparel, which is expected to ultimately make up 30 percent of its business.
“Our approach to apparel aims for the most profitable, differentiating and brand-extending components of the apparel category,” Leavitt said. “This also creates a far more balanced business than some of our competitors, whose brand positioning is so tied to accessories it curtails their permission to enter the lifestyle-brand arena.”
That could be a reference to Coach, an accessories powerhouse that is moving toward more of a lifestyle positioning.
Later in his presentation, while taking about the home-goods market, Leavitt noted: “You have heard us say many times that when we think about analogues, while Coach is incredibly instructive, Ralph Lauren is equally appropriate. And it is our ability to do home decor that ultimately will skew us to be more like Ralph Lauren than Coach in reach and breadth.”
The conference was Webcast and sounded vaguely like part of a road show for Kate Spade, which is one of the most closely watched brands in the industry and seen as tapping into some of the magic that made Michael Kors Holding Ltd.’s stock offering so successful.
Investors have been pushing for Fifth & Pacific to somehow position Kate Spade so it can be valued independently of the firm’s other businesses, Juicy Couture and Lucky Brand.