By  on May 9, 2013

NEW YORK — Kate Spade is about to make a colorful splash on Madison Avenue.

The brand, the driving engine of Fifth & Pacific Cos. Inc., will cut the ribbon on its first flagship Friday — a 7,900-square-foot showplace at 789 Madison Avenue. With shiny white lacquered walls, marble floors with bows and a whimsical decor, the townhouse features three floors of selling space and a mezzanine on the second floor.

Designed by the in-house team, the flagship highlights all Kate Spade New York products under one roof, such as handbags, ready-to-wear, fashion accessories, small leather goods, tech accessories, jewelry, watches, shoes, legwear, eyewear, beauty, stationery and home.

“It’s the first opportunity we’ve had to really present the world of Kate Spade in New York,” said Craig Leavitt, the firm’s chief executive officer, on Wednesday. He and Deborah Lloyd, president and chief creative officer, were interviewed together at the store as workers applied the finishing touches. Potential customers kept dropping in and were told the store hadn’t opened yet and they should come back Friday, but one man and his wife preordered six pink dresses right out of the window for a family photo shoot.  (They’ll send them out Friday).

Kate Spade, which is on track to generate $700 million to $750 million in revenues this year, is one of the most closely watched brands in the industry and is poised for rapid growth on several fronts. Analysts believe that it has the potential to tap into some of the magic that made Michael Kors Holdings Ltd.’s stock offering so successful.

Leavitt declined to comment on specific plans for the brand, or on Fifth & Pacific’s progress in trying to sell or spin off sibling divisions Juicy Couture or Lucky Brand to focus the group only on Kate Spade. “Regardless, we are fortunate that our parent company believes in our growth story. We’ll continue to invest in the growth. When you think about us opening 30 full-price specialty stores in the U.S. alone this year, that shows the level of investment we’re making growing this brand. We’re just focused on continuing to build and grow our sales and profits and make the investment to be able to do that,” said Leavitt.

Kate Spade continues to show impressive sales results. As reported, the brand achieved a 22 percent gain in comparable-store sales while net sales shot up 63.1 percent to $141 million in the quarter ended March 30. Excluding $25 million in sales from the Kate Spade Japan business, which was brought in-house, the company’s sales leaped 34.1 percent. Kate Spade had adjusted earnings before interest, taxes, depreciation and amortization of $19 million. 

At an investment meeting in March, Leavitt told analysts that over the next four years, he expects to generate retail sales of up to $2 billion. The brand logged revenues of $461.9 million last year. At present, 65 percent of Kate Spade’s business is direct to consumer (freestanding stores and e-commerce), and the balance is done through its wholesale accounts.

The Madison Avenue flagship marks the company’s first move uptown. “Uptown is the new downtown,” is the company’s mantra, said Leavitt, who noted that the firm already has two smaller units between Mercer and Broome Streets and on lower Fifth Avenue and 20th Street. Typically Kate Spade stores are between 1,800 and 2,000 square feet. There are 52 full price stores in the U.S., including Madison Avenue, and 32 outlet stores. Internationally, there are 131 stores. Leavitt declined to give first-year projections for the Madison Avenue store or anticipated sales per square foot.

But a flagship of this size is unprecedented for the company.

“It sends an important message. We have the opportunity because of the breadth of our assortment to present the full lifestyle, and also the financial wherewithal to make this level of investment,” said Leavitt.
“I want to live in here,” added Lloyd. “This store has been a dream of mine for a long time. It’s a perfect time now in our growth to open.”

Some of the amenities of the boutique include a VIP salon, with stylish pink and black couches, colorful pillows (one which says, “ooh la la,” and another that’s zebra-striped), a coffee table and private dressing room for special customers to try on clothes. The store also features a working bar, and the sales staff has been trained to be knowledgeable about the neighborhood, offering advice on the best restaurants and salons to have one’s hair done. The decor has a signature bow-inspired facade; custom oversized sputnik chandeliers; gold mirror tiled staircases; a balcony with flowers; custom furniture and rugs, and artwork.

Lloyd said one customer had already walked by the store and saw some special pieces that they’re doing in the Madison Collection and booked a private appointment for Friday. “We’ve layered in special pieces that people can’t find anywhere else,” said Lloyd. The Madison Collection is exclusive to the flagship and includes such pieces as an organza bow blouse, a dress with a big bow and wide-leg trousers. The rtw collection retails from $248 to $448, and is about 25 percent higher than the regular collection (which is also carried in the store). “It’s less about the price, but more fashion,” said Leavitt.

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The ceo said he plans to open several more flagships around the globe and is considering Shanghai and Tokyo.“Those are the most important ones on the immediate horizon,” said Leavitt. They’re also looking at one or two more flagships in the U.S., with Houston a strong possibility.

At present, accessories accounts for over 70 percent of Kate Spade’s offerings, but rtw is making inroads. The flagship has a room dedicated to rtw, which is the first time the company has done that in one of its stores. The goal is to increase apparel to 30 percent of the business. “We’re not quite there yet, but that’s what we’re going towards. We’re working in that direction,” said Leavitt. “When you think of how we’ve grown our apparel business from zero three years ago, when we launched it, to what it is today, it really shows the strength and importance of that category. To have a store that shows how much we believe in that category, it’s going to help move that needle forward,” he said.

In assessing the 70 percent of the business that is accessories, he said handbags comprise the largest segment, but the other accessory categories are growing. “It’s become more balanced as we forge ahead as a lifestyle brand,” he said.

Footwear and small leather goods are displayed throughout the store, but the main footwear area is located on the mezzanine level, along with a seating area to try on shoes. The ground-floor level has a section featuring “things we love.” This month, as part of their adventure theme, there are suitcases, clutches (one that says “CALIFORNIA OFFWEGO”), knitwear and books titled “Ready for Departure?” smartly arranged on the display table.

The store also devotes significant space to the bridal category. While Kate Spade doesn’t design wedding gowns yet, it offers bridal accessories, such as footwear, gifts, jewelry, fine china, vases and frames. “So many women come to us for their bridesmaids and they take a dress out of our regular collection. We’re not ready to go the full gown mode yet,” said Lloyd.

Another growth initiative for the brand is extending the weekend aspect of the collection. “It’s a huge opportunity for us. I don’t even think we’ve scratched the surface,” said Lloyd. She said the brand is well known for its embellished cardigans and one of their bestselling items ever was the skinny Broome Street jean. “We’ve also been hugely successful with all the colored jeans. One of our most successful pieces this season is the floral denim,” said Lloyd.

The Madison Avenue flagship plans to host charity events and shopping nights at the store, which is open seven days a week. It will also have a Wish List for customers to register what they might like for their birthdays, anniversaries or Mother’s Day. “We develop personal relationships with our clients. We don’t consider ourselves a chain store even though we do have stores in malls,” said Leavitt.  To get the word out, Kate Spade will host a blogger event this afternoon at the store, and will launch an ad campaign on Madison Avenue buses Monday.

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