Kate Spade to shut Saturday and Jack Spade stores
The focus is on long-term investment in the Kate Spade New York brand
US retailer Kate Spade & Co. has revealed plans to close its Kate Spade Saturday and Jack Spade stores as it focuses long-term investment on its flagship Kate Spade New York brand.
The strategic initiative will see Kate Spade discontinue the Saturday brand as a standalone business and absorb key elements of it into the New York line.
The move will involve the closure of 16 company-owned and three partnered store locations in a phased approach during the first half of 2015. The e-commerce site will remain active until the label incorporated into the Kate Spade New York brand.
A new business model has also been developed for the Jack Spade brand that will enable it to leverage the distribution network of its retail partners and expand its e-commerce platform. As a result, 12 company-owned and operated stores will close during the first half. The brand's retail partner and e-commerce presence will continue with no interruptions during the process.
"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 maximise profitability and shareholder value in the near, mid and long term," said CEO Craig Leavitt. “We continue to focus on two axes of growth – geographic expansion and product category expansion.”
Cowen & Co analysts agreed with the firm's strategy to focus on execution within their core brand, adding that it could have been “a long and expensive road to turn the Saturday andJack brands into profitable entities”.
The move is expected to cost the company US$25m to $30m in restructuring charges, and up to of $9m in non-cash asset impairment charges. This, as the company revealed strong preliminary results for 2014 but a weak sales forecast for the coming year.
For 2014, Kate Spade said it expects a net sales increase of over 40% to a range of $1.13bn to $1,14bn, with higher than expected direct-to-consumer comparable sales growth of 26%.
Adjusted EBITDA is expected in a range of $145m to $150m, which includes losses of $29m from Kate Spade Saturday and the brick and mortar operations of Jack Spade, as well as inventory charges resulting from the planned initiatives.
For 2015, the company is forecasting net sales in the range of $1.20bn to $1.28bn, as direct-to-consumer comparable sales increase in the high single digits.
Separately, Kate Spade announced a partnership with Walton Brown, a subsidiary of Asia retail and brand management group The Lane Crawford Joyce Group, to grow the company in Greater China.
The joint venture will see the establishment of a network of stores in key cities, enhanced by an organisational and marketing platform across China, Hong Kong, Macau and Taiwan.
It has also signed a share purchase agreement with E-Land Fashion China Holdings Limited, its current partner in China, to acquire E-Land's 60% interest in KS China Co., Limited. The transaction is expected to close in February.
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