Kate Spade (KATE) (VCR) has been very successful in penetrating the North American and international markets, competing against retail apparel giants such as Michael Kors (KORS), Ralph Lauren (RL), and Coach (COH). Kate Spade’s combination of high quality and competitive pricing has attracted customers, which is showing in its top line.
As shown in the above chart, the company has achieved top-line growth over the four quarters of 2015, driven by organic growth. In 4Q15, sales grew by 7.6%. This growth included the 14% organic growth seen in its stores as well as its e-commerce channel. E-commerce is another strong driver for the company’s future sales, and its share of the total revenue is growing by every quarter.
Margins are expanding
The company has been able to extract good margins from its business and is on track for its target of a high double-digit EBITDA (earnings before interest, tax, depreciation, and amortization) margin. In 4Q15, the adjusted EBITDA was 20.8%. Compared with the 18.8% achieved in 4Q14, this is a considerable increase of 200 basis points. In the next part of this series, we’ll look at what Wall Street thinks about the stock.