Kate Spade’s high competition
Despite the highly competitive environment of the handbags and apparel industry—and a weakness in the US consumer spending—Kate Spade (KATE) has done fairly well, especially when compared to peers.
The company’s top line grew by 9.1% YoY (year-over-year) in fiscal 2015, as compared to a 7.7% YoY increase for Michael Kors (KORS) and a 12.7% YoY decline for Coach (COH) in their last reported fiscal quarters. Kate’s performance was better than those of apparel companies like Ralph Lauren (RL) and PVH Corp (PVH), which reported negative sales growth in their last fiscal quarters.
Expanding in new product categories
Kate is actively expanding in the children’s wear and home products segment in order to elevate its image as a lifestyle brand and increase cross-selling opportunities. The company introduced 14 new product categories in 2015. These categories were a success among the company’s existing customers as well as an attraction for new customers. About 30%–50% of the customers who made purchases in these categories were first-time purchasers of the Kate Spade brand.
Entering new geographies
Kate Spade entered eight new countries in fiscal 2015 through partnerships. It entered into a new distribution agreement to open standalone stores in major Indian cities and expanded its footprints in Latin America and greater China in fiscal 2015.
The company recently opened a new store in London’s Regent Street, which is the equivalent of Sachs Fifth Avenue in New York City. This is the company’s first European location to feature three of its four product categories: women, children, and home.
Notably, ETF investors seeking to get exposure to KATE can consider the iShares Morningstar Small-Cap Growth ETF (JKK), which invests 0.53% of its portfolio in the company.
Now let’s examine Kate Spade’s 1Q16 performance.