What’s Really Driving Kate Spade’s Sales?


Jul. 19 2016, Updated 3:06 p.m. ET

Kat Spade’s sales

Kate Spade’s (KATE) primary target audience is middle- and upper-middle class consumers, particularly women. Women’s accessories, including handbags, small leather goods, and other accessories make up the core product category for Kate Spade.

This category accounted for about 70% of Kate’s net sales in fiscal 2015. The segment is highly competitive, and KATE faces competition from bigger players like Michael Kors (KORS), Coach (COH), and Ralph Lauren (RL).

KATE drives 75% of its sales from company-owned retail stores and e-commerce sites—a percentage higher than most of its peers. This enables Kate to control its brand image and improve its gross profit.

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What are Kate’s key focus areas?

KATE is looking to establish itself as a global lifestyle brand. It plans to grow its revenue by expanding its product categories and by entering new geographies. This would allow the company to grow its operating margin and build scale. The company is also expanding its e-commerce channel, which represents a significant 20% of the company’s total sales.

E-commerce business

While COH, KORS, and RL have registered slowdowns in same-store sales, Kate has witnessed impressive sales comps. The company’s comparable store sales registered a 19% growth in the latest quarter (ending April 2, 2016).

Much of this sales growth was driven by the company’s robust e-commerce business. Global e-commerce business has done particularly well, registering strong double-digit growth in both flagship and flash sites. After excluding its e-commerce business, Kate’s same-store sales grew by slightly under 8%.

ETF investors seeking to add exposure to KATE can consider the iShares S&P Mid-Cap 400 Value ETF (IJJ), which invests 0.22% of its portfolio in the company.


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