Kate Spade & Company (KATE, Financial) operates principally under two global, multichannel lifestyle brands: Kate Spade New York and Jack Spade. The company's four category pillars – women's, men's, children's and home – span demographics, genders and geographies.
Known for crisp color, graphic prints and playful sophistication, Kate Spade New York aims to inspire a more interesting life. The Kate Spade New York collection includes the Madison Avenue, Broome Street and on purpose labels. Jack Spade offers a timeless and versatile assortment of bags, sportswear and tailored clothing founded on the aesthetic of simple, purposeful design. The company also owns Adelington Design Group, a private brand jewelry design and development group.
With collections spanning demographics, genders and geographies, the brands are intended to accent customers' interesting lives and inspire adventure at each turn. The company recently reported its first quarter and boasts of robust top-line growth. It witnessed an overall sales growth of 15%.
First quarter results
Net sales during the first quarter of 2016 were $274 million, which marked an increase of $35 million, or 14.5%, from the prior-year quarter.
First quarter 2016 direct-to-consumer comparable sales growth was 19%, or 8% excluding ecommerce.
Gross profit as a percentage of net sales was 61.8% for the first quarter (62.0%, excluding the impact of wind-down operations, and 60.6% on a reported basis, during the prior-year quarter).
Selling, general and administrative expenses were $152 million, or 55.3% of net sales in the first quarter ($137 million, or 57.4%, of net sales during the prior-year quarter).
Income (loss) from continuing operations on a reported basis was $11 million, or 8 cents per diluted share in the first quarter, which was a loss of $54 million, or 42 cents per diluted share, in the prior-year quarter.
Diluted earnings per share from continuing operations in the first quarter were 5 cents.
Segmentwise results
Kate Spade North America net sales during the first quarter were $219 million, which marked an increase of $32 million, or 17.1%, compared to the prior-year quarter.
Reported net sales for the first quarter of 2015 were $196 million.
Kate Spade North America's segment-adjusted EBITDA was $25 million.
Kate Spade International net sales for the first quarter were $49 million, which marked an increase of $2 million, or 3.2%, from the prior-year quarter.
Reported net sales for the first quarter of 2015 were $52 million and $47 million excluding wind-down operations.
Kate Spade International's segment-adjusted EBITDA was $9 million (17.5% of net sales) for the first quarter.
Adelington Design Group net sales for the first quarter were $7 million, which marked an increase of $1 million, or 23.8%, from the prior-year quarter excluding sales for wind-down operations.
Reported net sales were $7 million for the first quarter of 2015.
Adelington Design Group's segment-adjusted EBITDA was $2 million (31.8% of net sales) in the first quarter.
Strong attributes of the quarter
- The company focused on a powerful multichannel approach.
- Robust performance of global ecommerce business.
- Robust top-line growth of 15%.
- Solid store growth.
Focus
- The company aims to achieve at least 200 basis points of Adjusted EBITDA margin improvement for the full year.
- It continues to focus resources on targeted initiatives designed to generate strong results.
- Maximize profitability.
- Deliver stockholder value.
- Brand building initiatives.
- Direct-to-consumer business.
- Drive demand and help maintain gross margin over the long term.
On a concluding note
It is uniquely positioned to fulfill lifestyle brand vision and remain focused on reaching customers in all facets of their lives. The company is well positioned to generate significant margin expansion in 2016 and is confident in achieving full year top and bottom line guidance. Kate Spade became a stronger, refocused company in 2015 with a retail footprint of nearly $2 billion as it continued to successfully transform into a global, multichannel lifestyle brand. The company’s partnered approach to geographic and product category expansion allowed it to grow operating margin, build scale and offer customers access to their collections across markets.
Disclosure: I do not hold any position in the company.
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