Annual Report 2015
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f o e l b Ta nts e t n o C Financial Highlights................................................................. 2 Letter to Stockholder............................................................... 4 Our Story ................................................................................. 8 Our Brands............................................................................. 11 Kate Spade New York............................................................. 12 Jack Spade.............................................................................. 15 Kate Spade Home................................................................... 16 Market Information............................................................... 21 Locations................................................................................ 22 Financials............................................................................... 24 Results of Operations............................................................ 26 Balance Sheets........................................................................ 28 Principal Executives............................................................... 34 Board of Directors.................................................................. 35
l a i c n Fina ights l h g i H
Kate Spade & Company designs and markets accessories and apparel principally under two global, multichannel lifestyle brands: Kate Spade New York and Jack Spade. With collections spanning demographics, genders and geographies, the brands are intended to accent customers’ interesting lives and inspire adventure at each turn. The Company also owns the Adelington Design Group, a private brand jewelry design and development group that markets brands through department stores and serves JCPenney via exclusive supplier agreements for the Liz Claiborne and Monet jewelry lines. The Company also has a license for the Liz Claiborne New York brand, available at QVC, and Lizwear, which is distributed through the club store channel.
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(Amounts in thousands, except per common share data)
2014
Net Sales
2013
2012
$1,138,603 $803.371 $544,765
Gross Profit
680,271
496,590
339,932
Operating Income (Loss)
33,472
20,215
(36,022)
Income (Loss) From Continuing Operations (1)(2)
76,726
(32,165)
(52,686)
159,160
72,995
(74,505)
0.61
(0.27)
(0.48)
1.26
0.60
(0.68)
Income (Loss) from Continuing Operations
0.60
(0.27)
(0.48)
Net Income (Loss)
1.25
0.60
(0.68)
Weighted Average Shares Outstanding, Basic
126,264
121,057
109,292
Weighted Average Shares Outstanding, Diluted (3)
127,019
121,057
109,292
Working Capital
221,705
206,473
36,407
Net Debt (4)
226,699
263,979
346,892
Net Income (Loss)(2) Per Common Share Data: Basic Income (LOSS) from Continuing Operations Net Income (Loss) Diluted
Net Sales ($ Millions)
Working Capital ($ Millions)
Net Debt ($ Millions)
2013
36
2014
347
545 1,139 206
2012
222 264
803
227
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e h t o t r e tt e L s r e d l o h k c o t S
Dear Fellow Stockholders: Just over a year ago, we began a new chapter and became Kate Spade & Company. We have delivered industryleading sales results and made decisions through the lens of building brand equity, generating significant awareness and expanding margins as we focus on our two key axes of growth – geographic expansion and product category expansion.
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Our achievements in 2014 paint a
out performance across all regions. In
In 2014, we made significant progress
picture of Kate Spade & Company’s
addition, full year Adjusted EBITDA
along our two key axes of growth –
strong momentum and speak to our
increased 67% on a comparable basis
geographic expansion and product
progress as we work towards our long-
to $147 million. We also completed
category expansion. We continue to
term goal of becoming a four billion
the Juicy Couture wind down and the
apply the right resources to targeted
dollar business at retail.
sale of Lucky Brand, and successfully
initiatives to maximize profitability.
recapitalized our balance sheet. Our
And in early 2015, we took actions
We are, first and foremost, a growth
aggressive growth path is balanced as
with our Kate Spade Saturday and
story. In 2014, Kate Spade & Company
we work to enhance quality of sale and
Jack Spade businesses that will help
continued topline expansion, with net
manage our points of distribution to
accelerate our lifestyle brand vision and
sales for the full year of $1.139 billion,
foster aspiration and continue to drive
better position us to deliver on Kate
a 42% increase compared to 2013
demand, protecting the brand so that
Spade New York’s full potential. On the
and an increase in comparable direct-
ours is a long-term growth story.
geographic axis, we continued to see
to-consumer sales of 24%, reflecting
increased demand in North America,
with a full year net sales increase of
Asia’s premier fashion retail and
our margin through a partnered
49% to $892 million and growth across
brand management group, to scale
approach. In addition, we now have a
all product categories. Internationally,
our brand presence in Greater China.
better understanding of our customers’
our full year net sales increased 47%
On the product category axis, we
weekend style through our work on
to $214 million, driven primarily by
established our four category pillars,
Kate Spade Saturday. Our decision in
performance in Japan and Southeast
women’s, men’s children’s and home.
early 2015 to absorb key elements of its
Asia. We launched our UK eCommerce
Our women’s business continues to
success into Kate Spade New York will
site, an important step as we strengthen
thrive and we recently introduced
allow us to concentrate on the explosive
our foothold in Europe and establish
our swimwear collection. We remain
growth of the Kate Spade New York
our brand in key European fashion
focused on our elastic categories,
brand. We are committed to our men’s
capitals. And, in January 2015, we
and our recently announced global
heritage and Jack Spade’s evolved
announced an important partnership
licensing agreement for watches with
business model will enable the brand
with Walton Brown, a subsidiary of
Fossil Group reflects our commitment
to leverage the distribution network
The Lane Crawford Joyce Group,
to drive licensing revenue and expand
of our retail partners and expand our
eCommerce platform, providing a
advancement in that category, as we
Our goals are ambitious, but passion
path to grow the brand and expand
progress toward becoming a more
and drive are deeply rooted in our
our customer base. The collection
complete lifestyle brand.
heritage. We are still early in our
will evolve to include tailored clothing
journey as Kate Spade & Company;
and dress furnishings, in addition to
In the year ahead, we will continue
sportswear and bags. In early 2015,
to focus our resources on targeted
we continued our expansion, launching
initiatives designed to generate strong
a childrenswear collection, which
results, maximize profitability and
provides us the opportunity to share
deliver stockholder value. We are
the world of Kate Spade New York
uniquely positioned to fulfill our lifestyle
with an entirely new demographic. We
brand vision and remain focused on
also announced four new home dĂŠcor
reaching our customers needs in all
licensing agreements with best-in-class
facets of their lives.
partners that are expected to fuel our
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thank you for your continued support. Sincerely,
Craig A. Leavitt
y r o t S Our
Kate Spade & Company debuted on February 26, 2014, but the initial sparks formed far earlier in the minds of two imaginative and driven women. Liz Claiborne (in 1976) and Kate Spade (in 1993), each frustrated they couldn’t find what they believed women were looking for in the marketplace, took matters into their hands and founded their own successful companies. And so the spirit of our company was born. Today, Kate Spade & Company designs and markets accessories and apparel under two global, multichannel lifestyle brands: kate spade new york and Jack Spade.
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s d n a r B r u O
Our Kate Spade family of brands offers fashion products (accessories, apparel and jewelry) for women under the Kate Spade New York trademarks and for men under the Jack Spade trademarks. Coming Spring 2016, there will be a new home furnishing line under Kate Spade Home trademarks.
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e d a p S Kate k New Yor
She is quick, curious, playful and strong. Kate Spade New York inspires women to live colorfully, delivering on our promise to help her lead a more interesting life. Our once handbag company has expanded its offering into clothing, jewelry, watches, shoes, stationery, eyewear, fragrance, tabletop, and gifts. In every time zone and on every continent, Kate Spade New York is a global lifestyle brand offering aspirational luxury with a clever wit and playful charm that is distinctly our own.
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e d a p S k c a J Jack Spade grew out of the simple idea that useful products could also be stylish. With the belief that good design solves a problem with straightforward solutions, the brand uses timeless and durable materials, delivering unexpected happiness to its customers. Jack Spade understands that taste and style say more about someone than fashion or trends. As a brand it stands for smart designs and ideas to help men live a layered life. Offering apparel, accessories, bags and curiosities that project the brand’s sensibilities, Jack Spade speaks to an expanding collection of discerning customers in the U.S., with a small but burgeoning business abroad.
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e d a p S Kate Home
Building on its success in the home category, Kate Spade New York announced significant expansion in the home furnishings category with the introduction of furniture, lighting, rugs and fabric. The comprehensive collection, comprised of 325 pieces across four categories, launches to the trade at the fall High Point Market in North Carolina, with a complete assortment of offerings for every room in the home. Available in Spring 2016, the collection is comprised of three complementary collaborations, the range includes furniture produced with E. J. Victor, lighting made with Visual Comfort, and carpets realized with the rug firm Jaipur. The interior furnishings collection embody: the Drake armchair, the Georgia chest of drawers and the Worthington chair riffs on the classic silhouette.
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SHE IS QUICK AND CURIOUS PLAYFUL AND STRONG
t e k r a M ormation Inf
Our common stock trades on the NYSE under the symbol KATE. The table below sets forth the high and low closing sale prices of our common stock for the periods indicated. On February 20, 2015, the closing sale price of our common stock was $33.88. As of February 20, 2015, the approximate number of record holders of common stock was 3,441.
Fiscal Period
High
Low
1st Quarter
$40.15
$27.56
2nd Quarter
39.20
31.69
3rd Quarter
40.45
25.95
4th Quarter
32.21
24.64
1st Quarter
$19.23
$12.45
2nd Quarter
22.84
18.44
3rd Quarter
26.01
22.58
4th Quarter
33.59
24.32
2014:
2013:
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s n o ti a Loc
Kate Spade New York has over 140 retail shops and outlet stores across the united states, and more than 175 shops internationally. Our colorful products are sold in more than 450 doors worldwide, in every time zone and on every continent. Alabama....................................... 3
Mississippi..................................... 1
Arizona......................................... 3
North Carolina............................. 2
California................................... 25
Nebraska....................................... 1
Colorado....................................... 1
New Jersey.................................... 5
Connecticut.................................. 3
Nevada......................................... 5
District of Columbia.................... 2
New York.................................... 12
Delaware...................................... 1
Ohio............................................. 4
Florida........................................ 15
Oklahoma..................................... 1
Georgia......................................... 4
Oregon......................................... 1
Hawaii.......................................... 5
Pennsylvania................................. 4
Illinois........................................... 6
South Carolina............................. 4
Indiana......................................... 1
Tennessee..................................... 2
Kentucky...................................... 2
Texas.......................................... 13
Massachusetts............................... 6
Virginia......................................... 7
Maryland...................................... 2
Vermont....................................... 1
Michigan...................................... 3
Washington................................... 3
Minnesota..................................... 2
Wisconsin...................................... 2
Missouri........................................ 3
Texas............................................ 1
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150
stores in the usa
s l a i c n Fina
The following table sets forth certain information regarding our results of operations and financial position and is qualified in its entirety by the Consolidated Financial Statements and notes thereto, which appear elsewhere herein.
2014
2013
2012
$1,138,603
$803,371
$544,765
680,271
496,590
339,932
33,472
20,215
(36,022)
(Amounts in thousands, except per common share data) Net sales Gross profit Operating income (loss) Income (loss) from continuing operations(a)(b)
76,726
(32,165)
(52,687)
Net income (loss)(b)
159,160
72,995
(74,505)
Working capital
221,705
206,473
36,407
Total assets
926,338
977,511
902,523
Total debt
410,743
394,201
406,294
Total stockholders’ equity (deficit)
199,611
(32,482)
(126,930)
Income (loss) from continuing operations
0.61
(0.27)
(0.48)
Net income (loss)
1.26
0.60
(0.68)
0.60
(0.27)
(0.48)
Per common share data: Basic
Diluted Income (loss) income from continuing operations Net income (loss)
1.25
0.60
(0.68)
Weighted average shares outstanding, basic
126,264
121,057
109,292
Weighted average shares outstanding, diluted(c)
127,019
121,0571
09,292
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2011
2010
$569,820
$670,826
309,983
293,203
(140,335)
(126,134)
101,144
(164,328)
(171,687)
(251,467)
124,772
39,043
950,004
1,257,659
446,315
577,812
(108,986)
(24,170)
1.07
(1.74)
(1.81)
(2.67)
0.91
(1.74)
(1.35)
(2.67)
94,664
94,243
120,692
94,243
s n o ti a r e p O f o t l Resu Net sales for 2014 were $1.139 billion, an increase of $335.2 million or 41.7%, as compared to 2013 net sales of $803.4 million. Excluding the additional week in 2014, comparable direct-to-consumer net sales, including e-commerce, increased by 24.4% in the 2014; excluding e-commerce net sales, comparable direct-to-consumer net sales increased by 21.6%. Including the additional week in 2014, comparable direct-to-consumer net sales, including e-commerce, increased by 25.9% in 2014; excluding e-commerce net sales, comparable direct-to-consumer net sales increased by 23.1%.
41.7%
59.7%
6.7%
Net Sales
Gross Profit
Operating Loss
Fiscal Years Ended
January
December
2015
2013
$1,138.6
$803.4
680.3
496.6
645.3
473.1
Dollars in millions Net Sales Gross Profit Selling, general & administrative expenses Impairment of intangible assets Operating Income Other expense, net Impairment of cost investment
1.5
3.3
33.5
20.2
(4.0)
(2.1)
—
(6.1)
Loss on exstinguishment of debt
(16.9)
(1.7)
Interest expense, net
(20.2)
(47.1)
Benefit for income taxes
(84.3)
(4.6)
76.7
(32.2)
82.5
105.2
$159.2
$73.0
Income (Loss) from Continuing Operations Discontinued operations, net of income taxes Net Income
s t ee h S e c n Bala In thousands, except share data
January 3, 2015
December 28, 2013
$184,044
$130,222
90,091
89,554
158,241
184,634
616
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Current Assets: Cash and cash equivalents Accounts receivable — trade, net Inventories, net Deferred income taxes Other current assets
41,508
45,031
—
202,054
474,500
651,713
174,072
149,071
Goodwill
64,798
49,111
Intangibles, Net
90,327
90,678
56
57
88,976
—
Assets held for sale Total current assets Property and Equipment, Net
Deferred Income Taxes Note Receivable Other Assets Total Assets
33,609
36,881
$926,338
$977,511
January 3, 2015
December 28, 2013
Current Liabilities: Short-term borrowings
$10,459
$3,407
Accounts payable
88,402
142,654
Accrued expenses
150,926
200,178
3,008
2,631
Income taxes payable Liabilities held for sale
—
96,370
Total current liabilities
252,795
445,240
Long-Term Debt
400,284
390,794
Other Non-Current Liabilities
56,465
157,335
Deferred Income Taxes
17,183
16,624
—
—
issued shares — 176,437,234
176,437
176,437
Capital in excess of par value
199,100
155,984
1,145,643
1,020,633
(29,986)
(20,879)
1,491,194
1,332,175
(1,291,583)
(1,364,657)
199,611
(32,482)
$ 926,338
$ 977,511
Commitments and Contingencies (Note 9) Stockholders’ Equity (Deficit): Preferred stock, $0.01 par value, authorized shares — 50,000,000, issued shares — none Common stock, $1.00 par value, authorized shares — 250,000,000,
Retained earnings Accumulated other comprehensive loss Common stock in treasury, at cost — 49,065,798 and 53,501,234 shares Total stockholders’ equity (deficit) Total Liabilities and Stockholders’ Equity (Deficit)
In thousands, except per common share data Net Sales
$1,138,603
$803,371
$544,765
Cost of goods sold
458,332
306,781
204,833
Gross Profit
680,271
496,590
339,932
Selling, general & administrative expenses
645,266
473,075
375,954
Impairment of intangible assets
1,533
3,300
—
Operating Income (Loss)
33,472
20,215
(36,022)
Other expense, net
(4,033)
(2,062)
(325)
—
(6,109)
—
Impairment of cost investment Gain on acquisition of subsidiary
—
—
40,065
Loss on exstinguishment of debt
(16,914)
(1,707)
(9,754)
Interest expense, net
(20,178)
(47,065)
(51,612)
(7,653)
(36,728)
(57,648)
Loss Before Benefit for Income Taxes Benefit for income taxes
(84,379)
(4,563)
(4,961)
Income (Loss) from Continuing Operations
76,726
(32,165)
(52,687)
Discontinued operations, net of income taxes
82,434
105,160
(21,818)
$159,160
$72,995
$(74,505)
Income (Loss) from Continuing Operations
$0.61
$(0.27)
$(0.48)
Net Income (Loss)
$1.26
$0.60
$(0.68)
Income (Loss) from Continuing Operations
$0.60
$(0.27)
$(0.48)
Net Income (Loss)
$1.25
$0.60
$(0.68)
Weighted Average Shares, Basic
126,264
121,057
109,292
Weighted Average Shares, Diluted
127,019
121,057
109,292
Net Income (Loss) Earnings per Share, Basic:
Earnings per Share, Diluted:
Net Income (Loss)
$159,160
$72,995
$(74,505)
(10,234)
(11,788)
(3,990)
—
—
(160)
Other Comprehensive (Loss) Income, Net of Income Taxes: Cumulative translation adjustment, net of income taxes of $0 Unrealized losses on available-for-sale securities, net of income taxes of $0 Change in fair value of cash flow hedging derivatives, net of income taxes of $566, $602 and $0, respectively Comprehensive Income (Loss)
1,127
983
—
$150,053
$ 62,190
$(78,655)
she is anything but ordinary
l a p i c n Pri tives u c e x E Craig A. Leavitt
Roy Chan
George M. Carrara
William Higley
Chief Executive Officer
President & Chief Operating Officer
Deborah Lloyd
Chief Creative Officer
Thomas Linko
Senior Vice President, International
Senior Vice President, Human Resources
Timothy Michno
Senior Vice President, General Counsel & Corporate Secretary
Chief Financial Officer
Mary Beech Executive
Linda Yanussi
Vice President & Chief Marketing Officer
Senior Vice President, Global operations & Information Technology
Emilia Fabricant
Michael Rinaldo
executive Vice President, President of North America
Vice President, Corporate Controller & Chief Accounting Officer
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f o d r Boa tors c e r i D Nancy J. Karch
Craig A. Leavitt
Chairman Director Emeritus of McKinsey & Co.
Chief Executive Officer of Kate Spade & Company
Deborah Lloyd
Lawrence S. Benjamin
Managing Director of Capwell Partners LLC
Chief Creative Officer of Kate Spade & Company
Raul J. Fernandez
Doug Mack
Chairman of ObjectVideo, Inc.
Chief Executive Officer of Fanatics, Inc.
Kenneth B. Gilman
Retired Chief Executive Office of Asbury Automotive Group
Jan Singer
Kenneth P. Kopelman
Doreen A. Toben
CEO of Spanx
Partner in the New York City law firm of Kramer, Levin, Naftalis & Frankel LLP
Retired Chief Financial Officer and Executive Vice President of Verizon Communications, Inc.
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