Roundtable Discussion: Kate Spade Comes of Age

kate spade new york Holiday 2013

An image from kate spade new york’s Holiday 2013 campaign.

Today, Fifth & Pacific Companies, Inc. announced it is changing its name to Kate Spade & Company and transitioning in a merged leadership team. The name change follows Fifth & Pacific Companies’ recent divestiture of Juicy Couture and agreement to sell Lucky Brand.  The new Kate Spade & Company will focus on fully realizing the potential of kate spade new york, one of the world’s fastest growing retail brands, as well as Jack Spade and the recently introduced Kate Spade Saturday.

To learn more about what’s behind the big news, we sat down with outgoing CEO Bill McComb, as well as the incoming team: CEO Craig Leavitt, President and COO George Carrara, and Chief Creative Officer Deborah Lloyd.

Kate Spade & Company CEO Craig Leavitt.

Kate Spade & Company CEO Craig Leavitt.

The High Low:  Thanks for joining us today.  Let’s start with the big picture.  Why refocus the company around a single brand?

Bill McComb:  It’s simple. When you have a high growth, long runway opportunity—as we have with kate spade new york — you put everything you can behind it.  Such unique opportunities demand resources: board time, management time, marketing dollars and capital.  As excited as we were about the overall portfolio, it was very clear that a concentration of resources was needed to deliver fully on the enormous promise of kate spade new york.

Craig Leavitt:  Expanding our business, identifying new opportunities and continuing our positive growth trajectory will be our team’s primary focus. Over the past five years, kate spade new york has grown 7.5X, which is significant, and we are still in the early stages of our brand’s development. Our company’s concentration on kate spade new york offers us more dedicated resources, such as focused capital and enhanced organizational resources, to help accelerate our progress and momentum.  We will continue to take a strategic, thoughtful approach to growing our business, ramping up in North America and around the world, to deliver shareholder value.

George Carrara:  And from an investor point of view, kate spade new york is a very attractive asset. It’s our job to maximize the value for shareholders. That means shifting from our brand portfolio approach — where resources are divided across kate, Lucky and Juicy — to one in which all cylinders are firing for a brand that’s growth rate is far exceeding many, if not all, in the marketplace.

THL:  With kate spade new york coming out as the big winner, then, would you say Fifth & Pacific Companies, Inc. has come full circle?

Bill McComb:  You know, there are a lot of funny parallels.  When Liz Claiborne Inc. had its public debut, it was a breakthrough.  It was about quality, design, and style, and while the two brands aren’t really comparable in terms of aesthetics or imagery, we see parallels from a business perspective.  This is a great company, this is an industry-defining time for the brand, and it’s going to be a disruption on a global level — just like Liz Claiborne back in its day.

THL:  So, tell us about the leadership transition that’s coming.  What’s the time frame like?  What are some of the goals?

Bill McComb: The most important and beautiful thing about this transition is its continuity.  Deborah and Craig have been running the show at kate spade new york since 2007. Back then, we treated ksny as an incubator, protected from the many distracting elements of running a public company, solely focused on its own mission.  As we narrowed the portfolio and the brand continued to grow dramatically, the next stage of our evolution occurred naturally, with the kate spade new york brand team and our corporate leaders becoming increasingly integrated.  Finally, with George joining the FNPC team two years ago, he’s put a huge emphasis operationally on enabling the new approach that is the Kate Spade & Company  model.

George Carrara: What we’re doing is making Kate Spade & Company more direct-to-consumer, refining and improving our back-end retail capabilities. This means enabling and activating an omni-channel IT platform that spans e-commerce and delivers a ‘one database and one inventory’ approach to the whole system.

Deborah Lloyd: Our leadership team is aligned and united in our approach to growing and developing the kate spade new york brand. With the leadership of the Kate Spade brand remaining the same, the transition is really seamless.  We are able to welcome in and deepen our partnership with the corporate team and ensure a stable transfer of responsibilities.

Bill McComb: The combination of Craig as Chief Executive Officer, Deborah as Chief Creative Officer and George going in as Chief Operating Officer is a seamless progression. In truth, it isn’t even a big milestone, and it’ll happen in the blink of an eye because we’ve really been operating this way for a long time.

Deborah LloydKate Spade & Company Chief Creative Officer Deborah Lloyd.

THL:  Bill – why are you leaving?  You’ve played a crucial role in the turnaround and dramatic growth of kate spade new york.

Bill McComb:  I set myself up!  As a manager of a portfolio, without direct industry experience at the line level, I hired some of the best people around and gave them great platforms. Whether we became a mono-brand company as we’re doing, or whether Lucky Brand, Juicy Couture, and kate spade new york each became mono-brand entities, my plan was always to pass the baton to the leaders of these businesses. When you compare how we’ve performed relative to other large competitors, you can look and say the job is done, it’s time for this team to step up, and face Wall Street, the investors, and the consumer with the exceptional ideas I know they have.

THL:  This question is for Craig and Deborah.  As you make the transition from brand leaders to top public company executives, what do you expect to change in your day-to-day?

Craig Leavitt:  The biggest change is that our job is to look at opportunity and growth from an even broader perspective—namely, building shareholder value. In practice, that means we will continue grow this business in a thoughtful way, balancing our approach with the requirements and expectations of any public entity.  We will expand our stores around the world and continue to pursue our goal of creating a lifestyle brand, through the addition of product categories that are relevant and important to our customer.

Deborah Lloyd:  While my day-to-day role will not shift significantly, my job is all about change, every day.  My role is to inspire and lead our organization to constantly innovate and look to the future as we develop beautiful, high-quality products.  I will maintain focus on ensuring our business is growing and evolving each season to offer our customers not only incredible products but an invitation to immerse themselves in the kate spade new york, Kate Spade Saturday and Jack Spade lifestyles.

THL:  What’s new and unexpected that we should be looking for from kate spade new york, Kate Spade Saturday, and Jack Spade in 2014?

Deborah Lloyd:  In all three, we have strong, promising brands, each with their own unique growth opportunities.  We will continue to push ourselves to be leaders, both on- and off-line.  We will be brave and willing to take risks and experiment, all while listening to our customers and delivering collections that meet their needs and fit their lifestyles.  We exist for our customers and take feedback seriously.  We will continue to evaluate and adapt our collections accordingly.

For kate spade new york, while we remain anchored in the handbags that started it all, we will grow our apparel collection as well as expand our  tabletop, footwear, jewelry, watches, stationery, beauty and party offerings to create a true lifestyle brand.

Kate Spade Saturday launched last year and it offers significant potential.  From the moment we launched this brand, customer feedback has played a critical role in fit, style and product offerings.  We will continue listening and delivering the products our customers are telling us they want.  Jack Spade is a beloved brand with growth potential, which we will focus on unlocking  to realize its full value.

Kate Spade SaturdayA classic look from Kate Spade Saturday.

THL: The convergence of fashion and technology seems to be accelerating. How will the new Kate Spade & Company respond?

Craig Leavitt:  Great question. Our company is aligned and dedicated to progressive thinking in the digital space.  It starts with being channel agnostic and brand- and customer-centric. Our e-commerce site acts as our global flagship, offering the broadest assortment of product as well as a place where we can tell the story behind our inspiration.  We seamlessly integrated technology into our stores so when our customer needs something that’s not available in a store, our sales associates—really our brand ambassadors—easily help her find the product online. Technology is about being able to help our consumer find the product she wants, and delivering it to her wherever and whenever she wants.

George Carrara: In fact, to make sure we’re in the best position to deliver a seamless consumer experience, we’ve invested $20 million in technology infrastructure over the past 18 months, and it’s already paying off. During the most recent [cyber week], we tripled the volume of orders versus our results in last year’s comparable period, and we also have a site that’s fully optimized for desktop, tablet, and mobile technology.  We’ve also implemented and rolled out a state-of-the-art point of sale system in each of our stores. In the first half of 2014, we will add the integration of mobile technology points of sale in each our stores. Again, it’s about delivering the best possible omni-channel experience.

THL:  How’s the mobile approach playing out in real life?

Craig Leavitt:  Very well.  It’s empowering us to provide another level of service to the customer, especially in high volume stores. Getting customers served faster, shortening checkouts, executing transactions anywhere in a store—that’s the kind of service people want – and it is the kind of service they come back for.

George Carrara:  And it drives growth, too, of course.

THL:  George, as a leader of Fifth & Pacific Companies, Inc., who will continue to play a senior role in Kate Spade & Company, what can you tell us about what will change and what will stay the same?

George Carrara: First, do no harm. Deborah, Craig and team have created a special DNA with kate spade, and everything we do has to support the brand that’s driving our growth. Second, we will have to evolve to become a public company, and that will be driven through ever greater integration of our existing corporate function and the brand team. As Bill mentioned, the Fifth & Pacific Companies’ corporate team and Craig and his gang have been working together all along. It’s fundamentally a continuation of what we’re already doing.

THL:  During the kate spade new york Investor Day back in March 2013, you talked about building a $4 billion brand.  Do you still believe that’s feasible?  If so, on what kind of timeline?

Craig Leavitt: Yes, we have tremendous opportunities to expand in North America with new stores in new markets and delivering a positive  e-commerce experience.  In addition, we are poised for continued growth in Japan, as well with meaningful new opportunities in China, Southeast Asia and the Middle East, not to mention Europe. We also have new categories of business in the development stages — such as the home area — and we believe they will deliver meaningful growth in the years ahead. Last but certainly not least, Kate Spade Saturday and Jack Spade will also create pipelines for meaningful growth.

George Carrara:  To get to the numbers, in terms of the 2016 goals set out at Investor Day, we are on the path to exceed $2 billion in retail sales, with approximately one third of our business coming from international units.  During 2016, we expect our sales volume to exceed $1.2 billion and our [brand] EBITDA to exceed 25%.

A recent Jack Spade campaign.

A recent Jack Spade campaign.

THL:  There’s increasingly intense competition in your set.  Where do you see challenges and how do you intend to address them as you meet your sales objectives?

Craig Leavitt:  Having a clarity of vision about who our consumer is, creating product that has a strong point of differentiation, and continuing to surprise and delight her with that product is how we’re going to win. Our diversified business model gives our business the balance and scope to weather the inevitable ups and down in the marketplace.  Our breadth of product positions us as lifestyle brand.  In addition, we have expanded beyond the U.S. and are tracking to have one third of our business outside the U.S. by the end of 2016.

THL:  Here’s a question for everyone.  Looking ahead, what keeps you up at night?

Craig Leavitt: Filtering out the noise and staying focused on the signal — the big ideas that will drive our business forward.

Deborah Lloyd:  Focus.  Although we may want to do everything, we cannot. We must allocate the time and resources to do things right, and that’s what will keep our brands fresh, delightful and surprising.

George Carrara: Speed, efficiency, nimbleness—the keys to staying ahead of the curve and making sure we can fulfill our brands’ and our consumers’ needs.

THL:  What are you guys going to miss about Bill and his leadership?

Craig Leavitt:  For me, his tremendous level of energy and the mentoring that has made possible the unique opportunity to lead such an impressive business.

George Carrara:  Bill makes you see that the unattainable is in fact the possible. He pushes you to get there, and we are all bigger and better for it, as a company and as individuals.

Deborah Lloyd:  For me, it’s his passion.  He understands how to push us to those uncomfortable places, spotting things we haven’t necessarily seen.  And then, we achieve something incredible because of it.