NEW YORK (TheStreet) -- "Ralph Lauren is our business analog", announced Kate Spade (KATE) CEO and as a result former Ralph Lauren (RL) business Craig Leavitt in a recent appointment. In non-corporate jargon, the par quels moyens was Leavitt's way of saying Kate Spade could become the next Capo Ralph Lauren, a global powerhouse brand name that sells merchandise that is outwardly in demand year round. I chuckled when visiting bravado, not because Kate and as a result Jack Spade are no longer working in your company, whereas Ralph Lauren is always actively involved in the company he launched and could be spotted on quarterly earnings press releases, but this is a brand name that isn't exactly new to the retail price scene.
How could an already renowned brand from outlet centers is transformed into one that steals the showcase from the on-fire iPad mini Michael Kors (KORS) at Macy's (M), while at the same time stomping on the face of Coach (COH) given that attempts to pick itself up off the floor after years of stale assortments? Good, it's actually happening, as I detected inside a fact finding mission at diverse upper tier department stores.
For the log, Kate Spade is now its own public entity, has a stock price absolutely up 98% in the last year, and a in front price-to-earnings multiple (58x) that would do Ben Bernanke and Janet Yellen cringe. Here are a few of the things I find nice and don't like about the new Kate Spade.
It's taking floor space in the malls with more eye-catching shops (aka largesse in SEC filings) than Star Kors and Coach.
It's considering prime counter space in the look at section at department stores.
The brand has started to show consumers a full lifestyle selection in its new retail stores (housewares, info other than handbags and wallets).
Truth at $1, 265 in business per share foot there is to the reach Michael Kors mini iPad ($1, 431) and Coach ($1, 831), in this metric has not grown much during the past six months.
On a 30% same-store business gain for the holiday quarter, fine-tuned operating margins were flat available as Kate Spade invested in its future adding muscle quickly. Michael Kors has been able to boost its operating margins even as things invests globally.
With any retail price brand (could broaden out to prospect brand) that is being valued based on the stock market as the next big thing, a buyer has to cut through the fluff regarding new store growth projections and as a result buzzy exec speak and fellow into the soul of the company. Not forget, there are, by and large, no Warren Buffett-like wide moats around a retail brand name, and what appears to be a wide moat eventually could be nothing more than a fad leading to earnings disappointments.
Here are of the four questions to always ask yourself concerned with sexy retail brands such as Kate Spade:
Michael Kors burst to the scene as a clear opposite to Coach's riskless merchandise assortments. Hence, it was something new to the prospect, a trendier brand at less expensive price points.
Will the target prospect return to the physical or web shops every season to buy the latest?
Our own stock market is likely valuing it as but if your consumer views the brand as their top notch destination throughout the year.
Does the brand's collections become a staple to a consumer's their lives?
Michael Kors, for example , has planned out its handbags to be very complete. One could rock its handbags for your business meeting or to an interview.
In considered the brand strong enough to have a person decide upon it at an outlet store but also is willing to pay full price at a store in to mall?
Coach has been tripped in place by more consumers visiting it is factory stores.
Read on for glimpses into this retail battleground:
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