Kate Spade is the Last Brand Standing

When Fifth & Pacific (NYSE: KATE  ) finally ditched its Liz Claiborne moniker last year, a representative for the company said that the "Pacific" in its new name was meant to highlight the business's two West Coast style brands -- Juicy Couture and Lucky Jeans. Now, Juicy has been sold off and Lucky is on the chopping block. Sales at the company's other main brand -- Kate Spade -- are dominating its growth. It looks like Fifth & Pacific is well on its way to being Kate Spade.

Source: Kate Spade.

Kate Spade grows sales
In the second-quarter report the company released yesterday, sales from Kate Spade dominated the scene. The business pulled in the largest chunk of revenue, its comparable sales growth was far and away the best of the brands, and its EBITDA margin was the highest. The comparable store sales growth was especially impressive, as Kate Spade managed to hit 31%, beating out even high flying Michael Kors (NYSE: KORS  ) .

Kate Spade sales were boosted by a strong showing in leather goods and growth in watches. Management was especially happy with the watches business, which is following in the footsteps of Fossil and beating market expectations.

Strength at Kate Spade has been a defining feature of Fifth & Pacific over the last year. The company has launched a new, more accessible brand with Kate Spade Saturday and it continues to add new locations around the globe. With Juicy stores in line to be shut down, the company has said that some locations will be converted to Kate Spade shops, giving the brand another boost.

Slimming the business down
Last month, Fifth & Pacific announced that it had sold Juicy Couture's intellectual property to Authentic Brands Group for $195 million. In the most recent earnings call, management gave some more details on how that transition was going to work. It also touched on the company's future, saying that if the Fifth & Pacific were to become a one-brand shop, it would see some significant savings on overhead.

While Lucky is still a strong brand, the future of Fifth & Pacific looks more and more like it's going to be just Kate Spade. That will put it in a better position to compete with Kors and other fashion retailers, but will limit the company's ability to pad weak consumer demand by spreading out its successes and failures.

Right now, Kate Spade is a success. Sales per square foot surpassed $1,200 last quarter. For comparison, Kors is on pace to put up well more than $1,500 in sales per square foot this year. That means that Kate Spade may still has some room to run. Lucky Brand, on the other hand, definitely has space to expand with sales per square foot running at roughly 75% of the company's goal.

The future of Fifth & Pacific is Kate Spade
As those sales increase, Lucky is going to start looking like a great business. I'd prefer that Fifth & Pacific held on to it, but I can see that the business wants to cut down on back-room costs to compete with its thinner rivals. Fifth & Pacific shares are trading at just 2.2 times sales, making the company substantially cheaper than Kors, which trades at 6.5 times sales -- but which also puts up positive earnings.

If the company can continue to grow Kate Spade and keep Lucky on the right track, I think it has plenty of growth potential ahead of it. Just watch out for Kate Spade going the way of Juicy -- without another brand to back up the fall.

How to get all of the Kate Spade
Kate Spade bags can run around $500. That's a lot of cash, but have no fear, compounding interest is here to help. The beauty of investing in the stock market is its ability to help smart investors turn "savings" into "retirement" -- or handbags. If you think buying a $500 purse is  hard to stomach, imagine paying for college without a plan. 

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