Can Kate Spade Export Its Magic?

With more classic retailers falling behind, Kate Spade is expanding beyond its borders.

Jun 23, 2014 at 6:00PM

Years ago on a trip to Hawaii, I heard tales of a genre of Asian tourist -- the shopping tourist. Allegedly, these folks would fly to Hawaii with a carry-on bag and an empty suitcase that they filled up with the finest American loot. The sights? The sounds? None were had -- unless they were found in the mall. It's a tale that rings true with many retailers as they expand into the Asian market and find an insatiable appetite for polished American goods.

One of the newest entrants into Asia is Kate Spade (NYSE:KATE), handbag maven and all-around rock star. Kate has put up incredible sales growth in the U.S. Sales have been so strong that the company ditched its other major brands -- Juicy Couture and Lucky Brand -- to focus on the Kate Spade moniker. Now, Kate is looking to push beyond our fair soil, and she couldn't have picked a better time.

The ace of Spade
Let's start by looking at the handbag market. The three dominant, mass-market brands are Kate Spade, Michael Kors (NYSE:KORS), and Coach (NYSE:COH). Coach represents the old guard, and its failure to shift quickly has led to a weak third place. Last week, the company announced a revised forecast due to expenses it will incur as it closes down 70 of its retail locations -- about 13% of its entire North American footprint.

That leaves Kors and Kate vying for the top spot, with ambitions to be much more than they currently are. Kors is growing sales in North America at a steady rate, putting up a comparable-store sales increase of 20.6% last quarter. The company's relatively small European division did even better, growing comparable sales by 62.7%, demonstrating the demand for Kors outside of the U.S.

Kate Spade did slightly better than Kors, with comparable sales of 22% in North America. Right now, the former makes a scant 20% or so of its revenue outside of the U.S., but has its sights set on expansion in Europe and Asia, though no doubt hoping to recreate the magic of Kors.

Getting the word out
Michael Kors' European sales have surged ahead as the market catches on to the trend. Kors has reacted to the positive demand by opening new locations, and it now operates around 120 locations outside the U.S. The company has a mix of European and Japanese outlets, and it seems clear that Asia is the next big push.

Kate Spade's management team has said that expansion into Europe is its No. 1 priority, but it's not just going to wait around for Asia to come to it. The company appointed Roy Chan as the new senior vice president of international. Chan has an international background from the Jones Group and was COO at Evisu, a Japanese denim company.

Kate's long-term plan is to have two-thirds of its revenue generated outside the U.S. That's going to require some significant expansion, and Asia is the place where the magic happens. To that end, the company recently completed the buyout of Asia-based Globalluxe, which owned the Kate Spade brand in many Southeast Asian countries. It put a substantial employee base in place before the completion of the deal, so expect that area to be running smoothly and quickly very soon.

To sum it all up, Kate Spade is a brand on a mission and it has the pieces in place to make Asia its next big conquest. If it can beat Kors to the saturation point, then Kate Spade might have a chance to push its advantage into the stratosphere. Don't count Kors out just yet, but Kate is definitely one to watch over the next year.

Bringing the battle to you
There may be a war raging in fashion, but there's an even bigger opportunity in your own home. You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, or Apple.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Coach and Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers