Kate Spade streamlines brands, launches China JV

Kate Spade & Company, which owns brands Kate Spade New York, Kate Spade Saturday and Jack Spade, has announced it will phase out its Kate Spade Saturday brand into a label under Kate Spade New York and alter the business model for Jack Spade products.16 company-owned and three partnered Kate Spade Saturday stores will be closed in the first half of this year while the brand's eCommerce site will remain active until the brand is incorporated into the Kate Spade New York brand.Meanwhile, for Jack Spade, the company will launch tailored clothing and dress furnishings in addition to sportswear and bags it is currently offering.  Distribution will be focused on the brand's retail partners and eCommerce platform, with the company to close 12 proprietary Jack Spade stores during the first half of this year.Craig A. Leavitt, CEO of Kate Spade & Company, said, "We are committed to our men’s heritage and believe this category is an important part of our growth story and a complement to our thriving women’s business. With this new approach to distribution, Jack Spade is now better positioned to grow as we broaden our customer target.”Restructuring charges for Kate Spade Saturday and Jack Spade will amount to US$25 to $30 million and non-cash charges of US$7 to 9 million.Kate Spade & Company has also announced a partnership with Lane Crawford Joyce Group brand management arm Walton Brown, established in December to target China's middle class, to form a joint venture that will retail Kate Spade New York and Jack Spade brands and products.Kate Spade & Company's existing businesses in mainland China, Hong Kong, Macau and Taiwan will come under a combined structure.Operations of Kate Spade New York stores and distribution of products of its brands in Hong Kong, Macau and Taiwan were previously managed by Kate Spade & Company.Wholesale distribution to the joint venture in China will be ongoing while that in Hong Kong, Macau and Taiwan through the joint venture will begin this quarter.As part of the new partnership, Kate Spade Hong Kong and Walton Brown will each own half of the shares of Kate Spade China, and half of the shares of KS HMT Co. Limited, Kate Spade & Company's holding company in Hong Kong, Macau and Taiwan.Kate Spade & Company will close a deal this month to buy out the 60% stake held by its current partner in China, E-Land Fashion China Holdings, in Kate Spade China.Kate Spade & Company's Greater China business will be managed by both Kate Spade & Company and Walton Brown in an equal partnership structure with an initial term of 10 years.The newly formed partnership is tasked with establishing a strategic network of stores in key mainland Chinese cities.  The joint venture aims to open 100 Kate Spade New York retail stores in mainland China, according to a Kate Spade & Company spokesperson, which will be wholly owned by the joint venture.Thomson Cheng, president of Walton Brown, said, "Kate Spade & Company already has strong appeal and demand in the market, with even stronger growth potential. Together, we will build upon this momentum to establish a broader foundation and fuel Kate Spade & Company's scale in the region."Commenting on the Walton Brown partnership and changes to Kate Spade Saturday and Jack Spade's business models, Leavitt said, “We continue to focus on two axes of growth – geographic expansion and product category expansion. We are early in our journey as Kate Spade & Company, and we see a clear path to becoming a four billion dollar business at retail.""By taking these actions, we will be able to accelerate the fulfillment of our lifestyle brand vision, expanding our product categories and reaching customers in all facets of their lives, better positioning us to deliver on Kate Spade New York’s full potential.”