Kate Spade: Will it play hard to get after strong Q4?

Kate SpadeSo Kate Spade’s Q4 results are out and they look good, given the challenging backdrop last year. Not perfect but enough good news to continue to suggest make me think it’s a shame that this quirky, individual company feels the need to sell itself.

But that’s life. Some shareholders want to get more value from their investments so it probably will happen even though no sale is guaranteed and we don’t know who’ll potentially win the prize in the end.

So what did the company achieve in the all-important Christmas quarter? Quite a lot, which means any buyer isn’t exactly going to get it at a  knockdown price. In the last quarter the company rather coquettishly said to its suitors, “you want me? now prove it”.

Let’s look at some numbers… (turn away now if you can’t face so many figures gathered together in one place.)

Net sales rose nearly 10% to $471m and direct-to-consumer net sales rose over 9%, although they fell 1.5% if e-commerce is factored-out. That means it looks like the firm’s own Kate Spade New York stores weren’t so hot in Q4 and given that it said comp sales per square foot in those stores fell to $1,557 in the last 12 months from $1,615 a year earlier, that certainly seems to be the case.

Ok, that’s not great. What was the problem? The company said foreign exchange rates were a big part of it so that’s forgivable as it’s something nobody is immune to at the moment.

Gross profit as a percentage of net sales dipped to 59.2% from 60.2% a year ago, although this time it rose to 60.3%, if the results of wind-down operations were excluded.

Income from continuing operations was $87m/$0.67 per diluted share, up from $62m/$0.48 per share a year earlier.

And the core Kate Spade operation saw good sales in North America with a 9.5% rise to $407m and pre-tax profit up to $107m from $91m. International sales rose 12.4% to $59m and profit hit $10m, up from $4m.

Oh, and the company ended the year with nearly $500m in cash

CEO Craig A Leavitt said that the firm’s “solid fourth quarter and fiscal year performance demonstrate the strength of our differentiated business model, as we continued to gain market share and deliver strong growth despite a challenging retail environment.”

It achieved that growth by strengthening its handbag portfolio, adding new categories to its casual ready-to-wear line-up, and “thoughtfully” expanding its global store base.

Not that any of that is going to stop it probably being sold. Leavitt also said “we remain committed to maximising value and are exploring strategic alternatives that are in the best interests of our company and shareholders.”

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