Kate Spade to Shut Brand Stores While Forming China Venture

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Kate Spade & Co., the handbag maker working to become a global lifestyle brand, will close stores devoted to its lower-priced and men’s lines while starting a new joint venture to speed its growth in China.

The 19 stores for the bargain Kate Spade Saturday line will shut in the first half of the year, as will the 12 Jack Spade men’s locations, the New York-based company said Thursday in a statement. The changes will result in cash charges of as much as $30 million and non-cash charges of as much as $9 million.

“The best path was to apply all the learnings from the Kate Spade Saturday brand and incorporate it into our Kate Spade New York brand,” Chief Executive Officer Craig Leavitt said in a phone interview. “It’s a very big undertaking to launch and nurture a brand from scratch.”

Leavitt has set a goal of almost quadrupling sales to $4 billion by expanding Kate Spade into fragrances, jewelry, watches and sunglasses in the mold of brands such as Ralph Lauren. Kate Spade said today in a preliminary earnings statement that sales last year were about $1.13 billion to $1.14 billion, topping analysts’ estimates.

Kate Spade also announced that it’s forming a 50-50 joint venture with the Lane Crawford Joyce Group’s Walton Brown unit to accelerate its growth in China. Kate Spade said it will buy out E-Land Fashion China Holdings Ltd.’s 60 percent stake in its current China venture.

China Expansion

“Our geographic expansion is our most important avenue for growth,” Leavitt said. “The ability to build and improve a larger business in the greater China market is really key to our growth strategy.”

The transactions include a $36 million payment to E-Land and the receipt of a $21 million payment from Walton Brown. Kate Spade also will have restructuring charges of about $5 million.

Kate Spade climbed 6.6 percent to $31.68 at the close in New York, the biggest gain since Nov. 6. The shares were little changed last year after more than doubling 2013.