The Business of Fashion: Caerus Sends Constructive Letter to Kate Spade Board

Kate Spade Under Fire From Outside Investor Group

Caerus Investors, a New York City-based asset management firm focused on investing in consumer-related equities has sent a constructive letter to Nancy Karch, Chairman of the Board of Directors of Kate Spade (NYSE:KATE) urging the Board to take steps to realize shareholder value by pursuing a sale of the company. The full text of the letter follows:

Nancy Karch, Chairman of the Board

(Kate Spade & Co, 2 Park Ave, New York, NY 100016)

cc: Kate Spade Board of Directors

Dear Nancy,

We are deeply concerned about the precipitous decline in the share price of Kate Spade over the last two and a half years brought about by management’s inability to meet their own stated goals. The stock has now fully retraced the entire gains from when the former Fifth and Pacific first announced its intention to isolate Kate Spade as a stand-alone entity in early 2013. While we have long admired the growth prospects for the Kate Spade brand, we have become increasingly frustrated by management’s inability to achieve profit margins comparable to industry peers. Given the market’s lack of faith in the current management team, as evidenced by the 63% decline in the shares since the intraday high on August 11th, 2014, we believe the best path for enhancing shareholder value is to pursue a sale of the company. We strongly believe that a strategic, industry player would be willing to pay a substantial premium to add this growth business to their portfolio.

Over $3bn in equity value destroyed in the last two and a half years

kate-spade-stock-performance-graphic-business-wire

Kate Spade Stock Performance (Graphic: Business Wire)

We first invested in Kate Spade back in 2009 under parent company Liz Claiborne solely on the basis that the stand alone value of Kate Spade was grossly mispriced inside an apparel conglomerate with other poor performing assets and high levels of debt. We argued back then for the break-up of the company and were gratified when the Board finally made the decision to act in 2013. Shareholders were rewarded as the stock surged above $40 over the following year. Since those successful moves, material shareholder value has been destroyed by wasting time, energy and money on the former sub brand Kate Spade Saturday and management has missed interim sales and margin targets on 3 different occasions.

We are writing to you and the Board to let you know that real change is needed at Kate Spade. The equity market is grossly under-valuing the future growth opportunity of the business and the Board must act in the best interest of shareholders to maximize value for the company.

EBITDA Margins are woefully below peers

kate-spade-ebidta-company-filings-and-bloomberg-consensus-estimates-kate-spade-2016-estimates-are-caerus-estimates-graphic-business-wire

Kate Spade EBIDTA: Company filings and Bloomberg Consensus estimates. Kate Spade 2016 estimates are Caerus estimates. (Graphic: Business Wire)

EBITDA margins at Kate Spade are 400-1000bps below peers. Management has simply not delivered on stated margin targets resulting in the market doubting the prospects for the business.

Current Valuation Reflects little to no growth despite a 20% revenue and 42%

EBITDA CAGR

kate-spade-cagr-cy2013-2015-are-non-gaap-actuals-2016-estimates-are-caerus-estimates-graphic-business-wire

Kate Spade CAGR: CY2013-2015 are non GAAP actuals. 2016 estimates are Caerus estimates. (Graphic: Business Wire)

At one point during calendar year 2014, Kate shares traded at over 35x consensus EBITDA. Today, Kate Spade shares now trade at

Management and the Board have both stated on multiple occasions they see a path to $4bn in retail sales for Kate Spade, double the current run rate. Continue reading

Academy of Arts University Fashion Design and Textile Design Students Shine at Fall/Winter 2014 New Fashion Week

Designer Profile and Inspiration Images by David Dooley/Runway Images by Randy Brooke/WireImage 

Every designer dreams of showing their collection at Mercedes- Benz Fashion Week, and on Friday, February 7th that dream came true for 13 designers from the School of Fashion at Academy of Art University. “Since 2005, the School of Fashion has premiered the collections of students and recent graduates during New York Fashion Week. Part of our commitment to our students is to help launch their careers and have their work seen by industry professionals,” said Dr. Elisa Stephens, President of Academy of Art University. “Debuting these designers’ collections during Mercedes-Benz Fashion Week is an incredible opportunity for each of them.”

With more than 18,000 students, Academy of Art University is the nation’s largest accredited private art and design university. Established in 1929, the school offers accredited A.A., B.A., B.F.A., M.A., M.F.A., and M.Arch degree programs in Acting, Advertising, Animation & Visual Effects, Architecture, Art Education, Art History, Fashion, Fine Art, Game Design, Graphic Design, Illustration, Industrial Design, Interior Architecture & Design, Jewelry & Metal Arts, Landscape Architecture, Motion Pictures & Television, Multimedia Communications, Music Production & Sound Design for Visual Media, Photography, Visual Development, and Web Design & New Media. Online degrees are offered in most areas. Academy of Art University is an accredited member of WASC (Western Association of Schools and Colleges), NASAD (National Association of Schools of Art and Design), NAAB (Master of Architecture), and CIDA (Council for Interior Design Accreditation offered for BFA-IAD, MFA-IAD).

For the Fall 2014 season, 13 designers presented eight collections, four of which were collaborations between Fashion Design and Textile Design students. In total, six womenswear and two menswear collections were presented at the Academy of Art University Mercedes-Benz Fashion Week show.

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Jaci Hodges, M.F.A. Fashion Design, collaborated with Nisha Hanna Btesh, B.F.A. Textile Design, on a 1960s-inspired womenswear collection that was created with the use of Shibori, the Japanese technique of resistance felting. Originally from Austin, TX, Jaci holds a B.B.A. in Marketing with a minor in Philosophy. Additionally, she recently completed a design internship with gr.dano, a Bay Area ready-to-wear company co-founded by fellow alumna Jill Giordano. Nisha is a California native, born and raised in San Diego. Jaci and Nisha were inspired by the excess of prints worn during the late 1960s, in particular to those seen on the Brady Bunch, and the costumes worn by Mia Farrow in the film Dandy in Aspic.

Frank_Tsai_Andrea_Nieto_lineup

Frank Tsai, M.F.A. Fashion Design, collaborated with Andrea Nieto, B.F.A. Textile Design, on a menswear collection inspired by the mood and emotion of an international photography collection, “Beauty in Decay,” personal struggle, raw emotion, and the different stages of the healing process. Frank was born and raised in Kaohsiung, Taiwan, earned a B.S. Degree in Fashion Design and Merchandising, was awarded high honors for his undergraduate fashion show, and worked as the Marketing Manager for FU YU Clothing Company. Andrea grew up in Cali, Valle del Cauca, Colombia, is on the Academy of Art University President’s Honor List, was awarded a $10,000 scholarship through the YMA Scholarship Fund as a Geoffrey Beene National Scholar, and recently finished a design internship at BCBGMAXAZRIA. Continue reading

SOLSTICE SUNGLASSES ANNOUNCES ITS “WISH MORE, GIVE MORE, SAVE MORE” HOLIDAY PROMOTION

SOLSTICE SUNGLASSES, upscale sunglass specialty chain owned and operated by SOLSTICE MARKETING CONCEPTS (SMC), LLC., and the New York City based subsidiary of the renowned Italian designer eyewear manufacturer SAFILO GROUP, offers a unique sunglass shopping experience as all of its sunglasses are displayed openly and readily available to customers. The open sell retail format has been hugely successful, as customers are able to touch and try on as many pairs as they like with the utmost ease and comfort.

A visual from the SOLSTICE Sunglasses “Wish More, Give More, Save More” holiday promotion which kicks off today. (PRNewsFoto/SOLSTICE Sunglasses)

The company offers more luxury, designer and sport performance sunglasses than any other retailer or sunglass specialty store in the United States. With over 135 locations nationwide, and over 1,000 pairs from which to choose from in a variety of price points, there is a pair for everyone. Highly coveted brands available at SOLSTICE SUNGLASS locations include:  ALEXANDER MCQUEEN, BALENCIAGA, BOTTEGA VENETA, CARRERA, CARRERA X-CEDE, DIOR, DIOR HOMME, EMPORIO ARMANI, GIORGIO ARMANI, GUCCI, HUGO BOSS, JIMMY CHOO, JUICY COUTURE, KATE SPADE, MARC JACOBS, MARC BY MARC JACOBS, TOMMY HILFIGER and YVES SAINT LAURENT, to name a few. Continue reading