News Column

Kate Spade & Company Reports 2nd Quarter And First Half 2014 Results

August 30, 2014



By a News Reporter-Staff News Editor at Investment Weekly News -- Kate Spade & Company (NYSE: KATE) announced results for the second quarter ended July 5, 2014.

The Company is separating its former Kate Spade reportable segment into two reportable segments, Kate Spade North America and Kate Spade International. The Company's Adelington Design Group operating segment is also a reportable segment. Please refer to the item captioned "Presentation of Segments" for more information. As the Company has substantially completed the wind-down of the Juicy Couture business, Juicy Couture is now reported as discontinued operations. Therefore, results from continuing operations exclude Juicy Couture and Lucky Brand.

For the second quarter of 2014 on a GAAP basis, loss from continuing operations, was ($14) million, or ($0.11) per share, compared to a loss from continuing operations of ($24) million, or ($0.20) per share, for the second quarter of 2013.

Net sales for the second quarter of 2014, were $266 million, an increase of $87 million, or 48.7%, from the comparable 2013 period. Adjusted earnings per share from continuing operations for the second quarter of 2014 was $0.05, compared to adjusted loss per share of ($0.08) for the second quarter of 2013.

Adjusted EBITDA, net of foreign currency transaction adjustments, was $32 million for the second quarter of 2014, compared to $7 million for the second quarter of 2013. Comparable Adjusted EBITDA, net of foreign currency transaction adjustments, was $11 million for the second quarter of 2013.

For the first half of 2014, the Company recorded a loss from continuing operations of ($52) million, or ($0.42) per share, compared to a loss from continuing operations for the first half of 2013 of ($47) million, or ($0.40) per share. Net sales for the first half of 2014 were $490 million, an increase of $154 million, or 46.0%, from the comparable 2013 period, including an $18 million benefit associated with the additional week in 2014. Adjusted earnings per share from continuing operations in the first half of 2014 was $0.01 compared to an adjusted loss per share from continuing operations of ($0.18) in the first half of 2013. Adjusted EBITDA, net of foreign currency transaction adjustments, was $49 million for the first half of 2014, compared to $11 million for the first half of 2013. Comparable Adjusted EBITDA, net of foreign currency transaction adjustments, was $18 million for the first half of 2013.

Craig A. Leavitt, Chief Executive Officer of Kate Spade & Company, said: "Despite a more promotional retail environment, Kate Spade & Company had another strong quarter, with sales increases coming across both our North American and International segments. Adjusted EBITDA for Kate Spade & Company, net of foreign currency transaction adjustments, was $32 million for the second quarter of 2014, a $21 million increase compared to the second quarter of 2013. In addition, we achieved comparable store productivity of $1,477 per square foot over the last twelve months, our 16(th) consecutive quarter of annualized store productivity growth. We are increasing Total Company full year 2014 Adjusted EBITDA guidance to a range of $120 million - $130 million from the previously guided range of $115 million - $125 million."

Mr. Leavitt concluded: "Net sales for both our North American and International segments grew 55% and 54%, respectively, illustrating that our differentiated product resonates with consumers around the world. We have a clear vision of our customer and continue to design strong collections as we shape our fast-growing, global lifestyle brand."

George Carrara, President and Chief Operating Officer of Kate Spade & Company, said: "We are pleased with our outperformance. Since completing the transition to our newly integrated organization this quarter, our team is able to cohesively manage our initiatives in a more streamlined, effective way. Currently, we are conducting our annual business planning process and are actively pursuing both existing and newly identified margin expansion opportunities."

The adjusted results for the second quarter 2014 and 2013, as well as forward-looking targets, exclude the impact of expenses incurred in connection with the Company's streamlining initiatives, brand-exiting activities, acquisition related costs, losses on extinguishment of debt, impairment of cost investment in 2013 and non-cash write-offs of debt issuance costs. The Company believes that the adjusted results for such periods represent a more meaningful presentation of its historical operations and financial performance since these results provide period to period comparisons that are consistent and more easily understood. The attached tables, captioned "Reconciliation of Non-GAAP Financial Information," provide a full reconciliation of actual results to the adjusted results. We present Adjusted EBITDA, which we define as income (loss) from continuing operations, adjusted to exclude income tax provision, interest expense, net, depreciation and amortization, net, losses on extinguishment of debt, expenses incurred in connection with the Company's streamlining initiatives, brand-exiting activities, acquisition related costs, non-cash impairment charges, losses on asset disposals and non-cash share-based compensation expense. We also present Adjusted EBITDA, net of foreign currency transaction adjustments, which is Adjusted EBITDA further adjusted to exclude unrealized and certain realized foreign currency transaction adjustments, net. We also present Comparable Adjusted results (including Comparable Adjusted SG&A expense and operating income (loss)), which we use to measure our performance after giving effect to certain corporate cost savings. Comparable Adjusted SG&A, operating income (loss) and EBITDA are calculated by starting with adjusted results (which already exclude charges related to streamlining initiatives, brand-exiting activities and acquisition related costs) and includes adjustments to reflect the anticipated impact resulting from the Juicy Couture and Lucky Brand divestitures to show 2013 on a comparable basis to 2014. The annualized Corporate Adjusted EBITDA of ($53) million is consistent with our previously provided 2014 guidance for Corporate Adjusted EBITDA of ($50) to ($55) million, which includes estimated amounts to be billed under the Transition Services Agreement (TSA) for Lucky Brand and assumes ownership of Lucky Brand by the Company for the month of January 2014, followed by the implementation of the TSA for a period of up to 24 months thereafter. We present the above-described Adjusted EBITDA measures because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

The Company will sponsor a conference call at 10:00am Eastern time today to discuss its results for the second quarter of 2014. The dial-in number is 1-888-694-4676 with pass code 79282758. The webcast and slides accompanying the prepared remarks can be accessed via the Investor Relations section of the Kate Spade & Company website at www.katespadeandcompany.com. An archive of the webcast will be available on the website. Additional information on the results of the Company's operations is available in the Company's Form 10-Q for the second quarter 2014, to be filed with the Securities and Exchange Commission.

Keywords for this news article include: Finance, Kate Spade & Company.

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Source: Investment Weekly News


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