Kate Spade & Company and The Lane Crawford Joyce Group Announce Partnership to Expand Kate Spade New York Brand Presence in Greater China
50/50 joint ventures to align Kate Spade & Company businesses in the region, develop platform to accelerate long-term growth strategy
NEW YORK and HONG KONG, Jan. 29, 2015 /PRNewswire/ -- Kate Spade & Company (NYSE: KATE) and Walton Brown, a subsidiary of The Lane Crawford Joyce Group, Asia's premier fashion retail and brand management group, today announced the companies have formed joint ventures focused on scaling and accelerating Kate Spade & Company's growth in Greater China, continuing its geographic expansion plans. The newly formed partnership will leverage the expertise of Walton Brown, and the global demand for Kate Spade & Company products, to establish a strategic network of stores in key cities, enhanced by a robust organizational and marketing platform across China, Hong Kong, Macau and Taiwan.
Craig A. Leavitt, Chief Executive Officer of Kate Spade & Company, said, "This partnership is a pivotal next step as Kate Spade & Company continues to advance along a key axis of our growth strategy – geographic expansion – while also continuing our partnered approach to margin expansion."
Mr. Leavitt added, "Walton Brown is the right strategic partner as we position Kate Spade & Company for sustainable growth, allowing us to take a holistic approach to expansion, influence consumers and leverage resources across the Greater China region. Walton Brown's relationships, operations and marketing expertise will help us create a cohesive foundation of stores surrounded by a vibrant ecosystem to help deepen our connection with consumers in Asia."
Thomson Cheng, President of Walton Brown, stated, "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. Drawing upon our best-in-class expertise and network, we look forward to partnering with Kate Spade & Company to enhance its global presence during this exciting time in the Company's transformation."
Kate Spade & Company also announced a share purchase agreement with E-Land Fashion China Holdings Limited ("E-Land"), its current partner in China, to acquire E-Land's 60% interest in KS China Co., Limited. ("Kate Spade China"). The transaction is expected to close in February 2015.
The partnership will align Kate Spade & Company's existing businesses in China and Hong Kong, Macau and Taiwan under one combined structure. Following the formation of the partnership, both Kate Spade Hong Kong, Limited, and Walton Brown will own 50% of the shares of Kate Spade China and KS HMT Co., Limited, the holding company for the Company's wholly owned businesses in Hong Kong, Macau and Taiwan. With an equal partnership structure, Kate Spade & Company and Walton Brown will actively manage the business together. The partnership will have an initial term of 10 years.
The combined transactions are expected to include a $36 million payment to E-Land to acquire its interest in Kate Spade China and terminate related contracts and the receipt of approximately $21 million from Walton Brown for their interest in the joint ventures subject to adjustments. In addition, the Company estimates that it will incur restructuring and transaction costs of approximately $5 million, including severance, lease terminations and asset impairments in order to convert the wholly owned businesses in Hong Kong, Macau and Taiwan into a joint venture. These transactions are consistent with the Company's partnered and capital-efficient approach to geographic expansion and lay the foundation for a solid expansion strategy in the region with a long-term potential of 100 stores.
Kate Spade & Company will continue wholesale distribution to the joint venture in China and expects to begin wholesale distribution to Hong Kong, Macau, and Taiwan through the joint venture during the first quarter of 2015. Accordingly, the Company will no longer consolidate the operations for the businesses in Hong Kong, Macau and Taiwan, which had net sales of approximately $34 million in 2014 and will account for its investments in the partnership under the equity method of accounting. The Company's distribution agreements with Valiram in Singapore, Malaysia, Indonesia and Australia and AT Luxury in Thailand are not affected by these transactions.
ABOUT KATE SPADE & COMPANY
Kate Spade & Company (NYSE: KATE) designs and markets accessories and apparel under two global, multichannel lifestyle brands: kate spade new york and Jack Spade. With collections spanning demographics, genders and geographies, the brands are intended to accent customers' interesting lives and inspire adventure at each turn. The Company also owns the Adelington Design Group, a private brand jewelry design and development group that markets brands through department stores and serves jcpenney via exclusive supplier agreements for the Liz Claiborne and Monet jewelry lines. The Company also has a license for the Liz Claiborne New York brand, available at QVC, and Lizwear, which is distributed through the club store channel. Visit www.katespadeandcompany.com for more information.
ABOUT WALTON BROWN
Walton Brown is a company of The Lane Crawford Joyce Group, Asia's premier fashion and brand management group, which includes iconic, luxury department store Lane Crawford, cutting edge fashion boutique Joyce, fashion footwear, handbags and accessories specialist Pedder Group, and retail, brand management and distribution company ImagineX.
Walton Brown is a full service retail management business which partners with large-scale international brands to grow their businesses in Greater China by providing total geographic and channel coverage of the market including retail, wholesale, e-commerce, travel retail and outlets. Walton Brown manages the Juicy Couture brand in Greater China. Walton Brown also currently operates the chain of premium shopping malls Maison Mode in Chengdu, Changsha and Urumqi with more than 800 brands across 800,000 square feet. Its portfolio also includes an outlet business with large retail complexes totaling more than 600,000 square feet, offering off-season fashion merchandise from more than 200 brands, in Chengdu under the Times Outlets banner, and Qingdao. A 1.4 million square foot site is under development for an outlet in Changsha to open in 2016, with more outlets to follow in Western China.
ABOUT LANE CRAWFORD JOYCE GROUP
The Lane Crawford Joyce Group is Asia's premier fashion and brand management group, which includes iconic, luxury department store Lane Crawford, cutting edge fashion boutique Joyce, fashion footwear, handbags and accessories specialist Pedder Group, retail, brand management and distribution company ImagineX and full-service retail management business Walton Brown.
The Lane Crawford Joyce Group operates luxury department stores and boutiques, free-standing branded stores and e-commerce and omni-channel operations. It has leadership positioning in designer womenswear, menswear, shoes and accessories, cosmetics, home and lifestyle, and fine jewellery. It works with more than 1,500 international fashion brands –including 35 brands under exclusive distribution partnerships.
With more than 165 years of trading experience in the region, each of The Group's companies is acknowledged as a pioneer in its space, being first to market with designer and luxury brands, and building brands' businesses through dynamic partnerships and collaborations. The Group currently operates 620 points of sale across 50 cities in Greater China and South East Asia, with a total retail space of more than 1,600,000 square foot.
SOURCE Kate Spade & Company
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