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Fifth pacific companies’ ceo hosts investor day michael kors bags uk transcript Good morning, everyone, and welcome to the fifth pacific companies, inc.2013 Kate Spade New York Investor Day.Therefore, it cannot be recorded, transcribed or rebroadcasted without fifth pacific companies, inc.’s permission.Please note that there will be a slide presentation accompanying the prepared remarks.There are separate links to the slides for webcast and phone participants.Statements made during this conference that relate to company’s future performance, including forecasted targets for net sales, adjusted brand ebitda, adjusted ebitda margin, store expansion and other future events are forward looking statements within the private securities litigation reform act.These forward looking statements are based on current expectations and are subject to the qualifications and cautionary statements set forth in the company’s annual report on form 10 k for the fiscal year ending december 29, 2012, under the captions item 1a risk factors and statement regarding forward looking statements.The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.Please welcome the chief executive officer of fifth pacific, bill mccomb.Hey, guys.Good morning.Thank you all for joining us live here in new york, for those that were able to make the meeting.And for those that are listening by webcast, welcome as well.Today, as you know and as i’ve been saying, is the first of 3 in depth investor conferences that we’re going to host.And as you know, today we’re featuring kate spade.To a large extent, this new format of an extended single brand presentation is a direct response from feedbacks from you, who told us that you’re looking for more in depth access to the brand management team, as well as a deeper level of insight on the brand science itself.And this is the year for us to do that.We believe we can give you much deeper insights and appreciation for each of the businesses separately and comprehensively.Now i’ll say right at the beginning, we have no new announcements today corporately.I told you we wouldn’t when we came.Today is an immersion of the kate spade businesses.So here’s an outline of today’s presentation.We’re going to start with craig leavitt, the ceo of kate spade, who’s going to lay out for you the vision that drives this highly creative and spirited team.And this is where you’ll see and hear the core elements of this company’s playbook, including key milestone goals.I’m then going to lead a discussion right here on the sofa with deborah lloyd, our president and chief creative officer of kate spade, on things like design, brand equity, inspiration, vision and customers.And then you’re going to see presentations from leading executives in the company covering marketing, our unique e commerce strategy and globalization.And then, finally, we’ll review 2 sub brands in the franchise:First, jack spade;And then we will conclude new and exciting kate spade status [ph].And then we’re going to wrap up by coming back out on stage for the q session.Now while the go through this presentation, here’s what i want you to get from the meeting.First and foremost, get to know the management, one of the reasons for spending time like this, their management principles, their management philosophies;Learn what guides their thinking;Hear how the brands are differentiated, who the target audiences are;Listen for the growth and profitability targets;Understand the playbook overall that’s going to drive this strategic plan on the business, how the brand is going to grow, the role of line extension, of international markets and key channel strategies for the business;Also, listen for important targets on the business that we’ll be disclosing for the business by the end of 2016 and what we see it looking like in years later when it’s even more built out.And finally, you’ll understand how technology, crm, digital marketing and an unconventional approach to omni channel retailing is going to impact the results of this franchise for years to come.And throughout the discussions, as i’ve said before, you’re going to see a case study of how fifth pacific has transformed the business that not very long ago was truly adrift by focusing on and implementing the 6 operating principles that fuel fifth pacific companies, all of our brands and corporate.These principles include first and foremost, embracing true brand centricity.The decision that we took back in the summer of 2007 to build these brands totally and completely around their consumer, chartering teams at the companies inside the company to lead and control all elements of growth as an operating plan.I think today, you’ll see how and why that has driven the results that we have today.You’re going to also feel our consumer culture, all decisions here center on creating and fulfilling demand directly with the customer.All in an environment, by the way, that honors ethics in everything that we do, a requirement at our company and a uniting core value for our people.And although we are truly brand centered now with believable businesses completely in place, we still care a lot about leveraging learning across the brand, across the fifth pacific platform.And i’ll say that the team you’re going to see and meet today is both an importer and exporter of important learnings in the fifth pacific family.And while each brand operates in their own unique way, they each have their own culture, if we were to, this afternoon, come back here and see the lucky team, you would see a lot of differences.But we embrace standardization as well in important areas for the company, like it investment, safety, quality, financial reporting.So that said, let’s go ahead and roll up our sleeves and let’s dive into the kate spade story.I’ll see you back in a little bit.Thanks.Please welcome the chief executive officer of kate spade new york, craig leavitt.Good morning.As you just saw, our brand is a story, the story of a great idea, a successful beginning, strong growth and a promising future.Today our leadership team and i will walk you through the first few chapters of our story, both those we’ve written and those we are currently writing.These early chapters will tell the story of a once niche brand that has grown to be an acceptable luxury player with nearly $800 million in retail footprint, on its way to $4 billion well before the end of this book.Because we have chapters left to write and to tell, kate spade is the story that has only just begun.20 years ago, Kate Spade, frustrated she couldn’t find the fashionable yet utilitarian handbag she’d been craving for years began making nylon bags out of her apartment.She quickly discovered that she wasn’t the only one with the need.And so began a revolution on the accessories market.Simple silhouette sprang to life with crisp palettes and clever details.Women and fashion editors alike fell for the design.And the company grew.The first retail store opened in north america in 1996, and the first internationally in japan in 1998.A second brand was launched, jack spade.And the company expanded beyond handbags, introducing footwear, eyewear and tabletop.Between 2001 and 2006, kate spade continued down the path as a delightful and optimistic niche brand, with michael kors handbags uk a strong foundation and a small group of loyal fans.Without new customers coming in, growth stalled.Some might say the brand had fallen asleep, unspoiled, unadulterated, but with that, asleep.But it was very much a sleeping beauty.When deborah lloyd and i joined at the end of 2007, beginning of 2008 and started reimagining the brand, we knew we didn’t need to write a new book.It was about the next chapter in the book that kate and andy had started.The brand had a strong dna, and we saw a huge opportunity to work with that dna and take it from this beautiful niche jewel into something bigger and extraordinary.And after all, that’s the story behind some of the world industry greats, like coach, even louis vuitton and chanel.We just had to take this dna, our brand voice, and clarify and ensure its relevancy.The outcome of this is our unique and truly special brand promise.It is at the core of everything kate spade.Think of it as our guiding light.It directs all of our decisions, expansions and choices.This promise is like magic dust for our consumer, this promise that kate spade helps our customers lead a more interesting life.We also found that we’re lacking the foundation of elements on which the base of growth so we were to set our vision and mission, laid out creative guidelines, clear customer archetypes for use in the design process.We developed a strategic plan to broaden the customer base and create the roadmap towards becoming a global multichannel lifestyle brand.And we went to work on our operations, building the needed capabilities of a more seasoned direct to consumer retailer.But before we had a chance to begin executing that strategic plan, the global recession hit.We had some tough choices to make.We were well into development on launches for jewelry and apparel and had to decide whether or not to proceed.We had to make choices around adjusting pricing strategy and whether it was time to initiate the planned redesign of our retail stores.Those were dark days.But we decided to continue with the product launches, reduce our level of promotional activity when everyone else was increasing it and invest in our stores.For a few months, i’ll be honest, we held our breath.But we knew we were in the clear when we started to see successful handbag, ready to wear and jewelry sales.Our pricing and promotional strategy worked and customers learned not to wait for our sales, and the delta in our newly redesigned stores, so meaningful increases in sales.We were able to complete our reconstruction.Despite our niche beginnings, we were able to build on what was the clear footprint of a lifestyle brand.And thank goodness, because we know you can’t turn it into one at the end of the story.And so part 1 comes to an end.And the next section of the kate spade novel begins, a section that requires a bit of a prologue.Today as we celebrate our 20th anniversary, the kate spade brand has traveled far from our niche beginnings.We’re still anchored in the handbags that started it all, but we also have thoughtfully expanded our product offering with 11 new categories, including tabletops, legwear, watches and stationery to date, and fragrance launching in just a few weeks.Our small beginnings with a single store on thompson street are long ago.At the end of 2012, we had 205 kate spade new york stores in 20 countries, both brand and partner operated, and we’re present in approximately 400 wholesale doors, as well as 12 jack spade stores in 4 countries and presence in 200 wholesale doors worldwide.The last 5 years have been particularly strong, with our revenues hitting $462 million in sales in 2012, a substantial 410% increase.And during that same period, we moved from negative adjusted brand ebitda to making $95 million.Our adjusted brand ebitda margin in 2012 grew 675 basis points, from 14% in 2010 to 21%, as our gross profit margins grew and our sg as a percent of sales improved.While still the special, exclusive and aspirational brand launched in 1993, today, kate spade has evolved with all the makings of a global multichannel lifestyle brand.

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