L Brands Inc (LTD), Fifth & Pacific Companies Inc (FNP): One Handbag Brand That’s Driving Sales

First, L Brands Inc (NYSE:LTD) let it be known that I heard “Eye of the Tiger” by Survivor while on hold for Fifth & Pacific Companies Inc (NYSE:FNP)‘s first-quarter earnings call — a bold choice. The company had a decent amount to be excited about, though. Earnings at Kate Spade drove the feel-good session, with comparable sales up 22% and total sales up 63%. Lucky Brand had a steady quarter, with comparable sales up 2%.

Juicy Couture brought up the rear, as usual, with a drop in total sales and comparable sales. But the company has plans in place for Juicy that could turn things around — just don’t expect that to happen overnight.

The good news from Kate Spade and Lucky
Leading with the good news, Kate Spade continues to take some small part of the fashion world by storm. The brand has spawned two spinoffs — Jack Spade and Saturday. Those brands are going to see expansion in the U.S. and abroad this year, and should bring in new customers. Jack is focused on menswear, while Saturday looks to a younger, less affluent female shopper.

The push is going to result in 70 new stores over the course of the year, among the three brands. It’s also going to pull pre-tax margin down, as the company is investing heavily in the brand. The cost of opening the new stores, expanding internationally, and increasing inventory to meet sales demand will put pressure on income this year.

Lucky Brand is in a more comfortable space, and now the company is simply working to increase comparable sales. While gross margin was up this quarter, CEO Paul Blum said that he thinks margin is basically tapped out. What the company is now looking for is an increase in sales per square foot.

Right now, Lucky is managing $462 per square foot, which is a good start. Stalwart denim retailer The Buckle, Inc (NYSE:BKE) runs at $475, and was at $462 two quarters ago. If Lucky can keep up that pace, things would look pretty solid. But Blum wants more — “more” as in $600 per square foot more. That’s going to rely on bigger sales, new handbags, and footwear. It’s a big turning point for Lucky, and it could be a gold mine.