Mar 1, 2016
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Kate Spade's focus on flagship brand drives sales

Mar 1, 2016

Kate Spade & Co reported better-than-expected quarterly sales at established stores, driven by demand for its top-of-the-range Kate Spade New Yorkk handbags and accessories.

Shares of the company, known for its quirky and colorful satchels and totes, rose as much as 4 percent in premarket trading on Tuesday.

Kate Spade New York - Twitter @katespadeny

Kate Spade has been focusing on Kate Spade New York, home decor and children's products, and investing online, strategies that analysts say have helped the company fight the effects of a slowdown in the handbag market.

The company is also winding down its lower-margin Kate Spade Saturday and Jack Spade menswear brands, while looking to strengthen the global presence of the kate spade new york brand.

Kate Spade said on Tuesday it would enter India through an agreement with Reliance Brands Ltd, a unit of Indian conglomerate Reliance Industries Group.

Kate Spade's sales at stores open for at least 14 months, including online sales, rose 14 percent. Analysts on average had expected a rise of 11.4 percent, according to Consensus Metrix.

"They continue to sell the products the customers want and they have maintained the strong discipline around how they are selling it," Nomura Securities analyst Simeon Siegel said.

The company also said it expects 2016 same-store sales to grow by low to mid-teens on a percentage basis. Analysts on average have forecast a growth of 10.6 percent.

The company's net income more than halved to $61.5 million, mainly due to a tax benefit in the year-earlier period.

Excluding items, the company earned 32 cents per share, in-line with analysts estimate.

Net sales rose 7.6 percent to $429 million, missing the average analyst estimate of $441.6 million.

Kate Spade's stock gained about 12 percent this year up to Monday, while the S&P 500 lost 5.5 percent.

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