Kate Spade & Co. swung to a profit in its latest quarter as
sales grew.
Total sales increased 5.7%, the company said, boosted by a 12%
rise in sales at stores open at least a year. While results missed
analysts' expectations, investors pushed shares 5.2% higher
premarket as the retailer outperforms its peers.
Kate Spade, the former Fifth & Pacific Cos. and Liz
Claiborne Inc., has narrowed its focus amid weakness in the handbag
market, shedding dozens of labels—such as Lucky Brand and Juicy
Couture—over the past several years. Earlier this year, the
retailer said it would close its Kate Spade Saturday and Jack Spade
stores as it seeks to focus on its flagship Kate Spade New York
brand.
Like some of its rivals, the retailer has worked to reduce
profit-eating promotions. But unlike at Coach Inc., sales still
rose amid a pullback in promotional activity. On Wednesday, Kate
Spade Chief Operating Officer George Carrara said margin expansion
improved during the quarter and the company lifted the low-end of
its full-year adjusted profit guidance.
"The shift to even less discounting and an emphasis on returns
is beginning to pay dividends," analysts at Wunderlich Securities
said in a note this week. The analysts also said handbags are a
much smaller piece of the mix for Kate Spade, compared with rivals
including Michael Kors and Coach, whose shares "remain in various
stages of free fall."
In all, for the quarter, Kate Spade reported a profit of $8.5
million, or seven cents a share, compared with a loss of $4.4
million, or three cents a share, a year earlier. Excluding certain
items, per-share earnings increased to eight cents from five
cents.
Revenue grew to $281 million.
Analysts projected 11 cents in earnings per share and $293
million in revenue, according to Thomson Reuters.
Gross margin rose to 61% from 58.6% a year earlier.
Shares in the company, down about 36% this year, rose to $21.80
premarket.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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