Kate Spade & Co. Q1 Sales Climb on Namesake Brand

In What's New, Industry News by Jeff Prine

kspadeNew York—Kate Spade & Co. today said its first quarter revenue climbed though the company’s loss from continuing operations widened.

For the quarter ended April 5, the apparel, handbags and accessories company (previously known as Fifth & Pacific and before that Liz Claiborne Inc.) earned $46.2 million, or 37 cents a share, compared to a net loss of $52.2 million, or 44 cents a share a year ago.

Strong Direct-to-Consumer

But loss from continuing operations, including winding down Juicy Couture, totaled $54.7 million, or 44 cents a share. That compares with the loss of $39.6 million, or 33 cents a share, in the prior-year period. Excluding one-time items, Kate Spade lost 6 cents a share. Analysts’ had expected a smaller loss of 4 cents a share.

Net sales of the Kate Spade brand rose 54% to $217 million, outpacing the $202 million analysts projected. The brand’s direct-to-consumer sales rose 29% on a comparable basis.

“Overall, Kate Spade & Company’s performance in the first quarter of 2014 continued to be very strong,” said Craig Leavitt, chief executive. “Direct to consumer growth was fueled by both door expansion, including two global flagships in Houston and Tokyo, and strong direct to consumer comparable sales growth of 22%, excluding the impact of the extra week. While the promotional environment was much more competitive than last year, we stayed on strategy to build our full-price business in our specialty stores with a focus on client experience and rigorous planning that increased conversions. Our small leathergoods and handbag categories led this robust growth.”

During its first quarter, the company’s gross profit as a percentage of net sales decreased to 55.3% compared to 57.4 % in the comparable 2013 period, “due to the absence of licensing sales and increased promotion activity at Juicy Couture and the impact of a change in sales mix due to timing at Kate Spade.”

Selling, general & administrative expenses increased 37.7% to $225 million compared to the first quarter 2013. The increase reflected costs associated with shedding brands and with increased direct-to-consumer expenses associated with the Kate Spade brands.

Leavitt recently replaced former CEO William McComb who was responsible for narrowing the company’s focus and shedding brands including most recently Lucky Brand. Meanwhile the Kate Spade brands, along with Michael Kors, reportedly have been slicing away at market share of rival luxury brand Coach.

Kate Spare reaffirmed its 2014 forecast for earnings between $115 million to $125 million.

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