Tags: Kate Spade | handbags | sales | stock

Shares of Hot Handbag Maker Kate Spade Plunge as Sales Cool

Tuesday, 12 August 2014 01:57 PM

Shares of Kate Spade & Co., the handbag maker with aspirations to be a global lifestyle brand, sank 25 percent Tuesday — the most in more than four years — on concern that growth is cooling, reversing the stock’s earlier gains.

Sales will increase at a high single-digit percentage rate in the second half, slowing from a 30 percent gain in the first half, Chief Operating Officer George Carrara said on a conference call. The company also may put off its profit-margin goals for 2016 until 2017, in part because its Saturday brand has taken longer than expected to ramp up.

The shares sank $9.87 to $29 at the close in New York, the biggest decline since June 2009. Tuesday’s plunge erased the stock’s gains for the year.

“This is a growth stock, so any time you see they’re coming out and saying high single-digit comparable-sales growth, and we just saw a 30 percent increase, that’s not the growth trajectory we were thinking we were seeing,” Mary Ross-Gilbert, a Los Angeles-based analyst at Imperial Capital, said.

The shares had climbed earlier in the day, fueled by better-than-estimated earnings. Second-quarter profit was 5 cents a share, excluding some items, the New York-based company said in a statement. Analysts had predicted break-even results, according to data compiled by Bloomberg. Kate Spade posted $266 million in revenue, topping the $237 million estimate.

Sales Gains

The company said its North American and international divisions both increased sales more than 50 percent last quarter even as retailers relied more heavily on promotions to entice customers. Kate Spade also boosted its annual earnings forecast to as much as $130 million, up from a high end of $125 million.

Kate Spade is looking to quadruple retail sales to $4 billion as a global lifestyle brand selling everything from apparel to home goods. Chief Executive Officer Craig Leavitt is focusing on categories with ready appeal, including fragrances, jewelry, watches and sunglasses. The retailer also is offering a range of prices to attract millennials on one end and luxury shoppers on the other.

“It still has tremendous growth opportunities,” said Gilbert, who has the equivalent of a buy rating on the shares. “The overall story is still intact.”

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Shares of Kate Spade & Co., the handbag maker with aspirations to be a global lifestyle brand, sank 25 percent Tuesday - the most in more than four years - on concern that growth is cooling, reversing the stock's earlier gains.
Kate Spade, handbags, sales, stock
367
2014-57-12
Tuesday, 12 August 2014 01:57 PM
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