Kate Spade & Company (NYSE:KATE) posted better-than-expected quarterly sales and earnings as the company took steps to reduce the amount of discounting. The New York brand said sales rose 15 percent to $316.53 million in the third quarter, compared with $277.3 million a year earlier. Analysts had projected revenue of $310.7 million. Net income was $29.6 million, or 23 cents per share, in the quarter ended Oct.1, compared with 2 cents per share, a year earlier.
“In the third quarter, several macroeconomic factors, including a challenging retail environment and continuing tourist headwinds, impacted our results,” Kate Spade said Chief Executive Craig Leavitt in a statement. “That said, we are making solid progress on several strategies that are continuing to drive growth in our business, which is reflected in the consumer’s strong response to our collections at full-price.”
In North America, sales rose 14 percent to $260 million. International sales rose 8 percent to $51 million. Gross profit fell 180 bps to 59.4 percent as the company reduced discounts on goods slowly.
“That channel has become very promotional, and, in fact, is causing us difficulties in our own retail channel, which is why you see our gross margin declining, because we are having to meet certain pricing,” Chief Executive John Idol said.
“Handbag growth rates remain sluggish, which we attribute to a combo of conservative inventory planning, cautious consumer sentiment possibly due to the U.S. elections, and a miniaturization cycle moving customers to lower price points,” Cowen & Co. wrote in note published Friday.