Kate Spade Shares Plunges After Disappointing Results

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Kate Spade & Co (NYSE: KATE) announced its financial results for the second quarter ended July 2, 2016 on Wednesday. The results didn’t meet analysts’ estimates and shares of Kate Spade fell over 20% in premarket trading today.

According to the release of Kate Spade, net sales increased 13.7% to $320 million compared to the same period last year. Net sales for Kate Spade North America rose 15.1% to $271 million in the second quarter and Kate Spade International net sales reached $43 million, increasing 6.6% year-over-year.

The company also announced the income from continuing operations of $25 million, or $0.19 per diluted share in the second quarter, increased $16 million from $9 million or $0.07 per share in the same period of 2015. Diluted earnings per share from continuing operations was 11 cents, compared to 8 cents in 2015.  

“Several factors contributed to our second quarter results falling short of our expectations, the most impactful of which are the retail landscape and continuing tourist headwinds,” Craig A. Leavitt, Chief Executive Officer of Kate Spade, said in the statement on Wednesday. “As we navigate these broader industry trends, we remain very confident in our long-term growth initiatives and have a number of strategies in place to drive our business in the second half of 2016.”

Based on the second quarter results, the company adjusted the guidance for 2016. Net sales were expected to be between $1.37 billion and $1.40 billion, cutting from the previous forecasts of $1.39 billion to $1.41 billion. Diluted earnings per share were estimated to be 63 to 70 cents per share, which is also below former expectations of 70 cents to 80 cents.

Looking forward, the company planned to provide more substantial promotions in its outlet stores and online stores; however, Leavitt stressed to generate full-price sales in traditional specialty shops. “We want to focus on the full-price customer. This strategy is working.” Leavitt said.

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