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Thursday, March 05, 2015

Kate Spade Profits Dented Slightly by Saturday's Demise

Kate Spade Profits Dented Slightly by Saturday's Demise:

The scene at Kate Spade's fall 2015 presentation. Photo: Cindy Ord/Getty Images
The scene at Kate Spade's fall 2015 presentation. Photo: Cindy Ord/Getty Images
If you're looking at sales figures, Kate Spade & Company closed out 2014 in top form. Net sales for the full year rose 42 percent to $1.1 billion; the company gained a lot of steam in the final quarter, selling $399 million worth of merchandise, a 45 percent increase on the same period last year. Sales growth in the fourth quarter, which ended Jan. 3, topped 50 percent in all markets, with international (a smaller business overall) showing slightly quicker gains.

In sum, people are still really into Kate Spade's sweet, quirky aesthetic. To keep that momentum going, the company plans to add another 50 to 55 stores in the coming year to its existing network of over 200 specialty and outlet locations.

The company's decision earlier this month to shut down all its Kate Spade Saturday and Jack Spade stores did, however, bruise an otherwise solid financial quarter. Net income in the fourth quarter sank to $126,524 million from $185,172 million the previous year, and gross profit as a percentage of sales lowered from 61.6 percent to 57.8 percent. The company expects to lose $8 million on unsold inventory as a result of Saturday's demise and Jack Spade's transition into selling only through its own e-commerce site and via wholesale channels.

Because profits fell short of expectations, Kate Spade's stock price dropped about 4 percent by 11:30 a.m. on Tuesday morning. But don't get too bummed: after the company takes the hit from reworking its secondary labels, we'd expect to see things rebound. Its sales progress suggests as much, anyway.

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