Kate Spade Loses Despite Earnings Beat

By Chris Lange Updated Jan 13, 1:37AM EST · Published Nov 2, 8:50AM EDT

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Kate Spade Loses Despite Earnings Beat — © Thinkstock

Kate Spade & Co. (NYSE: KATE) reported its third-quarter financial results before the markets opened on Wednesday. Despite the challenging retail environment that we have seen in the third quarter, Kate Spade made the cut for earnings. Posting a beat on both the top and bottom lines, this company is one of the few winners in this sector, although investors are initially sending shares lower.

The company posted $0.13 in earnings per share (EPS) and $316.5 million in revenue. The consensus estimates were calling for $0.09 in EPS and revenue of $310.94 million. In the same period of last year, Kate Spade posted EPS of $0.06 and $275.27 million in revenue.

In North America, net sales for the third quarter of 2016 were $260 million, an increase of $31 million, or 13.7%, year over year. Internationally, net sales totaled $51 million, up 18.9% in this time.

In terms of guidance for the full year, the company expects to have $0.63 to $0.70 in EPS with net sales in the range of $1.37 billion to $1.40 billion. The consensus estimates are $0.65 in EPS and $1.38 billion in revenue.

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Craig A. Leavitt, CEO of Kate Spade, commented:

In the third quarter, several macroeconomic factors, including a challenging retail environment and continuing tourist headwinds, impacted our results. 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. We remain focused on the factors we can control as we continue to grow our business and execute our long-term strategy, maintaining our commitment to become a $4 billion business at retail.

George Carrara, president and COO, added:

In the third quarter, we delivered direct-to-consumer comparable sales growth of 7% and top-line growth of 15%. While gross margin pressures have increased in our off-price business, we were able to offset these conditions through strong expense controls. We expect that these efforts, which enabled us to achieve Adjusted EBITDA margin expansion for the third quarter, will help us achieve our 2016 guidance. We remain confident in our long-term strategy.

Shares of Kate Spade closed Tuesday down 2.5% at $16.33, with a consensus analyst price target of $21.56 and 52-week trading range of $15.10 to $26.46. Following the release of the earnings report, the stock was down 2% at $16.00.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.