On Wednesday, shares of luxury retailer and handbag maker Kate Spade & Co. plunged, down over 20% in morning trading after the company reported disappointing quarterly profit thanks to weakening sales to tourists.
Kate Spade reported diluted earnings per share of $0.11, missing the Zacks Consensus Estimate of $0.14 per share. Net income came in at $27 million for the second quarter. Total revenues, however, increased 14% to $320 million, beating our consensus estimate of $318 million.
"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,” said CEO Craig A. Leavitt in a statement. “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. We continue to focus on the factors we can control, executing our long-term strategy and continuing to grow as a global, multi-channel lifestyle brand."
As a result of its weak quarterly performance, Kate Spade slashed its full-year forecast, with earnings per share now expected to fall in the range of $0.63-$0.79, down sharply from previous estimates of $0.70-$0.80 per share. The forecast for net sales has also been cut, and the company is now expecting to bring in revenues in the range of $1.37-$1.40 billion, down from $1.39-$1.41 billion.
The Future
Like many other retailers, Kate Spade has been focused on reducing the number of promotions in its brick-and-mortar stores. This, in addition to the declining number of tourists visiting the U.S. because of the strong dollar, has led to a slowdown in foot traffic, which in turn has forced Kate Spade to mark down their products.
But as the handbag industry in North America slows down, and competition from rivals like Michael Kors , Coach Inc. , and privately held Tory Burch heats up, Kate Spade has expanded its home and lifestyle selection. Consumers can now purchase things like furniture, lighting, rugs, and apparel for women and children all under the Kate Spade brand.
The company has also made efforts to increase its ship-from-store presence, a way to help Kate Spade sell more full-price items by shipping products bought online from its stores.
KATE is currently a #2 (Buy) ranked stock on the Zacks Rank.
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Kate Spade (KATE) Plunges 20% on Profit Miss, Slashed Forecast
On Wednesday, shares of luxury retailer and handbag maker Kate Spade & Co. plunged, down over 20% in morning trading after the company reported disappointing quarterly profit thanks to weakening sales to tourists.
Kate Spade reported diluted earnings per share of $0.11, missing the Zacks Consensus Estimate of $0.14 per share. Net income came in at $27 million for the second quarter. Total revenues, however, increased 14% to $320 million, beating our consensus estimate of $318 million.
"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,” said CEO Craig A. Leavitt in a statement. “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. We continue to focus on the factors we can control, executing our long-term strategy and continuing to grow as a global, multi-channel lifestyle brand."
As a result of its weak quarterly performance, Kate Spade slashed its full-year forecast, with earnings per share now expected to fall in the range of $0.63-$0.79, down sharply from previous estimates of $0.70-$0.80 per share. The forecast for net sales has also been cut, and the company is now expecting to bring in revenues in the range of $1.37-$1.40 billion, down from $1.39-$1.41 billion.
The Future
Like many other retailers, Kate Spade has been focused on reducing the number of promotions in its brick-and-mortar stores. This, in addition to the declining number of tourists visiting the U.S. because of the strong dollar, has led to a slowdown in foot traffic, which in turn has forced Kate Spade to mark down their products.
But as the handbag industry in North America slows down, and competition from rivals like Michael Kors , Coach Inc. , and privately held Tory Burch heats up, Kate Spade has expanded its home and lifestyle selection. Consumers can now purchase things like furniture, lighting, rugs, and apparel for women and children all under the Kate Spade brand.
The company has also made efforts to increase its ship-from-store presence, a way to help Kate Spade sell more full-price items by shipping products bought online from its stores.
KATE is currently a #2 (Buy) ranked stock on the Zacks Rank.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>