Kate Spade Co. is positioning itself as a leader in the luxury handbag market. Sales rose by 30 percent from $192.7 million in the second quarter to $250.4 million in the third quarter and are expected to reach $1 billion by the end of the year. That led shares to rise by 21 percent.
The brand is popular with young people and celebrities. Teenagers Malia and Sasha Obama, daughters of President Barack Obama, as well as Sarah Jessica Parker, Taylor Swift, and other famous entertainers have been seen sporting Kate Spade handbags.
Most of Kate Spade’s revenue comes from sales in North America, which rose 36.4 percent in the third quarter, due in large part to demand for its high-margin kate spade new york handbags and accessories.
Kate Spade raised its global same-store sales growth forecast from 15-17 percent to 19-21 percent. Global same-store sales rose 15.2 percent in the third quarter, beating analyst expectations of a 10.9 percent rise. The company’s gross margins rose from 61.4 percent to 62.8 percent.
With the holiday season coming up, high promotional costs can cut into profits. Still, Kate Spade is expected to perform well between now and the end of the year.
Kate Spade was created in 1993 and has been developing into a fashion leader. Its collections include handbags, other accessories, clothing, and shoes. The company also recently released a coffee table book.
Kate Spade is now competing with Coach, which has seen sales fall for the last six consecutive quarters. Coach’s mass appeal is waning, but the company is in the midst of a redesigning process.
Another handbag maker, Michael Kors, is also suffering. Its stocks fell 10 percent after the company released a weak sales report. Some believe this decline is due to product saturation.
A third competitor, Tory Burch, also designs stylish handbags and has released a coffee table book. The company is doing well, and analysts will be watching it closely.
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