Shares of Kate Spade stock rose after the handbag company reported fourth-quarter sales figures that were stronger than its competitors, Michael Kors and Coach. Kate Spade also performed better than the broader handbag market.
Kate Spade’s sales rose 14 percent in the fourth quarter, even though it ran fewer holiday promotions than it had the previous year. This showed that consumers were willing to pay full price for the company’s products. CEO Craig Leavitt reported double-digit increases in wholesale shipments and sales in the anchor handbag category.
Sales in the online segment were also better than expected, even though Kate Spade ran fewer flash sales. The brand’s gross margin increased by 2.5 percent. Kate Spade is able to pull in more traffic than its rivals and sell at a higher price point without the need to offer discounts.
In the last three months of 2015, Kate Spade saw strong sales in its anchor handbag and small leather goods categories. Its novelty handbags also performed well. Direct-to-consumer comparable sales increased by 14 percent in the fourth quarter.
Kate Spade did not perform well only on the basis of its traditional product offerings. The brand added 14 new product categories to its offerings last year, including athletic wear, sleepwear, and bedding. As many as 30 to 50 percent of the people who bought items in the new categories were new customers, which created an excellent growth opportunity for the company. Many of those people became repeat customers.
Kate Spade opened stores in eight new countries. The company plans to increase its revenue long term through these strategies, not by discounting. It also wants to avoid oversaturation.
Coach estimated that there was little change in its handbag sales in the fourth quarter. Coach’s domestic same-store sales were down 4 percent, and Michael Kors’ comparable sales declined by 0.9 percent.
Kate Spade’s sales were lower than its competitors’. Kate Spade’s fourth quarter sales were $428 million, Coach’s were $1.8 billion, and Michael Kors had sales of $1.31 billion.
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