Kate Spade Tries to Maintain Exclusive Status

Kate Spade handbagKate Spade New York has experienced strong growth recently with its lines of stylish clothing and handbags. It hopes to continue that trend by maintaining the aspirational status of its products.

Kate Spade had $1.2 billion in sales in 2014, up 42 percent over 2013. The company’s sales rose 14 percent to $255 million in the first quarter of this year. Kate Spade reaffirmed its sales forecast of $1.2 billion to $1.28 billion for 2015.

The company has not found success with all of its brands. It closed its Kate Spade Saturday casual chain and its Jack Spade men’s stores. It warned that cutting back on operations in North America could lead to slower online sales this year. The company generates over 75 percent of its revenue in North America.

Kate Spade’s leaders hope that by eliminating those parts of its business, it will be able to refocus on its brand and avoid problems that have confronted other luxury brands, including Coach and Michael Kors. Both have had declining sales because their bags have become less expensive and more common, which has made them lose their exclusive status.

Kate Spade also sees the potential for that problem. Even though the brand performed well compared to other luxury goods makers in the first quarter, its growth was slower than it has been in recent months. Kate Spade reported its slowest sales growth in almost two years this quarter.

The company is trying to prevent the loss of its exclusive status by keeping prices for its luxury goods up. It has cut back on online sales and is asking department stores not to discount its handbags. It is also cutting back on the number of outlet stores it plans to open in 2015.

Instead of trying to attract new customers, Kate Spade is attempting to appeal to its existing clientele with new product offerings. It recently began selling children’s clothing and home décor. It is also planning to launch baby clothing and gift lines in the fall.

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