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Nov 2, 2016
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Kate Spade third quarter sales beat estimates, retains outlook

Nov 2, 2016

Kate Spade remains on pace achieve its goal of becoming a $4 billion business in retail. The company reported its third quarter results on Wednesday, which beat estimates according to Reuters.

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Third quarter net sales increased 14.1% to $317 million and direct-to-consumer comparable sales were 6.7%, or flat excluding e-commerce. Kate Spade International led the way in growth increasing 18.9% to $51 million, while the main business driver, Kate Spade North America, increased 13.7% to $260 million. Adelington Design Group net sales fell 2.2% to $6 million when compared to the previous third quarter.
Gross profit as a percentage of net sales also fell to 59.4% compared to 61.2% from the third quarter of 2015, SG&A expenses were $151 million, or 47.7% of net sales, compared to $157 million, or 56.8% of net sales, in the previous third quarter, and income from continued operations was $30 million, or $0.23 per diluted share, versus $5 million, or 0.04 per diluted share, in the prior year.

Craig A. Leavitt, Chief Executive Officer of Kate Spade & Company, said: "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.
Kate Spade in the second quarter cut its full year 2016 forecasts due to foreign exchange headwinds, lower traffic and transaction size, and increased promotions. The company reported solid nine months results that included an 11.9% increase in net sales to $911 million, an increase in adjusted EBITDA to $143 million from $105 million in the prior year comparable period, and a $65 million income from continuing operations compared to a $40 million loss in 2015.
The company continues to expect its full year net sales to range from $1.370 billion and $1.400 billion, for adjusted EBITDA to fall in range of $242 million and $260 million, and for diluted EPS to be between $0.63 and $0.70. Direct-to-consumer sales are also expected to grow in the high single digit to low double-digit range.

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