Kate Spade & Company reports profit in Q1, net sales up 14.5 percent

Kate Spade & Company said that for the first quarter ended April 2, 2016 net sales were 274 million dollars, an increase of 35 million dollars or 14.5 percent compared to the first quarter of 2015, excluding sales for wind-down operations. Reported net sales for the quarter were 255 million dollars.

Commenting on the company’s performance, Craig A. Leavitt, Chief Executive Officer of Kate Spade & Company, said, "Our first quarter results reflect the stronger, refocused Kate Spade & Company and underscore the effectiveness of our differentiated strategy. We continue to focus on our powerful multi-channel approach, especially fueled by the robust performance of our global ecommerce business, which helped drive our industry-leading comparable sales growth of 19 percent. Our diverse business model helps position us for sustainable long-term growth.”

First quarter results in detail

For the first quarter on a GAAP basis, income from continuing operations was 11 million dollars or 0.08 dollar per diluted share, compared to a loss from continuing operations of 54 million dollars or 0.42 dollar per diluted share, for the first quarter of 2015. Diluted earnings per share from continuing operations using a normalised tax rate were 0.05 dollar, compared to 0.01 dollar in the first quarter of 2015.

"We are very pleased with our performance in the first quarter on a comparable basis to last year, particularly our robust top-line growth of 15 percent and Adjusted EBITDA margin expansion of 120 basis points. We remain well-positioned to generate significant margin expansion in 2016 and are confident in achieving our full year top and bottom line guidance," added George Carrara, President and Chief Operating Officer of Kate Spade & Company.

Direct-to-consumer comparable sales growth was 19 percent or 8 percent excluding ecommerce. Comparable sales per square foot for kate spade new york stores were 1,611 dollars for the latest twelve months, compared to 1,588 dollars for the twelve month period ended January 2, 2016. Gross profit as a percentage of net sales was 61.8 percent.

Segment highlights of the first quarter

Kate Spade North America net sales were 219 million dollars, an increase of 32 million dollars or 17.1 percent compared to the first quarter of 2015, excluding sales for wind-down operations. Reported net sales were 196 million dollars. Kate Spade North America Segment Adjusted EBITDA was 25 million dollars compared to segment adjusted EBITDA excluding wind-down operations of 20 million dollars for the first quarter of 2015.

Kate Spade International net sales were 49 million dollars an increase of 2 million dollars or 3.2 percent compared to the first quarter of 2015, excluding sales for wind-down operations. Reported net sales were 52 million dollars and 47 million dollars excluding wind-down operations, both of which included six million dollars in direct-to-consumer sales from its Hong Kong, Macau and Taiwan operations prior to the transition to a joint venture during the quarter.

Adelington Design Group net sales were seven million dollars, an increase of one million dollars or 23.8 percent compared to the first quarter of 2015, excluding sales for wind-down operations. Reported net sales were seven million dollars for the first quarter of 2015.

Issues guidance for 2016

For the fiscal year 2016, the company expects net sales to be in the range of 1.385 billion dollars to 1.410 billion dollars and adjusted EBITDA of 257 million dollars to 282 million dollars and diluted earnings per share between 0.70 dollar to 0.80 dollar. The company expects to open 40 to 45 new stores, a combination of company-owned and partner stores.

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