Kate Spade Swings To Profit in Q2, Driven By Comps

After tumbling to a net loss in Q1, Kate Spade & Co. saw a profit in its second quarter, ended July 4, 2015.

The New York-based apparel-and-accessories firm’s shares surged in pre-market and midday trading following the earnings release, which showed 10 percent to 12 percent improvements in direct-to-consumer comparable sales, excluding e-commerce.

While the comp gain was impressive, the handbag maker still fell short of Wall Street’s estimates for revenues and EPS.

Net Income: Net income from continuing operations was $9 million, compared to a loss from continuing operations of $14 million for the second quarter of 2014.

EPS: Diluted earnings per share were 7 cents compared to diluted loss per share of 11 cents in the same year-ago quarter.

Net Revenue: Reported net sales for the second quarter were $281 million, an increase of $15 million, or 5.7 percent, from the comparable 2014 period.

Adjustments: Net sales, excluding sales for wind-down operations and excluding certain non-comparable items in 2014, were $273 million, an increase of $46 million, or 20 percent compared to the second quarter of 2014.  Adjusted diluted earnings per share from continuing operations in the second quarter of 2015 were 8 cents, compared to 5 cents per share in the second quarter of 2014.

Hit, Miss or Beat: Kate Spade missed Wall Street’s estimates for EPS and revenues. Analysts polled by Yahoo Finance predicted EPS of 11 cents and revenues of $293 million.

Executive Insights: “Our second quarter results demonstrate our focus on building a diverse business model that will drive sustainable, long-term growth. Our strategy is centered on key factors that differentiate Kate Spade & Company – including our lifestyle brand vision, partnered approach to expansion and efforts to build quality of sale. Our success with new product introductions shows that we are resonating with our existing customers, as well as attracting new customers to our brand across our four category pillars. We are driving clear results, including direct-to-consumer comparable sales growth of 10 percent versus last year.” – Craig Leavitt, CEO of Kate Spade & Company, said in a release.

Looking Ahead: The company raised the low end of full year adjusted EBITDA range, with revised guidance of $190 million to $200 million, excluding wind-down operations.

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