Kate Spade aces holiday quarter with same-store sales beat

(Reuters) - Kate Spade & Co KATE.N reported better-than-expected quarterly sales at established stores, driven by demand for its top-of-the-range kate spade new york handbags and accessories.

Models present creations from the Kate Spade Spring/Summer 2014 collection during New York Fashion Week in this file photo dated September 6, 2013. REUTERS/Eric Thayer

Shares of the company, known for its quirky and colorful satchels and totes, rose as much as 6.7 percent to $21.15 in early trading on Tuesday.

Kate Spade has been focusing on the kate spade new york brand and investing in its online business, strategies that analysts say have helped the company fight the effects of a slowdown in the handbag market in North America.

The company has also expanded its flagship line to include home decor and children’s products ranging from furniture and rugs to kids’ purses and apparel.

“These new products (in kate spade new york) help us continue to acquire new customers,” Chief Executive Craig Leavitt said on a conference call with analysts.

Kate Spade's same-store sales growth was in contrast with that of bigger rivals Coach Inc COH.N and Michael Kors Holdings Ltd KORS.N, both of which reported a fall in same-store sales during the holiday quarter.

“Kate Spade has a brand clarity and uniqueness that is now lacking in brands such as Coach and Michael Kors,” Hakon Helgesen, retail analyst at research firm Conlumino said.

“This gives it the ability to pull in customer traffic and sell through at a higher price point, without having to resort to discounting to shift stock,” he added.

Kate Spade’s sales at stores open for at least 14 months, including online sales, rose 14 percent in the fourth quarter ended Jan. 2, handily beating the 11.4 percent increase that analysts polled by Consensus Metrix had expected.

“They continue to sell the products the customers want and they have maintained the strong discipline around how they are selling it,” Nomura Securities analyst Simeon Siegel said.

The company also said it expects 2016 same-store sales to grow by low to mid-teens on a percentage basis. Analysts on average have forecast a growth of 10.6 percent.

Excluding items, the company earned 32 cents per share, in-line with analysts estimate.

Net sales rose 7.6 percent to $429 million, missing the average analyst estimate of $441.6 million.

Kate Spade, which expanded into eight countries in 2015, also said it would enter India through an agreement with Reliance Brands Ltd, a unit of Indian conglomerate Reliance Industries Group.

The company’s stock gained about 12 percent this year up to Monday, while the S&P 500 lost 5.5 percent.

Reporting by Subrat Patnaik and Yashaswini Swamynathan in Bangalore; Editing by Saumyadeb Chakrabarty