Kate Spade Q2 net sales increase 13.7 percent

Kate Spade & Company net sales, for the second quarter ended July 2, 2016, were 320 million dollars, an increase of 39 million dollars or 13.7 percent compared to the second quarter of 2015. Net sales increased 47 million dollars or 17.2 percent, excluding sales for wind-down operations for the second quarter of 2015.

Commenting on the results, Craig A. Leavitt, CEO of Kate Spade & Company, said, “Several factors contributed to our second quarter results falling short of our expectations, the most impactful of which are the retail landscape and continuing tourist headwinds. As we navigate these broader industry trends, we remain very confident in our long-term growth initiatives and have a number of strategies in place to drive our business in the second half of 2016.”

Second quarter witnesses positive trend

Second quarter direct-to-consumer comparable sales growth was 4 percent or 1 percent excluding ecommerce. Gross profit as a percentage of net sales was 59.7 percent compared to 61 percent for the second quarter of 2015.

Kate Spade North America net sales were 271 million dollars, an increase of 36 million dollars or 15.1 percent compared to the second quarter of 2015. Net sales increased 40 million dollars or 17.1 percent, excluding sales for wind-down operations for the second quarter of 2015. Adjusted EBITDA was 47 million dollars compared to 38 million dollars. Segment adjusted EBITDA excluding wind-down operations was 38 million dollars.

Kate Spade International net sales were 43 million dollars, an increase of three million or 6.6 percent compared to the second quarter of 2015. Net sales increased seven million dollars or 19.8 percent, excluding sales for wind-down operations for the second quarter of 2015. Adjusted EBITDA was four million dollars compared to three million dollars for the second quarter of 2015. Excluding wind-down operations, adjusted EBITDA was two million dollars for the second quarter of 2015.

Adelington Design Group net sales five million dollars, an increase of 4.8 percent compared to the second quarter of 2015 and adjusted EBITDA was one million dollars for the second quarter of 2016.

Financial highlights of the first half

For the first half of 2016 on a GAAP basis, the company recorded income from continuing operations of 35 million dollars or 0.28 dollar per diluted share, compared to a loss from continuing operations for the first half of 2015 of 44 million dollars or 0.35 dollar per diluted share. Diluted earnings per share from continuing operations were 0.17 dollar compared to adjusted diluted earnings per share of 0.10 dollar in the first half of 2015.

Net sales for the first half of 2016 were 594 million dollars, an increase of 58 million dollars or 10.8 percent. Net sales increased 82 million dollars or 16 percent, excluding sales for wind-down operations for the first half of 2015. Adjusted EBITDA was 89 million dollars compared to adjusted EBITDA, excluding wind-down operations of 69 million dollars for the first half of 2015.

Reveals expectations for FY16

For the fiscal year 2016, the company expects net sales to range 1.370 billion dollars to 1.400 billion dollars, adjusted EBITDA to be between 242 to 260 million dollars and diluted earnings per share of 0.63 to 0.70 dollars. The company expects DTC comparable sales growth to be between high-single digit to low double digit. Kate Spade aims to open 40 to 45 new stores during the year. At the end of second quarter, the company operated 426 stores, which include 17 new stores opened during the quarter.

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