Kate Spade Shares Fall as Executives See Slower Sales Growth

(Bloomberg) -- Kate Spade & Co. fell the most in three months after the seller of luxury handbags, clothing and jewelry said sales growth may slow this quarter.

Chief Operating Officer George Carrara said on a conference call that sales last quarter were helped by a timing shift on some wholesale shipments. Without that boost, revenue growth in the current period “will moderate to a lower level,” he said.

The cautious outlook reflects the challenges facing Kate Spade, such as ailing department-traffic and a downturn for the handbag market as a whole. Chief Executive Officer Craig Leavitt said on the call that “macroeconomic headwinds” also continue to be an obstacle for the company.

The shares fell as much as 9.7 percent to $14.75 in New York, the biggest intraday drop since Aug. 3. They had dropped 8.1 percent this year through Tuesday.

The comments took the luster off a third-quarter performance that topped analysts' expectations. Earnings were 13 cents per share, excluding some items, the New York-based company said in a statement Wednesday. Analysts estimated 8 cents, on average. Sales rose 14 percent to $316.5 million, beating analysts' $311.1 million average projection.

Kate Space saw improvements in the performance of its full-price items, showing that it's making some progress in combating the negative effects of discounting too much. The company also invested heavily in digital marketing for handbag collections like Cameron Street, which boosted results.

“Kate's results highlight how competitive the handbag industry has become,” said Chen Grazutis, an analyst at Bloomberg Intelligence. “The stronger dollar continues to deter foreign tourists from shopping at U.S. outlets, and when they do, they become very sensitive on price -- with very little or no loyalty to any specific brand.”

To contact the reporter on this story: Sarah Very in New York at svery@bloomberg.net. To contact the editors responsible for this story: Bill Austin at billaustin@bloomberg.net, Kevin Orland, Nick Turner