Shares of Kate Spade & Co. fell 6.5 percent in morning trading after the company posted first-quarter results that missed Wall Street’s expectations.
For the first quarter ended April 1, net income fell to $1.4 million, or 1 cent a diluted share, from $11.6 million, or 9 cents, a year ago. The quarter included $7 million in pre-tax store impairment charges and $2 million of pretax fees and expenses in connection with the firm’s review of strategic alternatives, which could lead to a sale of the company. Net sales dipped 1.2 percent to $271.2 million from $274.4 million. The company said direct-to-consumer comparable sales declined 2.4 percent, or down 8.1 percent excluding e-commerce.
Kate Spade also said gross profit, as a percentage of net sales, rose to 63.2 percent, compared with 61.8 percent in the year ago quarter.
Wall Street was expecting EPS of 7 cents on sales of $299.8 million.
By segment, the company said Kate Spade North America net sales were $217 million, down 0.6 percent from a year ago. Adjusted EBITDA for the segment was $23 million, or 10.5 percent of net sales, for the current quarter, down from $25 million or 11.2 percent, in the year-ago quarter. Kate Spade International net sales were $49 million, flat compared to a year ago. On an adjusted basis, EBITDA was $8 million, or 15.9 percent of net sales, compared with $9 million, or 17.5 percent, a year ago.
The company said it ended the quarter with 452 stores.
Craig A. Leavitt, chief executive officer, said, “Despite a challenging retail environment and the later Easter holiday, we achieved yet another quarter of double-digit e-commerce comparable sales growth, which helped offset softness in bricks-and-mortar stores.”
He said the company’s board, with management, continues to evaluate its strategic options. Sources have said the company has been in talks with Coach Inc. regarding a possible acquisition.
George Carrara, president and chief operating officer, said, “We delivered over 140 basis point of gross margin expansion in the first quarter driven by operational efficiencies and our continued focus on quality of sale amidst a highly promotional environment.”
Carrara also said the company continued to generate “robust cash flow,” and that it ended the quarter “with $422 million in cash.”
Shares of Kate Spade were trading at $18.14 at 10:29 a.m.
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