Kate Spade's quarterly profit and revenue were up, but the company posted lower-than-expected comparable store sales. Fred Katayama reports.
Kate Spade's quarterly profit and revenue surged. But comparable store sales fell, hurt by weak demand for its off-price products and fewer tourists shopping at its stores. Shares dropped sharply on Wednesday to their lowest in nearly four years. Betty Chen of Mizuho Securities: (SOUNDBITE) BETTY CHEN, MANAGING DIRECTOR, SPECIALTY RETAIL, AMERICAS RESEARCH, MIZUHO SECURITIES, (ENGLISH) SAYING: "Expect some continued gross margin pressure. And that's some of the weakness on the stock today. We do believe that, as investors appreciate that strategy to prudent in this environment, and, more importantly, focus on the fact that full price stores actually saw margins increase, that they realize that the business remains very healthy." Like its competitors, Coach and Michael Kors, Kate Spade has been successfully working on a new strategy aimed at getting customers to pay full price. Chen says new merchandise, wage increases and the change of seasons are driving more customers into their stores - offline and online.