Kate Spade Eyes Rebound as It Breaks Away From Flash Sale Past

(Bloomberg) -- Tapestry Inc., the handbag maker formerly known as Coach, is getting shoppers back on board with its recovering Kate Spade brand.

The line’s same-store sales, a key metric for the retail industry, surpassed analysts’ expectations in the latest quarter, thanks to the fashion label’s revitalization efforts and a break from the online flash sales that it had become known for. Tapestry’s shares rose as much as 11 percent on Tuesday, the most in more than a year.

Designer Kate Valentine, better known as Kate Spade, had sold the business long before she died in June, though analysts said news of her untimely passing may have still boosted sales of the brand bearing her name.

Kate Spade Eyes Rebound as It Breaks Away From Flash Sale Past

Chief Executive Officer Victor Luis is leading Tapestry’s turnaround efforts by reorganizing the company as a house of fashion brands, including Coach and Stuart Weitzman. Its handbag labels are trying to recapture their luster after years of heavy discounting and strong competition eroded their status. The Coach and Kate Spade brands have sacrificed short-term results in order to convince customers to pay full price again.
“Fiscal 2019 will be a pivotal year at Kate Spade as we evolve the brand,” Luis said in a statement. “We will focus on global expansion, notably in China where the brand is nascent and we see boundless opportunity.”

Same-store sales for the Kate Spade brand fell 3 percent in the quarter, better than estimates for a decline of 7.2 percent. The recovering label, known for its happy-go-lucky style, had been struggling to win back customers after growing too ubiquitous with aggressive flash sales. At Tapestry’s Coach brand, its biggest business, same-store sales rose 2 percent, just shy of analysts’ estimates of a 2.3 percent gain.

“Our e-commerce site as well as our store sales reflected the strong and immediate heartfelt response to loyal customers to the tragic news of our founder’s passing,” Kate Spade brand president Anna Bakst said on a conference call.

Kate Spade Eyes Rebound as It Breaks Away From Flash Sale Past

Excluding some items, Tapestry’s profit amounted to 60 cents a share, compared with projections of 57 cents. Revenue for the quarter was $1.48 billion, just beating the average estimate of $1.47 billion.

The stock rose to as high as $52.66 on Tuesday. It had risen 7.3 percent this year through Monday’s close.

©2018 Bloomberg L.P.