Boston, MA 08/13/2014 (wallstreetpr) – Kate Spade & Co (NYSE:KATE), one of the renowned fashion and handbag companies, announced that the gross margin of company slashed to 58.6% in quarter which ended on July 5, 2014. In the same quarter in previous year, the gross margin stood at 61.8%. The company cited discounts given for inventory clearance, as the primary reason for diminishing gross margin. The concerns stemming from narrowing margin also overshadowed narrower loss as well as demand increase news. In the meanwhile, the company also announced that the margins shall remain pressurized throughout the present year.
Shares taking diversion
Amidst surging demand and narrowing losses, the shares of Kate Spade, which increased 9% approximately in the pre-market trading, again took a diversion and ended at 25% down.
Discount Broadening led to Narrowing Margins
The top management of Kate Spade & Co (NYSE:KATE), in the conference call, explained that the broader discounts given by them were fiercer than expectation. Kate Spade said that, while it is shooing away the use of promotions in order to drive more sales, it was, at the same time, compelled to move sales prior to time in order to remain in the race of competition.
The chief operating officer of the company, George Carrara said that kate Spade shall remain seated on sidelines, while the meaningful promotional activity takes place amongst the competitors and retailers.
Narrowing Loss of Kate Spade
In the overall financial performance, it was observed that the company reported a Q2 2014 loss of $4.4 million or 3 cents per share, in comparison to $43.1 million in the same quarter in previous year, or 36 cents a share.
Earnings from continuous operations, excluding the acquisition-associated costs, stood at 5 cents per share, in contrast with the loss of 8 cents per share in the previous year. Net sales of the company increased 49% and totalled at $266 million.
