Kate Spade Sales Struggle Signals Challenges for Fashion 

First comparable sales decline in years

Author: Andria Cheng

April 18, 2017

Once a solid bright spot in the fashion industry, the U.S. handbag sector is struggling to find its footing. 

The latest evidence: Kate Spade reported a 2.4% comparable-store sales decline, its first such drop in at least 25 quarters. Excluding online sales, comparable sales would have slid 8.1%.

Data deep dive

Kate Spade & Co.

Same-store sales data, store-productivity stats and more

The decline was a sharp contrast to the performance of just a few years ago, when Kate Spade was posting annual comparable sales gains of more than 20% each from 2012 to 2014. Sales gains slowed to 12.6% in 2015 and then to 9.1% last year. (And if not for ecommerce sales, 2016 comparables would have shown an increase of just 1.1%.)

The result echoed a recent NPD Group finding that showed U.S. handbag sales fell $1 billion, or 12%, to $7.3 billion in the year ended February 2017, leading a 7% drop in industrywide fashion accessories sales.

Related Story

'What Not to Wear'

Shoe and Fashion Accessories Fall

With consumers often using accessories as a way to spice up their wardrobe, NPD cautioned that the decline signals a decline in fashion as a priority.

Kate Spade has hired advisers to explore strategic alternatives, and rivals Coach and Michael Kors are said to be possible bidders as a consolidation wave is expected to sweep the industry. Among the challenges facing the sector are declines in department store and mall traffic and changing consumer tastes, with spending shifting to experiences and services rather than material things. To that point, both Euromonitor and NPD Group data showed that luggage sales have outpaced those for handbags.

Meanwhile, upscale brands are bracing for the possible impact of a stronger dollar and uncertainty over U.S. travel policies that could reduce overseas tourism travel and spending in New York and other markets, key to luxury sales. In New York, for instance, the city’s tourism arm, NYC & Co., earlier this year revised its forecast to project 300,000 fewer inbound international visitors this year, the first decline since 2008, “in light of the recent travel ban and related rhetoric.”

Related Story

Luxury Woes

'For Luxury Industry, Ecommerce Is No Longer a Luxury'

Kate Spade isn’t the only one struggling to reinvent itself. Michael Kors has also seen its same-store sales growth slow from a peak of 40% in 2013 to a 4.2% drop last year. Ralph Lauren, meanwhile, is shutting its Polo flagship on New York’s Fifth Avenue as part of its plan to cut costs and invest more on ecommerce and other digital ecommerce initiatives.

Coach, for its part, has returned to positive sales growth after a spate of sales declines. It’s bought luxury shoe label Stuart Weitzman and, to attract millennials and other younger shoppers, it signed pop star Selena Gomez, who boasts 117 million Instagram followers, to be a new face of the brand.