What: Shares of handbag maker Kate Spade & Co. (NYSE:KATE) climbed as much as 13% on Wednesday and were up 4% at 3:20 p.m. after the company's quarterly results and outlook impressed Wall Street.
So what: Kate Spade shares have fallen sharply in recent months on signs of slowing demand, but solid top-line results -- Q2 revenue rose 5.7% to $281.1 million -- coupled with upside guidance for the current quarter is reigniting optimism over its growth trajectory going forward. In fact, same-store sales increased 12% on strong demand in North America, while adjusted operating margins expanded 300 basis points, restoring some confidence in management's strategy to focus only on its luxury brands and phase out its lower-margin ones.
Now what: Management raised the low end of its full-year adjusted EBITDA range, with revised guidance of $190 million to $200 million, excluding wind-down operations. "Our success with new product introductions shows that we are resonating with our existing customers, as well as attracting new customers to our brand across our four category pillars," said CEO Craig Leavitt. "As we become an enduring lifestyle brand, we continue to concentrate on building brand equity, generating awareness and managing our points of distribution to drive sales and profitability." More importantly, with Kate Spade shares still off roughly 50% from their 52-week highs, there seems to be plenty of upside available to buy into that turnaround talk.
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