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Kate Spade Is Diversifying Beyond Handbags, and It's Working

The company is also planning to open its first stand alone stores in India later this year.
These babies aren't selling like they used to. Photo: Pascal Le Segretain/Getty Images

These babies aren't selling like they used to. Photo: Pascal Le Segretain/Getty Images

If you spent less money on handbags in 2015 than in years previous, you're not alone — women across the U.S. are spending less on expensive totes and midsize bags in favor of smaller, less expensive satchels, and it's transforming the businesses of Kate Spade, Michael Kors and other brands that have long depended on those big-ticket purchases for a sizable portion of their income.

Kate Spade, for its part, ushered in 14 new product categories — most notably children's — and expanded to eight countries in 2015, and the results paid off, with sales ringing in at $1.24 billion for the year, up 9 percent from 2014. Same-store sales were up 13 percent. Over the fourth quarter, net sales increased 8 percent to $428 million, driven by strong demand for novelty items, its Everpurse collaboration and its buy online/pick up in-store offerings over the holidays, CEO Craig Leavitt said on a call with investors Tuesday.

Kate Spade expects to see high-single and low-double-digit growth going into 2016, forecasting annual sales of between $1.39 billion and $1.41 billion. Driving that growth will be the introduction of yet more categories, including activewear, sleepwear and a bridal capsule this spring, as well as continued geographic expansion, including a range of stand alone stores in India, announced today.

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While the strengthening dollar has hurt sales to tourists all across the U.S., Kate Spade has been able to offset most of the damage by strengthening relationships with local customers, Leavitt said. The company is also continuing to focus on winding down promotions and the availability of off-price product to boost full-price sales.

Investors were pleased with the report, with company shares trading up 9 percent Tuesday afternoon.