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What Happened in the Stock Market Today

Clothing Department Store
Clothing Department Store

Image source: Getty Images.

Before Wednesday's jump, the stock had taken a beating in 2016 as operating results worsened. Comparable sales ticked lower last quarter and gross profit margin fell to 59% of sales from 61%. Kate Spade has had to rely on price cuts to keep inventory moving lately, which pinched its earnings power.

The rough selling trend apparently continued into the holiday season quarter where Kate Spade advertised Black Friday discounts as high as 70% on much of the merchandise in its outlet stores.

Along with many other mall-based retailers, it is struggling with lower customer traffic trends right now. CEO Craig Leavitt recently blamed a "challenging retail environment" for driving profit figures down, but noted that the company offset the losses by keeping a lid on costs. Expenses last quarter dove to 48% of sales from 58% in the prior-year period.

It isn't clear just how serious Kate Spade is about a potential buyout or whether any premium would clear the company's current pricing of almost $18 per share. In any case, investors can't count on an acquisition sending the stock higher. Shareholders should instead keep watching margin trends for signs that the company is finding traction in its latest apparel and accessory offerings.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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