Kate Spade slump: Buyers prefer second-hand luxury to new handbags that cost less

Kate Spade same-store sales fell 16 percent

Kate Spade is grappling with declining sales as shoppers snub moderately priced designer purses in favor of second-hand premium handbags that would cost two or three times as much new.

Ticker Security Last Change Change %
TPR TAPESTRY INC. 45.59 +0.32 +0.71%

The brand's sales at stores open at least a year, a benchmark in the retail industry, fell 16 percent in the three months through September, parent company Tapestry said Tuesday, Net income across the New York-based firm, which also owns Coach and Stuart Weitzman, tumbled to $20 million, or 7 cents per share, according to a statement.

Handbags hang in the window of a Kate Spade & Co. store. (David Paul Morris/Bloomberg via Getty Images). 

Revenue at Michael Kors, once sought after for tote bags with the signature MK logo and oversized statement watches, is likewise grappling with changing consumer tastes. Its sales slid less than 5 percent in the three months through June, parent Capri Holdings said in a statement, and it will update investors Wednesday on its financial performance through September

Ticker Security Last Change Change %
CPRI CAPRI HOLDINGS LTD. 43.05 +0.07 +0.16%
LVMUY LVMH MOËT HENNESSY LOUIS VUITTON SE 139.47 -3.50 -2.45%
REAL THE REALREAL INC. 3.32 -0.06 -1.78%

Handbag and tote sales in the U.S. have plummeted more than 20 percent over the first eight months of 2019, compared with three years ago, according to market research firm NPD Group’s Consumer Tracking Service.

The secondhand market for luxury purses, meanwhile, is booming. The RealReal, an online marketplace for reselling luxury handbags, clothing and jewelry, reported its revenue rose 55 percent to $80.5 million, from $51.8 million a year ago, with the average order value rising to $438 compared with $418 in 2018, the company said.

And Poshmark, a marketplace for new or used clothing, shoes and accessories, reported that sales of designer handbags on the site have increased by 53% in 2019, with top-selling luxury brands including Louis Vuitton, Gucci, Chanel and Burberry. Many originally sold for $3,000 or more

The site even offers Posh Authenticate, a free service that ensures bags costing more than $500 aren't counterfeit.

“The growing resale segment is both a threat and an opportunity for the handbag market, and I expect renting will gain traction in handbags during the next few years,” NPD analyst Beth Goldstein, said in a report.

Shoppers don’t just want a bag with a logo, she added. They’re looking at a brand’s engagement in social and environmental issues as well as quality, function and versatility.

LUXURY HANDBAGS GET BIG RETURN ON THEIR INVESTMENT

Kate Spade, founded in 1993, became an instant hit among Baby Boomers and Gen Xers who saw the chic shoulder bags as a status symbol. By 1998, the business was rolling in $28 million a year in revenue, establishing itself as the “it” brand for working women attracted to the moderate price point, between $100 and $400. At the time, Coach was the only major competition.

GET FOX BUSINESS ON THE GO BY CLICKING HERE