Kate Spade, Estee Lauder and Weight Watchers need an earnings makeover

Young shoppers browse makeup products at an Estee Lauder MAC Cosmetics store.
Kiyoshi Ota | Bloomberg | Getty Images
Young shoppers browse makeup products at an Estee Lauder MAC Cosmetics store.

It wasn't too long ago consumers were paying a premium to look and feel like a million bucks. But the recent rise of online retail channels like Amazon.com have started to disrupt the pricing power the luxury market once held.

Name brands are now resorting to heavy discounting to support the top line and keep pace with broader consumer discretionary space. This has not only come at the cost of margin growth but also investors holding these beaten down stocks.

More from Estimize:

Zillow Group Faces Challenges Ahead of Q3 Earnings Report

5 Stocks to Watch After the Market Closes Today

Gilead is Sending a Sell Signal Ahead of its Earnings Report

The tough retail environment is only likely to continue heading into the peak retail weeks of earnings season. We get an early look at the space over the next few days with reports from Kate Spade, Estee Lauder and Weight Watchers. These are popular brands that might have consumers looking great but will keep investors dejected.

Year-to-date stock performance


Tomorrow, Kate Spade and Estee Lauder are scheduled to announce results before the bell. Both stocks have been trading significantly lower in the past six months on a slew of disappointing earnings results.

Kate Spade's second quarter was marked by an unnerving slowdown in comparable sales, which continue to pressure margins. Sales comps grew 4 percent in the second quarter, compared to 15 percent in the previous four quarters. The slowdown was driven by weaker traffic trends, frequent promotional activity and heavy discounting.

The third quarter is expected to be influenced by some of these trends but should show some signs of improvement heading into the holiday season. Analysts at Estimize are calling for 10 cents per share, 74 percent higher than the same period last year. That estimate edged down 17 percent since the company's most recent report in early August. Revenue for the period is estimated to increase 20 percent, reflecting a slight improvement from previous quarters

Recent promotional initiatives including a new Miss Piggy Disney collection and a smartwatch collaboration with Fossil are encouraging as consumers head into the high spending months.


Estee Lauder, on the other hand, has been trending lower in the past few quarters. Slow retail growth in China and macroeconomic uncertainty continue to have an unfavorable impact on the top line. The recent acquisition of Elizabeth Arden, new product innovation and efficient cost controls will partially offset this pressure.

Analysts are calling for earnings per share of 81 cents on $2.9 billion this quarter, according to the Estimize consensus data. That reflects a 3 percent increase on both the top and bottom line but also a sharp tick down from previous quarters.


Looking good doesn't just involve material goods but also nutrition and weight control. Weight Watchers has been a leading provider of weight loss products and services for more than 50 years, but an influx of free or low-cost weight loss apps and online services have dented its performance.

To control these losses Weight Watchers has ramped upped its marketing efforts, which include bringing in Oprah Winfrey as a spokesperson and investor. The results of the one-year-old partnership, have been promising with key metrics making significant improvements during the second quarter.

Total revenue and earnings were flat for the period thanks to increases across subscribers and paid weeks. End-of-period subscribers were up 9 percent on the back of a 3.8 percent increase in online subscribers and a 6.6 percent bump in meetings.

Analysts at Estimize expect Weight Watchers to build on this success in Thursday's report. The consensus data is calling for earnings of 41 cents per share, reflecting a 13 percent increase from a year earlier. Revenue is forecasted to rise 4 percent to $283.07 million, marking the first period of positive growth in more than eight quarters.


How do you think these names will report? Be included in the Estimize consensus by contributing your estimates here.