Bloomberg

(Bloomberg) -- Kate Spade & Co. sells cat bags. No, not the kind for toting Priscilla out to the beach house. These bags have cat ears, cat whiskers, and cat eyes. There are also cat rings, cat watches, cat shoes, cat T-shirts, cat cardigans, and shiny gold cat iPhone cases. 

It’s the latest line of items to hit what the luxury brand calls its “novelty” department, a selection of quirky, whimsical handbags and accessories that look decidedly different from the sleek leather goods most people associate with Kate Spade. Every month, the label introduces new stuff to its novelty shop, ranging from origami seahorses to wicker bags that look like beehives. This summer, the retailer’s novelties include grapefruit tote bags, banana pouches, and parrot jewelry. Now come the kitties. 

While they seem like mere curios, these products have become oddly important to Kate Spade's business strategy. The move, however, didn’t work out too well in June. The novelty items helped drag down results for the quarter, though the company says a strong dollar (specifically its effect on tourist traffic and buying power) was the key villain. On Wednesday, Chief Executive Officer Craig Leavitt cut sales and profit forecasts, sending shares down as much as 22 percent. On a conference call with analysts, executives insisted the June failure was an anomaly but acknowledged the importance of getting novelty products right. Leavitt said the segment pulls shoppers into stores and is even more integral to getting people onto the Kate Spade website. The brand will continue to invest in it, he pledged.

"We know it drives both traffic and conversion in both our e-commerce and stores," says Leavitt. "It's a very important part of our story-telling that builds further engagement with the consumer."

Because these items are updated so often, they give customers a reason to keep coming back to see what's new. While they're in the store gawking at novelty boombox rings and record case bags, perhaps they'll see a regular Kate Spade bag–say, a slate-and-black leather satchel–that they just need to have. Plus, each playful item builds Kate Spade's image as an eccentric alternative to such competitors as Michael Kors Holdings Ltd. and Coach Inc.

Kate Spade plans to revisit novelty themes it has used in the past, though executives didn't share additional details of upcoming products. 

"We deliver newness every single month," said Leavitt. "We are focused on product that's really engaging and differentiated, and that does carry risk."

Cat bags, for instance.

To contact the author of this story: Kim Bhasin in New York at kbhasin4@bloomberg.net.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.

©2016 Bloomberg L.P.

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