Kate Spade Up for Grabs

Posted by Alfredo Wilkie on

Kate Spade & Co. (KATE) posted its most recent fourth-quarter and full-year 2016 financial results a week earlier than expected on Feb. 16.

The New York-based fashion design house has seen its shares rise 20.5% since the earnings release, which was accompanied by a confirmation that the firm is reviewing strategic alternatives. After a period of decline at the beginning of 2016, KATE recovered partially in late December when news first came out regarding a potential sale.

KATE Posts Earnings Beat

In the most recent Q4, Kate posted earnings of $0.41, surpassing the Street’s estimate of $0.35 non-GAAP EPS for the quarter. KATE’s management touted revenue growth of 10% to $471 million amid a weak handbag market, falling $1.1 million short of the consensus estimate.

The apparel firm was formed after its founders sold a 56% share of the company to the Neiman Marcus Group in 1999. The hgh-end retailer later acquired the company in 2005 at a $134 million valuation, only to sell it a week later to Liz Claiborne at a $10 million loss. After a series of rebranding campaigns and selloffs​, in which the firm, most recently, sold Lucky Brand Jeans to Leonard Green & Partners for $225 million, investors have been far from impressed with the mono-brand company’s performance.

Analysts Suggest Imminent Sale

In a recent analyst note, analysts at SunTrust Robinson Humphrey called KATE a “strong but mismanaged brand,” making it an “attractive acquisition target” likely to be acquired by Coach Inc. (COH), Michael Kors Holdings Ltd. (KORS), PVH Corp. (PVH), Abercrombie & Fitch Co. (ANF) or VF Corp. (VFC).

Cowen & Co.’s Oliver Chen pointed to Kate Spade’s early earnings report and lack of fiscal 2017 guidance as indicators that a deal could materialize in the very near future. Chen suggested that luxury fashion company Coach would provide the firm with in-store execution, outlet renovation and supply-chain improvement. On the other hand, designer accessory firm Michael Kors could complement Kate Spade’s brand with cosmetics and wearables along with international and fashion expertise. (See also: Luxury Handbag Retailers Retrench.)

Read more: Kate Spade Up for Grabs, Shares Up on Sale Talk | Investopedia http://www.investopedia.com/news/kate-spade-grabs-shares-sale-talk/#ixzz4ZYiW5uMk
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