KATE Stock Jumps 15% as It Confirms Strategic Alternatives



Kate Spade’s stock spikes 15% after its 4Q16 results

Kate Spade New York’s (KATE) stock price made big strides yesterday after the company confirmed that it was reviewing strategic alternatives while reporting its 4Q16 results. The company reported its earnings one week earlier than scheduled.

Kate’s CEO, Craig A. Leavitt, said that the company was “exploring strategic alternatives that are in the best interests of our Company and shareholders.”

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More on the strategic review

KATE’s confirmation comes around one-and-a-half months after The Wall Street Journal reported in December 2016 that the company was exploring the possibility of a sale.

KATE’s management, however, hasn’t provided a definitive timetable for the review, but it’s said that it plans to move in a timely fashion. Perella Weinberg Partners is KATE’s financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison is its legal counsel for the strategic review.

A look at Kate Spade’s stock market performance

Kate Spade’s stock price surged 14.7% to close at $22.56 on February 16, 2017. The company is trading 17% below its 52-week high and has risen 21% year-to-date (or YTD).

KATE has been among the best performing apparel and accessory companies. Michael Kors (KORS), Ralph Lauren (RL), and VF Corporation (VFC) have fallen 11%, 13%, and 5.6%, respectively, YTD. Coach (COH) has also done reasonably well, rising 8.4% YTD.

ETF investors seeking to add exposure to KATE can consider the First Trust Consumer Discretionary AlphaDEX ETF (FXD), which invests 0.31% of its portfolio in the company.

Valuations and recommendations

Kate is currently valued at a one-year forward price-to-earnings (or PE) ratio of 26.7x. It’s operating in the middle of its 52-week PE range of 18.4x–34.0x. It’s trading at a premium to its peers Michael Kors and Coach, which are valued at 9.5x and 17x, respectively, as of February 16, 2017.

The stock is covered by 20 Wall Street analysts. 55% of whom have recommended “buys,” and 45% of whom have recommended “holds.” There are no “sell” recommendations on the stock.

Read the next two articles to learn about the company’s financial performance in 4Q16.


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