Why Kate Spade fell
Reuters reported last week that Kate Spade received a buyout offer from Coach and that the company most likely received a valuation below its current market value of $2.9 billion as of April 3.
Michael Kors Holdings (KORS) has also reported showing interest in Kate, although it’s not pursuing the acquisition as actively as Coach is.
Kate Spade, Michael Kors, and Coach declined to comment on the news. However, Kate Spade confirmed in February that it was pursuing strategic alternatives. Michael Kors hinted during its last earnings call that it was “actively looking” for potential acquisition targets.
Stock price performance
Kate Spade’s stock is currently trading 36% below its 52-week high price. Despite a decline of more than 16% over the last two days, the company has risen 4.2% year-to-date. Coach is also up 13%, while Kors has tumbled 14.3% YTD.
Valuations and stock recommendations
Kate is currently trading at a one-year forward price-to-earnings ratio of 22.5x versus a three-year average of 47x. It continues to trade at a premium to Michael Kors and Coach, which are valued at 9.2x and 17.6x, respectively.
20 Wall Street analysts cover the company and have jointly rated it a 2.4 on a scale of one (strong buy) to five (strong sell). 40% of the analysts recommend buying the stock while the remaining suggest holding it. Currently, there aren’t any “sell” recommendations.
About Kate Spade
Kate Spade is a designer and manufacturer of apparel, women’s handbags, and fashion accessories. The company primarily operates under two lifestyle brands: Kate Spade New York and Jack Spade. Jack Spade offers fashion products for men, while Kate Spade New York sells apparel and accessories for women and children as well as home products. The company also owns Adelington Design Group, a private brand jewelry design and development group.
ETF investors seeking to add exposure to Kate can consider the iShares Morningstar Small-Cap Growth ETF (JKK), which invests 0.5% of its portfolio in the company.
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