Fossil Group's Partnership With Kate Spade A 'Tremendous Opportunity,' Says Sterne Agee

In a report published Wednesday, Sterne Agee analyst Ike Boruchow commented that the recent announcement of a partnership between

and

for Kate Spade-branded watches is a "tremendous opportunity" for Kate Spade. Under the agreement, Fossil Group will design, develop, and distribute Kate Spade watches through 2025. Fossil Group believes that the new brand will have an immediate and meaningful impact on sales given the success and growth trajectory of the Kate Spade New York lifestyle brand. Boruchow noted that Kate Spade will benefit from a "proven partner" in Fossil Group and gain "significant" shelf space within department stores. The analyst added that his estimates suggest Kate Spade could generate as much as $80 million of watch revenue when the license agreement takes effect in 2016 with this figure growing to $200 million or more by 2018. Boruchow also added that Kate Spade had previously shown interest in expanding its lifestyle brand and partnering with Fossil Group who is the best-in-class operator in the space will drive revenue and expand margins for Kate Spade. Shares of Kate Spade are Buy rated with price target raised to $37 from a previous $35.