Analyst Says Market Is 'Confused' About Kate Spade & Co.

Kate Spade & Co.

is off more than 10 percent since posting earnings Thursday, but an analyst said the sell off resulted from confusion. The handbag and apparel retailer beat first-quarter expectations and posted a sharp deceleration in revenue growth. The company warned that same-store sales will increase more slowly as it cuts back online promotions. But Mizuho's Betty Chen maintained a Buy rating and $40 target, noting that the retainer reiterated its 2015 earnings forecast. Chen said the company's profit goals are "achievable despite confusion" among investors about its strategy. Chen said cutting back on promotional sales is prudent while she applauded the company's ongoing effort to broaden its product line-up and expand its presence in China and Latin America. "They're making progress with these strategies," according to Chen, although Kate Spade shares have fallen more than 12 percent in the past year. Despite the stock's performance, analysts following the company on average maintain a Buy rating and $37 target, according to a poll by FactSet. In the recent period, same-store sales grew at a slower-than-expected 6 percent excluding online operations. Growth in total revenue of about 14 percent slowed to about half the rate of recent quarters. Kate Spade recovered a little of its losses Friday, trading at $29.44, up $0.28 cents.