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Why The 'Clear Winner' In The Handbag Space Could Be Kate Spade

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In a report published Tuesday, Wunderlich analyst Eric Beder maintained a Buy rating on Kate Spade & Co (NYSE: KATE), with a price target of $39.

Kate Spade's publicly traded handbag competitors remained in "various stages of free fall" due to which Kale Spade had also "been branded by investors," analyst Eric Beder said, while adding that this was "a mistake" and did not reflect "the relative size of the brand, the true lifestyle brand status of Kate Spade, and management's strong commitment to maintaining Kate Spade as a premium lifestyle player."

Beder expects Kate Spade's 2Q results, scheduled to be released on August 5, to provide "compelling evidence" that the company's business model remained "superior to the other handbag players."

In the report Wunderlich noted, "We are comfortable with our penny-above-consensus 2Q EPS projection of $0.12. We believe Kate Spade remained on track with solid Spring offerings and continued to take overall market share in the handbag category. Further, we believe the shift to even less discounting and an emphasis on returns is beginning to pay dividends now and for the future."

Kate Spade is expected to reiterate its full-year guidance. Other players like Coach Inc (NYSE: COH) and Michael Kors Holding Ltd (NYSE: KORS) have been hit by soft brand presence and their saturated offerings have forced them to resort to incremental discounting.

"While we believe dismal results from COH and KORS will blunt any near-term positives for KATE, we continue to view the name as the clear winner in the women's accessories space and believe management has positioned the company to drive sustained momentum for the foreseeable future," the report added.

Posted-In: WunderlichAnalyst Color Reiteration Analyst Ratings

 

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