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Wunderlich Sees Kate Spade As 'Truly Unique Story In Handbag, Accessory World'

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  • Kate Spade & Co (NYSE: KATE) shares have declined 19 percent over the past three months, remaining below $24 since June 24.
  • Wunderlich’s Eric Beder maintained a Buy rating for the company, with a price target of $39.
  • Kate Spade has a strong business model, Beder said, while adding that it was moving from being merely a handbag company to a lifestyle company.

Analyst Eric Beder mentioned that Kate Spade continued to be “a truly unique story in the handbag and accessory world.” The company has been the frontrunner in the millennial fashion segment.

A “powerful business model” has helped the company grow at one of the fastest rates among retailers. Beder added, “…we believe it is no longer just a handbag company, but a lifestyle company with compelling growth opportunities and a premium-brand-focused management team highly worthy of a premium multiple.”

The management has been building Kate Spade as a lifestyle brand, expanding the company into the four “category pillars” - children's, men’s, women’s and home. This allows the brand to engage with their customers during their lifetime.

Saying that Kate Spade has a “unique and powerful business model,” Beder explained that it was not impacted by “tourist traffic troubles,” since it had built the local consumer base.

In the report Wunderlich noted, “It is evident that Kate Spade’s management has created a successful roadmap to building brand equity, through expansion efforts across channels, categories, and geographies. We view Kate Spade’s business model as unique and effective in building the brand, without any dilution damage.”

Beder believes that the company would be able to continue to drive brand equity and that it is well positioned to benefit from “some of the strongest sales and margin growth in our universe.”

Posted-In: Eric Beder WunderlichAnalyst Color Reiteration Analyst Ratings

 

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