Kate Spade & Co KATE reported strong 4Q results and returned to positive free cash flows in 2015. Citi’s Kate McShane maintained a Buy rating for the company, while raising the price target from $26 to $32. The analyst also added Kate Spade to Citi’s focus list.
Kate Spade’s Strengths
Kate Spade’s robust 4Q results and FY16 guidance have boosted investor confidence in the company. McShane identified the company’s strengths as:
- Ability to display healthy growth, backed by its disciplined distribution and promotional strategy
- Room for comp upside, driven by increased store productivity
- Continued margin expansion
Industry checks reveal that Kate Spade’s handbag business remains strong. “Although spring may be off to a slower start (similar to apparel overall), industry participants are starting to see some escalation,” the analyst wrote.
Kate Spade’s margins are set to expand as the brand grows internationally and benefits from the growing license agreements. McShane added that the company’s current stock valuation is highly attractive.
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