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SunTrust Doubts Kate Spade Initiatives Can Offset Headwinds

SunTrust Doubts Kate Spade Initiatives Can Offset Headwinds

SunTrust maintains its Neutral rating on the shares of Kate Spade & Co (NYSE: KATE), saying that the company's initiatives may not be enough to offset external headwinds.

The company reported lower-than-expected second-quarter earnings and cut its full-year guidance reflecting the second-quarter miss and anticipated ongoing pressure in tourist areas and Japan and an elevated promotional landscape.

"We believe that proactive company-specific initiatives (microassorting, speed-to-market, digital marketing) will not be able to fully offset ongoing external challenges, and are concerned that planned increased flash and outlet sales could lead to brand degradation while the competitive landscape could contribute to elevated promotions," analyst Pamela Quintiliano wrote in a note.

Related Link: Attention Luxury Investors: Kate Spade Just Reported Q2 Results

As such, the analyst cut EPS estimates for the third quarter, F16 and F17 to $0.07, $0.67 and $0.85 from $0.12, $0.75 and $1.07, respectively.

Noting that the shares to be range-bound near term, the analyst slashed the price target to $18 from $25.

At the time of writing, shares of Kate Spade rose 2.31 percent to $16.83.

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