Kate Spade Is Cowen's Favorite Name In Handbags

Cowen analyst Oliver Chen picked up Kate Spade & Co KATE as one of the best stocks in the handbags category. The brokerage rates the stock as Outperform.

Chen believes the handbag space is still facing challenges at outlets given the tourist exposure in Kate Spade. As far as the visitation, the analysts felt this would be compensated by weak tourism trends despite the brokerage seeing the complete sequential monthly enhancement in visitation since March.

"Given that KATE only has 65 North American Outlets and 14 International Outlets, they are therefore over-indexed in the A and A+ centers. These locations happen to have a higher penetration of foreign tourists - which makes the issue of lower quality tourism worse. Additionally, Outlets are also becoming increasingly more promotional, which is pressuring margins in the overall channel," the analyst said.

Cowen thinks Kate Spade has boosted its promos at Outlet in an effort to maintain its market share.

"Given that KATE only has 65 North American Outlets and 14 International Outlets, they are therefore over-indexed in the A and A+ centers. These locations happen to have a higher penetration of foreign tourists - which makes the issue of lower quality tourism worse," according to the analyst.