This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Sozzi: Attention ALL Ladies, Kate Spade Is Bursting Onto the Scene

Stocks in this article: KATE COH KORS M RL

NEW YORK (TheStreet) -- "Ralph Lauren is our business analog", proclaimed Kate Spade (KATE) CEO and former Ralph Lauren (RL) executive Craig Leavitt in a recent interview. In non-corporate jargon, the comment was Leavitt's way of saying Kate Spade could become the next Polo Ralph Lauren, a global powerhouse brand that sells merchandise that is seemingly in demand year round. I chuckled at this bravado, not because Kate and Jack Spade are no longer working at the company, whereas Ralph Lauren is still actively involved in the company he founded and could be spotted on quarterly earnings press releases, but this is a brand that isn't exactly new to the retail scene.

How could an already well-known brand from outlet centers be transformed into one that steals the show from the on-fire Michael Kors (KORS) at Macy's (M), while at the same time stomping on the face of Coach (COH) as it attempts to pick itself up off the ground after years of stale assortments? Well, it's actually happening, as I detected in a fact finding mission at various upper tier department stores.

For the record, Kate Spade is now its own publicly traded entity, has a stock price that is up 98% in the last year, and a forward price-to-earnings multiple (58x) that would make Ben Bernanke and Janet Yellen cringe. Here are a few of the things I like and don't like about the new Kate Spade.


  • It's taking floor space in department stores with more eye-catching shops (aka concessions in SEC filings) than Michael Kors and Coach.
  • It's taking prime counter space in the watch section at department stores.
  • The brand has begun to show consumers a full lifestyle collection in its new retail stores (housewares, stuff other than handbags and wallets).


  • Although at $1,265 in sales per share foot there is opportunity to reach Michael Kors ($1,431) and Coach ($1,831), this metric has not grown much in the past six months.
  • On a 30% same-store sales gain for the holiday quarter, adjusted operating margins were flat as Kate Spade invested in its future growth. Michael Kors has been able to expand its operating margins even as it invests globally.

All-Time Must Ask Questions for Investors

With any retail brand (could broaden out to consumer brand) that is being valued by the stock market as the next big thing, an investor has to cut through the fluff consisting of new store growth projections and buzzy exec speak and peer into the soul of the company. Remember, there are, by and large, no Warren Buffett-like wide moats around a retail brand, and what appears to be a wide moat one day could be nothing more than a fad that leads to earnings disappointments.

Here are the four questions to always ask yourself on sexy retail brands such as Kate Spade:

Is the brand really new?

  • Michael Kors burst onto the scene as a clear counter to Coach's riskless merchandise assortments. Hence, it was something new to the consumer, a trendier brand at more affordable price points.

Will the target consumer return to the physical or online stores every season to buy the latest?

  • The stock market is likely valuing it as if the consumer views the brand as their top destination throughout the year.

Does the brand's merchandise become a staple to a consumer's life?

  • Michael Kors, for example, has designed its handbags to be very versatile. One could rock its handbags to a business meeting or to an interview.

Is the brand strong enough to have a person buy it at an outlet store but also be willing to pay full price at a store in the mall?

  • Coach has been tripped up by more consumers visiting its factory stores.

Watch More Videos From Brian Sozzi

Read on for glimpses into this retail battleground:

1 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs