NEW YORK (TheStreet) -- Wall Street has fallen in love with preppy handbag and accessory maker Kate Spade
(KATE - Get Report).
However, based on the financial performance of the company, the great Kate Spade stock bubble may be about to explode.
The company is estimated to announce its second-quarter earnings on Aug. 8. In just one telling sign of excessive optimism, Kate Spade has missed Wall Street's earnings expectations for four consecutive quarters. For the first quarter, the company actually delivered its first sales beat vs. consensus forecasts in three quarters, yet still fell shy of Wall Street's profit estimates.
Yet hopeful investors have pushed shares of Kate Spade up 17.27% year to date, outpacing the 3.7% rise in the Bloomberg Branded Apparel Index. Fueled by bullish commentary from chief executive officer Craig Leavitt, those investors are expecting the company to become the next Polo Ralph Lauren (RL) -- a global lifestyle brand powerhouse.
- An ability to maintain a mostly non-promotional, full-price market for its products that range from bright-colored housewares to quirky ballet flats.
- The continued rollout of product extensions. In November, for example, Kate Spade will unveil its first swimwear collection consisting of 70 pieces.
- A dramatic increase in global square footage via the opening of new specialty stores, concessions and likely flagship stores in international tourist destinations. Kate Spade currently operates 118 specialty stores, 51 outlet stores, and 43 concessions.
- Further penetration of lucrative online sales. Digital sales already comprise approximately 20% of Kate Spade's business.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts