Kate Spade (KATE) Stock Falling on Weak Retail Data

Kate Spade (KATE) stock is declining in afternoon trading on Friday after a Commerce Department report raised concerns about consumer spending.
By Amanda Albright ,

NEW YORK (TheStreet) -- Kate Spade (KATE) stock is falling 6.99% to $19.55 in late afternoon trading on Friday, as retail stocks falter on weak economic data.

The New York City-based company sells handbags and accessories.

Retail sales increased 0.1% from the prior month, according to a U.S. Commerce Department report today. Analysts surveyed by Reuters were expecting a 0.3% increase.

Concerns about consumer spending during the holidays affected retail stocks, such as J.C. Penney (JCP), which fell despite better-than-expected earnings results today, Reuters reports. 

Additionally, retail stocks are declining after Macy's (M) and Nordstrom (JWN) reported weak earnings results this week, Reuters reports. 

Separately, TheStreet Ratings team rates KATE SPADE & CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate KATE SPADE & CO (KATE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 293.9% when compared to the same quarter one year prior, rising from -$4.40 million to $8.54 million.
  • KATE's revenue growth trails the industry average of 15.9%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for KATE SPADE & CO is rather high; currently it is at 61.00%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, KATE's net profit margin of 3.03% significantly trails the industry average.
  • The debt-to-equity ratio is very high at 2.46 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, KATE's quick ratio is somewhat strong at 1.23, demonstrating the ability to handle short-term liquidity needs.
  • Net operating cash flow has decreased to $43.00 million or 17.84% when compared to the same quarter last year. Despite a decrease in cash flow of 17.84%, KATE SPADE & CO is in line with the industry average cash flow growth rate of -24.28%.
  • You can view the full analysis from the report here: KATE

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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