"KATE is a growth company with potential to scale channels, geographies and product categories to reach goal of $4 billion in sales over time (at retail), more than double current levels," analysts said.
As the fifth largest handbag manufacturer in the US, the company should be well positioned to capture additional market share, the firm added. However, analysts noted that this comes at a time when the handbag industry is beginning to show signs of deceleration, following 4-5 years of superior growth.
The New York City-based company is a handbag and accessories manufacturer and retailer.
Shares of Kate Spade are decreasing by 0.92% to $24.90 at the start of trading on Friday.
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 revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and premium valuation."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- KATE's revenue growth has slightly outpaced the industry average of 11.0%. Since the same quarter one year prior, revenues rose by 14.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, KATE SPADE & CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 56.05% to -$43.32 million when compared to the same quarter last year. Despite an increase in cash flow of 56.05%, KATE SPADE & CO is still growing at a significantly lower rate than the industry average of 134.88%.
- The share price of KATE SPADE & CO has not done very well: it is down 22.52% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: KATE Ratings Report