Coverage: Kate Spade puts itself up for sale
Upscale retailer Kate Spade confirmed Thursday that it is considering “strategic alternatives” for the company’s future, which in the world of business news coverage typically includes a possible sale.
Nathan Bomey of USA Today had the news:
he handbag, clothing, shoes and accessories seller’s move comes amid challenges for U.S. luxury retailers as the strong dollar dampens foreign tourist spending.
Investors applauded the move, sending shares up 6.8% in pre-market trading to $21. The stock had already jumped in December after reports the company had put itself up for sale.
The company reported Thursday that its fourth-quarter net income rose 39% to $86 million. Sales rose 9.8% to $429 million, but that was helped by the opening of 52 new stores in 2016.
Sales per square foot at stores open at least a year fell 2.4% in the 12-month period ending Oct. 1.
The company said it had hired advisers to conduct “a process to explore and evaluate strategic alternatives” and that it would not provide any updates during the process.
Lauren Gensler of Forbes reported that the company’s recent financial performance is mixed:
Kate Spade also reported mixed fourth quarter earnings on Thursday amidst a “challenging retail environment.” Sales rose 10% to $471 million, but missed analyst estimates of $473 million.
Net income climbed to $85.5 million, or 66 cents per share, up from $61.5 million, or 48 cents per share, a year earlier. Excluding certain items, earnings came in at 41 cents, which topped analyst estimates of 35 cents per share.
Shares of Kate Spade have climbed 18% over the last twelve months, partly fueled by takeover chatter. Hedge fund Caerus Investors said in a November letter that Kate Spade would make a “great acquisition candidate” and the Wall Street Journal reported in December the company was exploring a potential sale.
Like other retailers, Kate Spade’s business has been hampered by declining mall traffic and a strong dollar that has negatively impacted tourist spending. Michael Kors, for instance, recently gave weak guidance after reporting declining sales. Its stock has fallen 10% this year.
Krystina Gustafson of CNBC.com noted that the company’s shares rose on the news:
Shares of Kate Spade jumped 10 percent in premarket trading Thursday after the luxury handbag maker confirmed that it is exploring strategic alternatives for its business. The firm made the announcement while releasing its fourth-quarter earnings, which beat Wall Street estimates on the bottom line but fell short on revenue.
The company made the announcement while releasing its fourth-quarter earnings, which beat Wall Street estimates on the bottom line but fell short on revenue.
The stock price was up 9 percent shortly after Thursday’s opening bell.
In its news release, Kate Spade management said that it is”conducting a process to explore and evaluate strategic alternatives to further enhance shareholder value.” The company plans to move in a “timely” manner but has not set a definitive timetable for completion.