Kate Spade Expected To Be The Fastest Growing Player In Accessories

CLSA initiated Kate Spade & Co ( KATE with an Outperform rating and $21 price target. The view is based on expectations that the company would be the fastest-growing player in accessories, given its small global footprint and underpenetrated wholesale channel.

Analyst Rick Patel believes the company has earnings per share power of $1.85, given continuing new stores and strong brand acceptance over the long term. However, the analyst noted some recent challenges such as weak traffic, which impacted comps, and elevated promotions at outlets.

CLSA also noted that comps at full price stores are hurt by its aversion to discount and that Japan is weak. Though the firm sees several tailwinds helping margin expansion, it believes the challenges to sales will impact margins as well.

CLSA said it like Kate Spade's long-term story, but is kept at bay by near-term challenges.

At time of writing, shares of Kate Spade were up 0.17 percent at $17.68.