Barry Rosenstein has been quite successful with his value-oriented, event driven investment firm, Jana Partners. Last year, the Jana Master Fund delivered a return of 24.2%. Barry Rosenstein stated that Jana Partners looked for basic industry companies which were cheap and possessed some potential catalysts, including restructuring, spin-offs, and recapitalizations.
Recently, Jana Partners expressed its belief that Fifth & Pacific Companies Inc (NYSE:FNP) should be worth around $28 per share after it exited its Lucky and Juicy brands. Investors must be happy with Fifth & Pacific, as the company has experienced a significant rise of more than 68% to nearly $21 per share. Should investors get in Fifth & Pacific Companies Inc (NYSE:FNP) at its current trading price? Let’s find out.
KATE SPADE had the highest and fastest growing EBITDA
Fifth & Pacific Companies Inc (NYSE:FNP) is the designer and marketer of a global portfolio of retail-based, premium brands, including KATE SPADE, JUICY COUTURE, and LUCKY BRAND, operating in four main business segments: JUICY COUTURE segment, KATE SPADE segment, LUCKY BRAND segment, and Adelington Design Group.
The majority of its revenue, $498.6 million, or 33.1% of the total revenue, was generated from the JUICY COUTURE segment, while LUCKY BRAND and KATE SPADE segments contributed revenue of around $462 million each. However, the KATE SPADE segment generated the majority of the company’s EBITDA at nearly $95 million, while JUICY COUTURE and LUCKY BRAND produced only $24.55 million and $34.7 million, respectively, in EBITDA.
At the beginning of April, the company announced that it was thinking of selling its LUCKY BRAND and JUICY COUTURE brands, so that it could focus on its best and rapidly growing brand, KATE SPADE. While LUCKY BRAND’s comparable sales rose only 3%, JUICY COUTURE had a 2% decrease in comparable sales.
In contrast, KATE SPADE experienced a remarkable growth of 27% in its direct-to-consumer comparable sales in the last quarter. While JUICY COUTURE’s EBITDA declined by as much as 61.8% and LUCKY BRAND’s EBITDA increased 36.6%, KATE SPADE looks like a clear winner among those brands, with 65.6% growth in adjusted EBITDA.
Fool contributor Andrew Marder wrote that KATE SPADE has been quite successful in competing with both Michael Kors Holdings Ltd (NYSE:KORS) and Coach, Inc. (NYSE:COH). Michael Kors seems to be the fastest growing company, with a 41% increase in comparable store sales in its latest quarter. Coach’s comparable store sales have risen only 1% in the U.S. However, Coach’s comp store sales have grown in the double-digits in China.
Coach is the best pick now
At $21 per share, Fifth & Pacific Companies Inc (NYSE:FNP) is worth around $2.5 billion on the market. The market values the company at as much as 94.15 times EV/EBITDA. The high EV multiple is due to low 2012 EBITDA, which was due to unallocated corporate costs, charges related to streamlining initiatives, brand-exiting activities, impairment of intangible assets, and loss on asset disposals.