Digging Into kate spade: Fifth & Pacific Companies Inc (FNP)

The Big Dog Competitors

Competitors Coach and Michael Kors Holdings have their own interesting numbers, but with Michael Kors as one of the most successful IPOs (it actually debuted December 2011) of last year yet with a P/E of 43.31 and a forward P/E of 26.58 it’s been hard for me to recommend. Now that any insider selling overhang is out of the picture Michael Kors is free to run higher to my embarrassment. Analysts have a mean target of $65.00 for some 20% upside and expect five year 29.60% earnings growth.

Coach has a similar P/E to FNP at 17.30 and a yield of 1.90%. Coach has ten times the market cap at 17.53 billion and a long time CEO who came up in the ranks and is highly invested in the company, Lew Frankfort. Analysts have a price target of $68.00 but the stock was at a 52 week high of $79.70 in March 2012. It has underperformed the S&P 500, down 3.80% over 52 weeks.

Coach reports on January 23 and analysts will want to hear those China numbers and how the heritage accessories are doing. For a company with a 54.86% return on equity and a 31.22% operating margin Coach seems oversold here.

Buy One, Get Three Free

For the cost of kate spade, you’re getting Lucky Brand, Juicy Couture, and the heritage brands for free. Fifth & Pacific has run over the last year, though not as much as Michael Kors, and that was partly due to getting out from under the Liz Claiborne cloud as well as the spectacular performance of the kate spade brand throughout 2012. CEO William McComb said quite candidly in the preannouncement, “I am optimistic about delivering sizeable growth in 2013 at kate spade and Lucky Brand, while recognizing that the fixes at Juicy Couture will come late in 2013 and into 2014.” As a small cap that has run big I would consider it speculative compared to Coach but I think the kate spade brand is brilliant (there I go in that fashion mag style) and I am definitely not the only one.

The article Digging Into kate spade originally appeared on Fool.com.

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