Ike Boruchow of Sterne, Agee & Leach said in a client note that Kate Spade may be one of the most compelling growth stories in retail right now. The analyst said that he was impressed with Fifth & Pacific's forecasts for $1.2 billion in Kate Spade sales in 2016, compared with $462 million in sales last year. Boruchow said that the forecast may be conservative.
Last month Fifth & Pacific, which was formerly known as Liz Claiborne Inc., reported revenue at Kate Spade stores open at least a year jumped 27 percent in the fourth quarter. This metric is a key measure of a retailer's health, because it excludes stores that recently opened or closed.
Boruchow said that Kate Spade currently has 81 stores in North America. The analyst said this small base of stores gives the brand a "significant runway for growth." The brand is also planning to open more than 100 stores overseas through 2016. These international stores are expected to add $275 million to $325 million in incremental sales by 2016, but Boruchow says this goal seems conservative based on sales data from the brands' stores abroad.
Boruchow now anticipates a 2013 loss of 1 cent per share for Fifth & Pacific, a clothing, accessories and fragrance maker whose other product lines include Lucky Brand and Juicy Couture. His prior forecast was for a loss of 4 cents per share. The analyst is also boosting his 2014 estimate to 34 cents per share from 32 cents per share. He maintained a "Buy" rating and $26 price target.
Fifth & Pacific shares finished at $18.80 on Friday. They hit a 52-week high of $19.47 last Tuesday. They traded as low as $9.02 last July.