FNP: Better Than Expected

About a year ago, Fifth & Pacific (FNP), better known as the former Liz Claiborne, was around $5. Our case for the company was bullish was it looked to cut costs and shed non-performing brands and assets. The stock now trades over $11 a share and has moved from a cost cutting stock to a growth stock. FNP continues to focus on growing core bands and getting the most out of them.

 

After reporting very good earnings today, it’s clear that Kate Spade is the knockout brand within the company. They’ve experienced hyper growth and comp’d up about 70% last year and this quarter they’ve done +34%. That’s a really strong number. The brand, along with Lucky, has solid strength and continues to perform. Keep in mind that Kate Spade is 50% of the company’s EBIT.

 

 

FNP: Better Than Expected - LIZ comps

 

 

The one caveat is Juicy Couture, which underperformed a bit weaker, primarily in their accessories business. The issue at hand is that they launched new product in February and it’ll take time to flush out the old product and bring in the new. We expect a turn in Juicy come the back half of 2012.

 

We remain bullish on all durations: TRADE, TREND and TAIL. This stock should be $25 and we think it could double within a year from its current ($11) number, but not necessarily in a straight line.


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