The recent Tory Burch deal, in which Chris Burch (Tory’s ex-husband) sold the majority of his 25% stake in the company for ~$813 million, acts as a reminder that Fifth & Pacific (FNP) is undervalued at current levels. It’s worth noting that Tory Burch is one of FNP’s closest comps. Estimates on Burch's top-line suggest a multiple north of 4x and ~3x 2012 and 2013 sales respectively. This lands right between FNP’s two publicly traded peers: KORS at 5.5x and COH at 3.5x 2012 sales and at the low-end of 2013 multiples.
FNP on the other hand trades at less than 2x 2013 Kate Spade sales alone (not including Lucky or Juicy Couture, which FNP owns in addition to Kate Spade) – a 45% discount to the peer average. Hedgeye Retail Sector Head Brian McGough outlines the growth potential in FNP:
“We’re modeling Kate Spade sales approaching $800 million in sales for 2013 and over $1 billion in 2014; we expect profitability to continue to move upward toward the 20% level over the next 2-3 years. Assuming a 3x multiple of next year’s sales for Kate Spade alone that would imply a valuation close to a $2.5Bn for the brand – over 50% higher than the entire value of FNP today.”