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Takeaway: The numbers check out – revs, EPS, guide. Now it’s mgmt’s game to lose based on how it handles the call. More ways they can win than lose.

KATE quick take


1)  Headline EPS looked good. $0.02 – in line with consensus.

2) 15% comp was in line with our estimate – and about double what the company guided. Consensus was around 12% -- as best as we can tell.

3) 36% growth in revenue – or a 3% revenue beat. Not bad. New store productivity was off the charts. We expected this given the conversion of stores from Juicy to Kate (28 stores were pulled out of comp base during conversion.)

4) Raised EBITDA targets for the year by $10mm, to $130mm - $140mm. KATE (and its predecessors) is not known for taking up guidance – it’s been the opposite historically more often than not.

5) As expected, pushed out 2016 margin targets by a year. That’s 100% in line with what the company said last quarter. As we highlighted yesterday in our 40-page slide deck outlining our thesis on KATE, actual EBITDA dollars are likely to come in about 44% higher than an otherwise higher EBITDA margin target would suggest – given how far ahead the company is tracking with its’ top line.

Overall, we feel very good about these numbers – especially given the volatility we’ve seen out of KATE over time. We wish we could call it a day after looking at the numbers, but we can’t. We still need to hear what management says on the conference call – and we all know what happened last time. But that’s the same reason why we could hardly find a single soul to hit the bid on KATE over the past three months. People have been 1) Afraid of these numbers and this guide (which is a concern that is now proven unfounded), and 2) Afraid of what management will say when it opens up to investors on the call. That’s something that still concerns us. But like we said yesterday, we’re hard pressed to think of a whole lot that the company could say that would result in any more enemies in the investment community. This call is KATE’s game to lose.