KATE | Why KATE’s 8K Matters

Takeaway: KATE gave additional info to stem neat-term modeling volatility. But it’s what they didn’t say that’s probably more important.

The company filed an 8K in conjunction with its presentation today. A couple quick thoughts…

1) No change in guidance. It’s pretty safe to say that if business has been trending down, or was negative in any way, shape, or form, then KATE would have been obligated to disclose that in this 8K. Given how the stock has been trading, this is critical.

 

2) The company gave additional information related to store count and square footage in the US vs. Int’l. This might sound like a ‘who cares’ event, but given the poor level of disclosure at KATE, it is a step in the right direction.

 

3) Similarly, the company provided new information as it relates to the size of Jack, and Saturday, as well as the top line impact of its efforts to improve Quality of Sale.  Does any of this allow us to build a more accurate 2017 model for units, productivity or margins? No, but it offers up some clarity for people who are scratching their heads wondering why the company is beating on comp, and yet missing on the top line. It won’t matter anymore after the 4Q report. But should stem some of the volatility in results until then.

 

No Change to Our Thesis

We Still think KATE’s top line will double and margins will go from 6.6% last year to the high teens in three years’ time. All in, we’re looking at better than $2.50 in earnings for a stock that can’t seem to stay above $20. The CAGR needed to get to $2.50-$3.00 is well north of 50%, and yet the stock is trading at a high teens multiple on next year’s $1.07. This is a company that hasn’t meaningfully turned a profit since 2008, and once people get visibility into 2016, we think that investor sentiment around its growth and profitability will turn up substantially. This is a name that could, and should double by the end of next year. KATE remains one of our top picks in retail.

 

KATE | Why KATE’s 8K Matters - kate financials

 


Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more