Below is a note from Hedgeye CEO Keith McCullough on why we're adding Kate Spade (KATE) to Investing Ideas today:
"Do you like to buy things on sale?
Kate Spade (KATE) is getting smoked -15% today and this is what our Retail/Apparel guru, Brian McGough, just had to say about it:
“The latest KATE deal banter is bullish the way I see it.
KATE was on the tape after the close Monday via a Reuters article that KATE will spend ‘a few more weeks negotiating a sale’, and that it has a bid from Coach. It's down hard here, and I’m scratching my head as to why...
Clearly, it’s outside of expectations. That’s obvious by the stock move.
But consider this…
a) We now know it has at least one bid in hand,
b) If the article is right, KATE is the one controlling this process. It is choosing to take it more slowly.
c) If business was horrible, wouldn’t it want a deal in hand ASAP? If business is good, won’t it want more time to shop? If I was KATE’s banker I would.
You want my opinion? Well you’re getting it anyway!
The stock has been trading off of Deal Reporter and WSJ speculation about ‘final bids due…etc’. I think that was all banker-fed bantering and positioning via the press. The ‘final bid’ will never be due until the last bidder comes in. Period.
I think KATE thinks it will be in a better bargaining position after the print (quarter closed 3 days ago). My contention is still that we see an initial deal close to $25, and a final deal closer to $30.”
