We Are Removing Kate Spade (KATE) from Investing Ideas
07/11/17 11:31AM EDT
We are removing Kate Spade (KATE) from the long side of Investing Ideas today. Below is a brief update from Hedgeye Retail Sector Head Brian McGough on why Coach (COH) is now the preferred long:
|
“Game, set and match on the COH/KATE tender completion. I’m getting very little interest from Buy Side in COH long – because the ‘it was a great deal’ call is consensus. But it’s not consensus for the appropriate bullish reasons.
- A fair price for KATE was $23-$25, unless my model is egregiously wrong. But Coach got $18.50
- COH naturally played down synergies – likely to avoid KATE Board from getting sued.
- I’m modeling a 20% earnings beat accordingly for COH. This will likely be accretive on Day 1.
- Here’s a perennial mediocre company that just bought one of the better organic growth stories in Retail for a killer price.
- AND it has the balance sheet – due to price – to either buy something like Jimmy Choo (or Tory Burch?). I don’t like deals…but this is a no-brainer.
- Simply put, KATE shareholders were just proved irrelevant..
The setup for Coach (COH) here is asymmetric from where I sit.
|
© 2024 Hedgeye Risk Management, LLC. The information contained herein is the property of Hedgeye, which reserves all rights thereto. Redistribution of any part of this information is prohibited without the express written consent of Hedgeye. Hedgeye is not responsible for any errors in or omissions to this information, or for any consequences that may result from the use of this information.
