Shares of Kate Spade & Co. shot up 6.6 percent to 17.71 in midmorning trading amid a rush in fashion stocks and word that activist Caerus Investors was calling for a sale of the company.
While the Dow Jones Industrial Average started the day off with a gain — rising as much as 86.39 points after big increases tied to Donald Trump’s surprise electoral win last week — blue chip stocks turned and were roughly flat, trading at 18,855.06 at 11:15 a.m.
Many fashion players were gaining ground, including Chico’s FAS Inc., up 8.6 percent to $14.88; Kohl’s Corp., 7.2 percent to $57.05; Urban Outfitters Inc., 7.3 percent to $40.62; Nordstrom Inc., 6.5 percent to $62.56; J.C. Penney Co. Inc., 6.6 percent to $9.76, and Macy’s Inc., 5.6 percent to $43.68.
Although fashion stocks have enjoyed something of a run recently, valuations are still depressed across the sector and investors are starting to get antsy.
In a letter sent to Kate Spade’s chairman Nancy Karch, Caerus Investors argued it was time for the company to find a home in the portfolio of a larger strategic player. Signed by Ward Davis, founder and chief investment officer, and Brian Agnew, managing partner, the letter was posted on the publishing platform Scribd.
Davis and Agnew wrote that Kate Spade’s stock had “fully retraced the entire gains from when the former Fifth and Pacific first announced its intention to isolate Kate Spade as a stand-alone entity in early 2013….Given the market’s lack of faith in the current management team, as evidenced by the 63 percent decline in the shares since the intraday high on August 11, 2014, we believe the best path for enhancing shareholder value is to pursue a sale of the company. We strongly believe that a strategic, industry player would be willing to pay a substantial premium to add this growth business to their portfolio.”
The pair said more than $3 billion in equity value had been lost by the company over the past two years.
“We think the brand equity is extremely strong but better suited in the hands of a larger, more experienced, global player that can more effectively grow the business,” Davis and Agnew wrote.