Increased competition and its focus on brick-and-mortar stores instead of online shopping models could be some of the reasons for its lackluster performance. Its underpriced shares have attracted sharks, with hedge funds stating that it could make a good acquisition.
The Wall Street Journal has reported citing sources familiar with the matter at hand, Kate Spade & Co, under pressure from an activist investor, is working with a bank to look for potential buyers, which include retailers.
The entire process is at an early stage at the moment at the moment.
The handbag and accessories manufacturer has a market value of $1.86 billion as of Tuesday’s closing.
With the news hitting the market, its shares surged by 16%, despite being halted twice.
When asked to respond to requests for comments, Kate Spade did not immediately respond to such a request.
Caerus Investors, a hedge fund, had stated that Kate Spade would make a good acquisition since the price of its stock, in comparison to its peers, was at a discount.
Incidentally, the sale of handbags have been weak over the past few years in the United States, with consumers preferring to shop online rather than visit departmental stores. The rise of the dollar has also contributed to decreased sales, as the flow of tourists have diminished considerably.
In response to the weakening market, Michael Kors Holdings Ltd and Coach Inc., Kate Spade’s peers, have tightened supplies in their departmental stores and have explored deals.
Last month, the Financial Times had reported that Burberry made multiple offers for Coach, all of which got rejected.
As per regulatory filings, Caerus has declared a 0.03% stake in Kate Spade while Jana Partners LLC, owned by activist investor Barry Rosenstein has revealed its stake of 0.85%.
Significantly last month, Kate Spade reported lower than expected quarterly same-store sales sighting increased competition as the reason for its sales performance during the holiday shopping season.