Kate Spade is bowing to pressure from U.S. hedge fund Caerus Investors, sending the company's shares skyrocketing on Thursday. Fred Katayama reports.
Handbag maker Kate Spade says it's "exploring strategic alternatives," meaning the company is trying to sell itself. The news sent the stock skyrocketing on Thursday, valuing the company at about $2.8 billion. Kate Spade has been under pressure from its investor, New York-based hedge fund Caerus. The fund sent a letter to Kate Spade's board in November saying it was "increasingly frustrated" by the inability of the company's management to achieve profit margins comparable with its peers. Since then, several media outlets have reported that Coach and Michael Kors were interested in buying Kate Spade Naveen Jaggi is president of retail at investment firm JLL. (SOUNDBITE) NAVEEN JAGGI, PRESIDENT OF RETAIL BROKERAGE AND CAPITAL MARKETS, JLL, (ENGLISH) SAYING: "I think Kate Spade is a great brand. I don't think they have to sell, quite candidly, in my opinion. I think Kate Spade has really great brand equity in the community. Think what Kate Spade needs to think about is how do they take their existing customer that's 25, 28, 30 years old, and, as they get older, how does the brand get older with them." Kate Spade's search for a buyer comes amid a slump in sales for handbag makers and a drop in mall traffic and tourist spending due to a stronger dollar. The company also reported earnings on Thursday. Quarterly sales fell but profit was higher than expected.