New York-based activist investor Caerus Investors has sent a letter to the management of luxury handbag and accessories maker Kate Spade urging the company to pursue a sale of the company. The investor says it is deeply concerned about the decline in the company's share price of the last two and half years and of the company's inability to achieve the profit margins of its peers. "Given the market's lack of faith in the current management team, as evidenced by the 63% decline in the shares since the intraday high on August 11th, 2014, we believe the best path for enhancing shareholder value is to pursue a sale of the company," said the letter. "We strongly believe that a strategic, industry player would be willing to pay a substantial premium to add this growth business to their portfolio." Caerus said it first invested in the company under then parent Liz Claiborne in 2009, on the basis that Kate Spade was mispriced inside a company with other assets that were underperforming and argued for a breakup of that company, which came in 2013. The stock rose above $40 the following year. "Since those successful moves, material shareholder value has been destroyed by wasting time, energy and money on the former sub brand Kate Spade Saturday and management has missed interim sales and margin targets on 3 different occasions," said the letter. Kate Spade shares were not yet active in premarket trade, but are down 6.5% in the year to date, while the S&P 500 has gained 6%.
Continue Reading Below
Copyright © 2016 MarketWatch, Inc.