Why Kate Spade & Co. Stock Jumped Today

What happened

Shares ofKate Spade & Co.(NYSE: KATE)were up 13.6% as of 1:30 p.m. EST Thursday after the luxury handbag and fashion accessories company announced fourth-quarter 2016 results and that the company is "reviewing strategic alternatives."

So what

Quarterly revenue climbed 9.8% year over year (10.1% excluding sales for wind-down operations in last year's fourth quarter), to $471 million, driven by 9.2% growth in direct-to-consumer comparable sales. On the bottom line, net income grew 39.2%, to $85.5 million, while diluted earnings per share from continuing operations were $0.67. Adjusted for using a normalized tax rate, diluted earnings were $0.41 per share, up from $0.32 per share in the same year-ago period. Analysts, on average, were expecting Kate Spade to report slightly higher fourth-quarter revenue of $472.8 million, but lower adjusted earnings of $0.35 per share.

Image source: Kate Spade & Co.

But more exciting for investors is Kate Spade's official confirmation that it is reviewing strategic alternatives. More specifically, with the help of financial advisor Perella Weinberg Partners, Kate Spade is "conducting a process to explore and evaluate strategic alternatives to further enhance shareholder value."

Now what

The first thing that comes to mind in these cases is the potential for Kate Spade to put itself (or a portion of its business) up for sale. But to be fair, Kate Spade reminded investors, "There can be no assurance that this review process will result in a transaction or other strategic alternative of any kind."

In addition, Kate Spade noted there is no definitive timetable for the completion of this process, instead promising it will "proceed in a timely manner" and offer updates as it deems appropriate. So investors will need to hurry up and wait for more details on any potential acquisition. But in the meantime, given the prospect of a juicy acquisition premium extending Kate Spade's recent gains, it's no surprise to see investors bidding up the stock today.

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Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.