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FNP Shares Soar on Narrowed Q3 Loss

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Shares of Fifth & Pacific Companies, Inc. rose 4.2% to $28.89 on Oct 7, 2013 from the previous day’s closing price after the company posted strong financial results for the third quarter of fiscal 2013. The company’s adjusted loss of 3 cents per share from continuing operations was narrower than the year-ago comparable quarter loss of 5 cents.

The year-over-year improvement in results was primarily driven by top-line growth. However, quarterly loss was higher than the Zacks Consensus Estimate of a loss of a penny. On a reported basis, the company’s quarterly loss came in at 12 cents per share compared with a loss of 17 cents in the year-ago comparable quarter.

Net sales rose 18.1% year over year to $430.6 million in the quarter, primarily driven by strong performances at the company’s Kate Spade and Lucky Brand segments, partially offset by weak sales at Juicy Couture and Adelington Design Group segments.

Adjusted gross profit margin expanded 75 basis points (bps) to 56.5% in the quarter owing to increased penetration of the higher margin Kate Spade business as well as improved gross profit rates at the Juicy Couture and Adelington businesses.

Adjusted selling, general & administrative (SG&A) expenses of this Zacks Rank #2 (Buy) increased 20% year over year, which was higher than the top-line growth. As a percentage of sales, SG&A expenses were 55%, up 80 bps from 54.2% in the comparable period last year. All this resulted in a year-over-year improvement of $4.0 million in the adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to $25.0 million.

Fifth & Pacific ended the quarter with cash and cash equivalents of $6.8 million. Total debt at the quarter-end was $522.0 million compared with $386.0 million at the end of the year-ago period. The increase in total debt was primarily due to the company’s investment towards acquiring Kate Spade Japan and the increasing inventory of Kate Spade business.


Fifth & Pacific expects its fiscal 2013 adjusted EBITDA to come in the range of $120–$140 million. Depreciation and amortization for the fiscal is anticipated to be $70–$75 million. During fiscal 2013, the company intends to make a capital expenditure of $115.0 million. Debt balance at the year-end is projected to be $280 million and interest expenses in the range of $46–$48 million.

Other Stocks to Consider

Apart from Fifth & Pacific, other better-performing stocks in the apparel-retail industry include DSW Inc. (DSW - Free Report) , Finish Line Inc. (FINL - Free Report) and Fossil Group, Inc. (FOSL - Free Report) . All of these carry Zacks Rank #2 (Buy).

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