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Will Vince Be the Next Michael Kors?

Vince had a hotter IPO than KORS, but that doesn't mean it's a better stock

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When more 85% of your product is sold to women, it makes good business sense to have executives in place who actually buy the products. While retail has always been fairly liberal when it comes to promoting women up the ranks, it’s refreshing to see that Vince has made it so widespread.

More importantly, VNCE has hired people — men and women — who appear to have the experience necessary to take the brand to the next level. I’m not suggesting that will make it the next Michael Kors, but it certainly has the opportunity to become a decent-sized specialty retailer.

Its big Achilles’ heel is its men’s products, which have been around since 2007 and yet represent a small part of Vince’s overall business. Plans are afoot to add a men’s shoe line in 2014 while also elevating the men’s collection from also-ran.

That’s easier said than done.

Plenty of good retailers have stumbled trying to be unisex when they should have just picked one and stuck to their knitting. Trying to please both sexes often results in a loss of focus. If Vince wants to be the next Michael Kors, it can’t afford any mistakes, big or small.

This decision to push further into men’s wear could be VNCE’s undoing.

Bottom Line

Sun Capital was smart to float Kellwood’s best business at a time when the IPO market was hot. It paid $544 million (also assumed $411 million in debt) for Kellwood back in 2008. With the underwriters exercising the over-allotment, it sold 1.5 million shares for $30 million and is sitting on another 24.7 million shares valued at $745 million as of Dec. 30.

Sun Capital will also receive approximately $172 million from VNCE for tax savings at three levels of government from its separation. Add that up, and Sun has just short of $1 billion in hand with its other Kellwood businesses likely to be sold. It has already doubled its money in five years with some gravy still to come.

Well played, boys.

As for VNCE stock, I think it will deliver double-digit returns in 2014 … but so will KORS. In my opinion, Vince isn’t the next Michael Kors. If anyone has that chance, it’s Kate Spade (FNP), and I’m even skeptical there.

Most of the easy money in VNCE has been made already. If you can wait for it to grow itself into a bigger player in 24 to 36 months — it might be worth a flyer.

But then again, why not take that chance with KORS?

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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