Shares of Kate Spade (KATE) received a boost in morning trading after an activist investor sent a letter to the accessories and apparel retailer urging the company to pursue a sale, saying it was concerned about the company's underperformance.

CAERUS LETTER: Caerus Investors, a hedge fund managed by Ward Davis and Brian Agnew, made public a letter sent to Kate Spade Chairman Nancy Karch, urging the board to pursue a sale of the company. The investor said it is "deeply concerned" about the decline in the company's share price over the last two and a half years. "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," the letter to Karch said. The letter also said that "We strongly believe that a strategic, industry player would be willing to pay a substantial premium to add this growth business to their portfolio."

WHAT'S NOTABLE: Caerus said it first invested in Kate Spade under then-parent company Liz Claiborne in 2009 on the basis that the standalone value of Kate Spade was "grossly mispriced" inside a company with other assets that were not performing well and argued at the time for a breakup of the company, which came in 2013. The stock rose above $40 over the following year, Caerus noted. "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," Caerus said. The size of Caerus Investors' current stake in Kate Spade is unclear.

RECENT EARNINGS: Kate Spade recently reported quarterly results, with executives commenting that comparable sales in the quarter were impacted by increasing tourism headwinds in its brick and mortar business and calling comps and gross margins "somewhat disappointing." The company, which noted that industry-wide challenges have persisted into the second half of the year, said it continues to feel the impact of the price-sensitive customer in its full priced and off-price channels, particularly in its outlets, and said the environment remains "heavily promotional."

PRICE ACTION: Kate Spade is up about 6.5% to $17.72 in morning trading.

OTHERS TO WATCH: Kate Spade peer Coach (COH) is also moving higher this morning, but Michael Kors (KORS), another peer, has slumped nearly 5%.