'Look under the hood' when it comes to Michael Kors: Analyst

Kate Spade and Michael Kors storefronts.
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Premium handbag maker Michael Kors posted Tuesday. However, retail analyst and Telsey Advisory Group CEO Dana Telsey said it's important to dig below the surface.

"I think, overall, when I look at the name, I think yes, you had a sequentially improved comp, earnings came in better than expected, but look under the hood," she told CNBC's "Fast Money: Halftime Report" Wednesday. "The reason why the numbers are better than expected: You had lower SG&A, lower tax rate, you had a share repurchase."

Telsey added that the handbag industry is decelerating off a larger base but Kate Spade might still be a good buy.

"I think the difference between KATE and KORS, it's a smaller business, it's off a smaller base, it has a more extensive product offering," she said. "It doesn't have as much exposure to the department stores as what both Coach and Kors have, and their comps are running positive because it is such a smaller base."

A shopper looks at Michael Kors handbags at Macy's in New York City.
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Telsey said Nordstrom, which carries brands such as Kate Spade and Michael Kors is making the right moves. The prestige department store has online, off-price and full line offerings, which attract a wide breadth of customers.

"Nordstrom has been the one that's been the advancer in the move to millennials and the move towards omnichannel," she said.

Despite the decelerating handbag business, Telsey said she sees acceleration in the cosmetics, active and jewelry sectors.

Michael Kors was priced at nearly $43 in early afternoon trading.

A pedestrian passes by a Michael Kors retail store in New York.
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