NEW YORK (Reuters) — Liz Claiborne Inc. said yesterday it agreed to buy luxury accessories maker Kate Spade LLC for $124 million, including debt, expanding its reach into high-end department stores such as Nordstrom Inc.Liz Claiborne, a leading US seller of clothes and accessories for women, said the deal is expected to close in the current quarter and will likely hurt earnings slightly in fiscal 2007.

Prudential analyst Lizabeth Dunn raised concerns about the price of the deal, saying there were likely other bidders and that Liz Claiborne may have made its purchase when the accessories cycle was at its peak.

“We have some concern that Liz Claiborne overpaid,” Dunn wrote in a research note.

But the company said the acquisition diversifies its portfolio of apparel, accessory and jewellery brands, and the potential for growth is substantial.

Kate Spade, previously owned by department store chain Neiman Marcus, designs, markets and retails purses, messenger bags and other accessories for women and men through its Kate Spade and Jack Spade brands. The company generated sales of about $84 million for its fiscal year ended July 30.

Liz Claiborne has been aggressively acquiring other companies to boost its sales and reach in the United States and internationally.

“Kate Spade further diversifies our portfolio and provides considerable opportunity for organic growth,” Liz Claiborne president Trudy Sullivan said in a statement. “We believe the potential for Kate Spade in the direct-to-consumer channel, both domestically and internationally, is sizeable.” She added that the company believes there is room for domestic and international wholesale growth.

Liz Claiborne shares have climbed 35 percent so far this year.

The stock is selling for 12.7 times next year’s expected earnings, compared with an average 16.1 times earnings for other companies in the Standard & Poor’s textiles and apparel index.