It's said that image is everything in fashion, and for luxury brand Michael Kors, that image has begun to tarnish.For more than a year, fashion insiders, from style bloggers to financial analysts have been warning of "the coming crash" of Kors' lifestyle company, Michael Kors Holdings.
They're worried that in the three years since the company went public, it's been opening so many stores that it's at risk of oversaturating its own market -- a prospect that could doom the brand.
Michael Kors Holdings Ltd. on Wednesday reported higher retail sales helped by new store openings, but it lowered growth forecasts for sales and profit as shoppers turn to smaller handbags that cost less.
Its retail sales in the latest quarter rose 7.5% from a year earlier to $532.8 million. Kors opened 116 new stores in the past 12 months, bringing its total to 589 locations around the world. Excluding store openings and closings, retail sales fell 8.5%.
Michael Kors, the brand, is becoming ubiquitous, and that’s the kiss of death for trendy fashion brands, particularly those positioned in the up-market younger consumer sectors. Its distribution is racing towards ubiquity, wholesale and retail (online, its own stores, outlet stores and internationally). Even worse, a rocket-propelled accelerant to ubiquity is its expansion into multiple product categories and sub-brands, so they can compete at all price points.
Michael Kors Holdings Ltd. reported its revenue climbed a better-than-expected 6.3% in the latest quarter on strong demand for its accessories and footwear, momentum with its online offerings and international growth.Shares of the company, down 43% over the past year, shot up 14% to $46.30 in premarket trading."We are pleased with our third-quarter results, as we delivered revenue, comparable-store sales and earnings growth ahead of our expectations," Chief Executive John Idol said.
Macy's is in trouble. The retailer's same-store sales growth has been weakening over the last several years, and Deutsche Bank analysts expect things to only get worse for the department store chain.
Deutsche Bank analyst Paul Trussell on Monday downgraded Macy's from "buy" to "sell," saying he has "low confidence that the company can bust out of its same-stores sales rut."
Sales declines at Michael Kors, one of Macy's key vendors, were cited as a primary reason for the downgrade.
The once red-hot fashion brand reported a surprisingly sharp decline in comparable sales, suggesting its aggressive expansion is hurting Kors’ luxury aura.
When you’re a red-hot aspirational luxury brand, it’s tempting to capitalize on the moment with aggressive expansion plans and a broader assortment of products to become a so-called “lifestyle” brand.
If it seems like you see a Michael Kors purse on every shoulder when you walk down the street or hit the mall, there’s something to your observation: The brand had a years-long hot streak after going public in 2011 when its jet-set-inspired handbags and accessories became a must-have for aspirational luxury shoppers.