The Coming Crash Of Michael Kors... Take It To The Bank
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. Some would argue all of those segments will simply end up competing with each other, thus cannibalizing the top end of the spectrum.
Ironically, a similarly positioned Tommy Hilfiger brand, under the same financial "engines" of Silas Chou and Lawrence Stroll, came tumbling down in the late 90s for the same reasons. The seductive thing about the Kors-type of "hot" trajectory is in the initial delight of consumers as the brand becomes to stand for everything for everybody, everywhere. I mean everyone can own a Michael Kors-something. And everyone can even have the "it" bag during this of-the-moment serendipitous cultural zeitgeist – for the moment. Or should I say for about a nano-minute. Because all of a sudden, in a nano-split second, the largely young and trend-fickle consumer base wakes up and realizes the brand is slapped on everything and is being worn by everybody, everywhere. And, crash! Wonderful becomes awful. The brand stands for nothing for anybody – everywhere.
Yet a lot of people, Michael Kors himself and many executives running the company, along with a lot of shareholders, become billionaires from ubiquity. Speaking of which, Silas Chou and Lawrence Stroll just get to add to their already-billions of net worth.
The Two Canaries in The Mine??
So, by the way, could these guys be the proverbial "canaries in the mine?" In 2012 they decreased their share ownership from about 52% of the company (just before the IPO in 2011), to just over 15%. I’ll let you do the data mining to determine what they netted on that sell-off.