Luxury brand Michael Kors suffered a surprising 5.8% drop in overall Q1 same-store sales and a 6.7% drop in North American same-store sales, in sharp contrast to its meteoric rise in recent years.
Analysts had expected a Q1 same-store sales rise of 3% in North America, the retailer’s biggest market.
The retailer opened 121 new stores in the past fiscal year for a total of 526. Inventory is up 21.8% while overall sales rose 17.8%.
Michael Kors is everywhere, and that could be a problem, analysts say. Stores — and concessions within department stores — are so numerous that they could be competing with each other. The ubiquity could be hurting the “it”-ness of the once-hot brand, and the inventory build-up could lead to clearance sales that could also further erode sales and the brand’s shine.
Retail expert Robin Lewis warned about this last year in his blog, The Robin Report.
“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,” he wrote in a November post entitled 'The Coming Crash of Michael Kors…Take it To The Bank.' “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.”