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Micheal Kors Pre-Christmas slowdown


Michael Kors has warned of slowing sales in the run up to the Christmas season, with sales growth in stores that have been open more than a year, down to 11% from 24% in the previous quarter.

The group, best known for its collections of watches and handbags, also announced that it will be moving its headquarters to London from its current base in Hong Kong. “There was definitely a reduction in mall traffic” explained Kors Chief Executive John Idol in a conference call on Tuesday.

“We’ve kind of been seeing that for the last couple of quarters, but it was more significant in this quarter than we had anticipated. When you don’t take a promotional posture, obviously some of the business goes in different directions” Idol explained.

“We think that’s the right thing for us to do as a luxury brand” he added. Kors’ approach to the market is very delicate, it perceives itself as a high end brand similar to Louis Vuitton, Prada and Gucci, at a lower price point.

The label will happily sell a crocodile skin handbag for a sum in excess of £8,000, in the same store there could also be a ‘crocodile pattern” bag for £250.

The motto for Kors seems to be that a little real luxury helps sell a lot of near-luxury. Slashing the prices of its high-end items would ruin this model and goes someway to explaining their rational.

LVMH Moet Hennessy Louis Vuitton, one of Kors’ perceived rivals, also announced some major news on Tuesday.

The group, who most notably owns Louis Vuitton and Marc Jacobs, revealed that it would be distributing its share holding in Hermes to its own shareholders on 17th December.

The deal comes as part of an agreement to end hostilities between the two companies signed in September, as previously reported by Retail Gazette.

Under the terms of the agreement all LVMH shareholders will receive 2 Hermes shares for every 41 LVMH shares they hold, with an interim cash dividend of £1 per share being paid to shareholders on 4th December.

The redistribution of shares means that Bernard Arnault, the French Billionaire who controls LVMH, will have an 8.5% stake in Hermes.

As a result Arnault, France’s richest man, has committed to not buy any more Hermes shares for the next five years, either personally or via the companies he controls.

Tensions between the two luxury rivals started back in 2010 when LVMH, who owns Louis Vuitton, Fendi, Marc Jacobs and Donna Karan to name a few, announced that it had started building a holding in Hermes and had obtained 17.1% stake.

Hermes saw the move as hostile and it was widely believed that LVMH was planning a takeover.

However LVMH agreed in September 2014 to relinquish this holding, and in return, Hermes would drop its legal proceedings against its rival.

In 2013, LMVH were fined €8mn for misleading markets by not announcing its Hermes holding sooner.

Published on Thursday 06 November by Editorial Assistant

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