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Michael Kors is losing its cool

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Where once Michael Kors was the maker of the ‘it’ watch and the ‘it’ bag, ‘it’ has steadily oversaturated the market.

Shares fell as low as 24% yesterday, after warnings from the US retailer that same-store sales growth would flatline this year, following nearly a decade of gains.

The luxury lifestyle brand has been hit hard by reduced footfall in malls and poor sales of watches.  Consumers don’t have time for a Michael Kors watch, not when there’s a shiny, new kid like the Apple Watch on the block.

In a conference call with analysts yesterday, the Apple Watch was not directly mentioned but CEO John Idol was forced to say:

"We will capitalise on wearable technology in watches and other categories as innovation and demand in this area continue to advance."

Michael Kors has gone on something of a store opening spree recently.  Overall sales in North America were up in the quarter, but that's singlehandedly because of the higher store count.

The eponymous fashion label grew rapidly by offering accessible luxury to the masses but its global omnipresence hasn’t been working in its favour of late. 

"The company has expanded too successfully and is now finding it harder to penetrate further," analysts at retail research firm Conlumino wrote yesterday in a report about Michael Kors "The main warning for Michael Kors is one we have seen before: luxury brands that enjoy meteoric rises can also suffer from overexposure."

Despite this, revenues from digital business jumped 63% in the year that ended in March from the previous period, driven by the launch of a new website in the US. Michael Kors plans to invest heavily in its ecommerce division.

Michael Kors was a considerably attractive stock in the years following its IPO in 2011, but competition in the accessories market from Coach and Kate Spade has put pressure on the retailer.

Published on Thursday 28 May by Veebs Sabharwal

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