Kors is the latest retail highflier to get its wings clipped

Add once soaring–and seemingly invincible–Michael Kors to the list of retail brands to disappoint the market.

Last week Kors, the “accessible luxury” fashion brand that has grown from a niche player to a multi-billion dollar global juggernaut in under a decade, reported earnings that actually slightly beat expectations. Yet a miss on sales and lowered guidance sent the stock cratering.

At first blush, the overall sales weakness should not have surprised anyone. Kors has pulled back significantly on its wholesale distribution while simultaneously reducing promotional activity. An increase in that sector would have taken a miracle. But what was shocking was a rather precipitous 6.4% drop in comparable stores sales and a nearly 23% decline in licensing revenue.

It’s tempting to see the problems at Kors as brand specific, self inflicted and temporary as the brand realigns its pricing and distribution strategy. But I believe they underscore several broader and more vexing industry issues.

For several quarters now we’ve witnessed a panoply of once mighty high-end brands falter. The luxury department store industry’s big stall is now well into its second year. Saks has reported several quarters of disappointing comps. Neiman Marcus, saddled with high debt and weakening sales, had its debt rating downgraded last week. Nordstrom’s industry leading full-line store performance has become tepid at best. And all of this comes amidst a surging stock market and improving consumer confidence.

To be sure, the strong dollar and weak oil market has a material dampening effect. But even if that were to reverse–which seems rather unlikely anytime soon–the industry is still plagued by increasingly unfavorable demographics, lack of innovation, over capacity and growing consumer willingness to “trade down” to less expensive substitutes. Until these companies find ways to drive traffic increases, attract meaningful numbers of new customers and drive revenues through transaction growth instead of merely raising prices, we can expect a continued string of disappointments from most, if not all, of these brands.

And it just might take a major shakeout to restore the industry to its glory days.

A version of this post originally appeared @Forbes where I recently become a contributor. You can check out my latest work here.

Author: stevenpdennis

Steven Dennis is a trusted advisor and thought-leader on customer-centric strategic growth and innovation. As President of SageBerry Consulting, he applies his C-level executive experience to drive growth and marketing strategy for multi-channel retail, e-commerce and luxury industry clients. He shares his ideas and wisdom regularly in the press, as an industry speaker and through his popular blog "Zen and the Art & Science of Customer-Centricity"(https://stevenpdennis.wordpress.com/). Prior to founding SageBerry, Steven was Senior Vice President of Strategy, Business Development and Marketing for the Neiman Marcus Group. As a member of the Executive Committee he drove the company's major growth initiatives, multi-channel marketing programs and customer insight agenda. Before joining Neiman Marcus, Steven held leadership positions with Sears, including Acting Chief Strategy Officer, Lands' End acquisition integration team leader, Vice President-Multichannel Integration and General Manager-Commercial Sales. Earlier in his career he was with NutraSweet and the global management strategy consulting firm, Booz & Co. Steven received his MBA from the Harvard Business School and a BA from Tufts University. In addition to his consulting work, Steven is an executive-in-residence at the JC Penney Center for Retail Excellence at SMU’s Cox School of Business, President of the DFW Retail Executives Association and serves on the Advisory Boards of Invodo Inc. and Nectar Online Media. He is also active in the social innovation and education reform arena as a Partner and member of the Board of Directors of Dallas Social Venture Partners. He is currently co-leader of DSVP's investment and engagement with SMU's Center on Communities and Education "School Zone" initiative in West Dallas.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s