Unlike its luxury peer Coach , Michael Kors hasn’t yet figured out a way to bounce back from an expansion strategy that ultimately hurt sales and cheapened the brand. Coach is slowly turning it around, and this past quarter, reported a profit beat and fourth straight quarter of rising comparable sales in its North American market.
The cannot be said for Michael Kors. For its most recent quarter, the luxury retailer reported that comparable sales declined 14.1%, alongside a 22.8% decrease in its wholesale business, which are sales largely made to department stores.
Total sales fell 11.2% to $1.06 billion, which came in above the Zacks Consensus Estimate of $1.04 billion. Earnings per share were 73 cents, also beating the Zacks Consensus Estimate of 70 cents per share. Excluding non-recurring items, net loss attributable to Michael Kors was $28.8 million, or 17 cents per share, compared to net income of $177 million, or 98 cents per share, in the prior year period.
“Fiscal 2017 was a challenging year, as we continued to operate in a difficult retail environment with elevated promotional levels. We acknowledge that we need to take further steps to elevate the level of fashion innovation in our accessories assortments and enhance our store experience in order to deepen consumer desire and demand for our products,” said CEO John Idol.
As a result, Michael Kors plans to shutter between 100-125 full priced retail stores over the next two years. The company stated it will incur one-time costs of nearly $100-$125 million related to the store closures, though it expects annual savings of $60 million. For fiscal 2018, Michael Kors forecasts revenue of $4.25 billion, below analysts’ estimate of $4.37 billion. The retailer also expects a high single-digit drop in same-store sales.
Michael Kors has a long, tough road ahead of them. For years, the brand was unstoppable, but once it overtook Coach as the top U.S. handbag maker, it reached a level of ubiquity that contradicted what it meant to be “luxury.” Michael Kors completely oversaturated the handbag market, and its products lost any sense of desirability; consumers didn’t covet a Michael Kors purse as much as they used to because a Michael Kors purse was found on seemingly every woman’s arm in America (also read: Michael Kors’ Problem is That It’s Basic).
Shares of Michael Kors are down nearly 10% in mid-morning trading Wednesday. KORS is a #4 (Sell) on the Zacks Rank, with a VGM score of ‘A.’
For a look at the broader luxury retail market, check out this episode of Zacks Shopping for Stocks:
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9x stock explosion after they launched their iPhone in 2007? Now, 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade, which could, in turn, save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>
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Michael Kors to Close Over 100 Stores, Blames 'Difficult Retail Environment'
Unlike its luxury peer Coach , Michael Kors hasn’t yet figured out a way to bounce back from an expansion strategy that ultimately hurt sales and cheapened the brand. Coach is slowly turning it around, and this past quarter, reported a profit beat and fourth straight quarter of rising comparable sales in its North American market.
The cannot be said for Michael Kors. For its most recent quarter, the luxury retailer reported that comparable sales declined 14.1%, alongside a 22.8% decrease in its wholesale business, which are sales largely made to department stores.
Total sales fell 11.2% to $1.06 billion, which came in above the Zacks Consensus Estimate of $1.04 billion. Earnings per share were 73 cents, also beating the Zacks Consensus Estimate of 70 cents per share. Excluding non-recurring items, net loss attributable to Michael Kors was $28.8 million, or 17 cents per share, compared to net income of $177 million, or 98 cents per share, in the prior year period.
“Fiscal 2017 was a challenging year, as we continued to operate in a difficult retail environment with elevated promotional levels. We acknowledge that we need to take further steps to elevate the level of fashion innovation in our accessories assortments and enhance our store experience in order to deepen consumer desire and demand for our products,” said CEO John Idol.
As a result, Michael Kors plans to shutter between 100-125 full priced retail stores over the next two years. The company stated it will incur one-time costs of nearly $100-$125 million related to the store closures, though it expects annual savings of $60 million. For fiscal 2018, Michael Kors forecasts revenue of $4.25 billion, below analysts’ estimate of $4.37 billion. The retailer also expects a high single-digit drop in same-store sales.
Michael Kors has a long, tough road ahead of them. For years, the brand was unstoppable, but once it overtook Coach as the top U.S. handbag maker, it reached a level of ubiquity that contradicted what it meant to be “luxury.” Michael Kors completely oversaturated the handbag market, and its products lost any sense of desirability; consumers didn’t covet a Michael Kors purse as much as they used to because a Michael Kors purse was found on seemingly every woman’s arm in America (also read: Michael Kors’ Problem is That It’s Basic).
Shares of Michael Kors are down nearly 10% in mid-morning trading Wednesday. KORS is a #4 (Sell) on the Zacks Rank, with a VGM score of ‘A.’
For a look at the broader luxury retail market, check out this episode of Zacks Shopping for Stocks:
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9x stock explosion after they launched their iPhone in 2007? Now, 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade, which could, in turn, save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>