Has the Michael Kors boom finally ended?

2 February 2017 (Last Updated February 2nd, 2017 04:45)

Michael Kors’ comparable store sales growth has softened over the past four years and entered into decline with Q2 2016/17 at -5.4%, creating doubts over the brand’s direction and how it can achieve growth beyond new store openings.

Michael Kors’ comparable store sales growth has softened over the past four years and entered into decline with Q2 2016/17 at -5.4%, creating doubts over the brand’s direction and how it can achieve growth beyond new store openings.

The US retailer faces the dilemma many other luxury fashion brands have come up against – overexposure due to widespread accessibility. While Michael Kors, the designer, needed to raise his profile and gain international awareness, the brand’s strategy of creating lower value, high volume products has driven sales and recognition but has also made the brand a victim of its own success by saturating demand.  The retailer now faces declines in comparable store sales and needs to strike a balance between accessibility and exclusivity in order to maintain brand appeal in the long term.

In the UK the brand appeals to young female millennials with 73.6%* of the retailer’s shoppers being female and 55.3%* of shoppers in the 16-34 age bracket. The problem for Michael Kors is how to retain this customer group as disposable incomes increase and young female millennials start to trade up to more aspirational brands.

The retailer has made use of wearable technology’s popularity with the launch of its chic, on-trend Michael Kors Access smartwatches and activity trackers, and has launched a menswear range as well as a new fragrance, all of which have been met with some success and attracted new customers. However, to retain the brand’s core customer, the retailer must encourage young female millennials to trade up within the brand’s bags to its more expensive range, the Michael Kors Collection, by developing a mid-point price bridge collection where there is a gap in the market.

There is also a significant opportunity for Michael Kors to tap into its loyal customer base with the brand’s womenswear range, which is stylish and trend-led, particularly focusing on marketing the retailer’s casualwear such as its denim range. This will help to raise awareness of the brand’s extensive clothing range and increase customers’ overall spend with the brand, ensuring stronger sales in the long term.

While there is plenty of potential growth in the Asian markets, where the brand is still a novelty, Michael Kors needs to ensure its more mature markets in the US and Europe do not fall into long-term decline by strengthening its brand equity with the retailer’s core customers, young women.

*Source: GlobalData Retail 2016 clothing survey