Michael Kors Asia outperforms US
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Michael Kors Asia sales are showing healthy growth – at the same time as same-store figures are falling heavily in its US home market.
Michael Kors has kicked off its new financial year with a weak set of numbers this week.
Total revenue was virtually flat, just 0.2 per cent higher than during the same period last year., and driven by the opening of new stores which helped push overall retail sales up by 7.6 per cent. That offset a dismal comparable sales decline of 7.4 per cent.
Michael Kors Asia has been a growth spot, with revenues rising by 74.5 per cent – although this is flattered by the acquisition of the company’s Greater China licensee.
However, even on an underlying basis, the region is in positive territory, again thanks to the more favorable brand perception from consumers.
In the US, one of the key issues is that interest in the brand appears to have peaked. This is evident from Conlumino’s brand tracking, which shows that while Michael Kors is not viewed unfavorably by consumers, it is not enjoying the resurgence that Coach has managed to engineer. This domestic woe is evident in the North American numbers which tumbled by 5 per cent, a sequentially worse performance than the previous quarter.
“Nevertheless, given the investment being put into the new digital flagships – such as the one at 520 Broadway in New York – such an outcome is disappointing.”
The worsening of North American results is partly attributable to the stronger dollar which has likely weakened tourist sales at key flagships in the US, and Michael Kors is affected more than Coach in this respect, as it relies more on tourist spend at its larger stores. Nevertheless, given the investment being put into the new digital flagships – such as the one at 520 Broadway in New York – such an outcome is disappointing.
The numbers from Europe were somewhat better with a 3.3 per cent increase in revenue over last year. Here, the MK brand is less ubiquitous and the company’s new stores, such as the one recently opened on London’s Regent St, are generating good trade in a way that the stores in North America are failing to do. Given that the company has several further European digital flagship stores in the pipeline for this fall, it looks likely that Europe will continue to deliver respectable sales growth across this fiscal year.
Wholesale decline
In the continuation of a theme we have seen across many luxury brands, wholesale revenue has decreased – falling by 7 per cent. Some of this is down to the company’s own actions to reduce exposure to channels that do not reflect its brand image, and some is down to the generally weaker traffic to malls across North America which has affected a number of outlets and stores that sell Michael Kors product.
Looking ahead, while international sales will grow this year, the increase will be offset by continued pressures in North America. As such, revenues will likely be flat which will create pressure on the bottom line given all of the investments the brand is making.
- Neil Saunders is CEO of Conlumino.
Questions & Answers
Q.Why has Michael Kors Asia seen such strong revenue growth this financial year?
Why has Michael Kors Asia seen such strong revenue growth this financial year?
The significant revenue increase in Asia is partly due to the acquisition of the company’s Greater China licensee. Even without this, the region shows positive underlying growth due to a better brand perception among consumers.
Q.What factors are contributing to the decline in Michael Kors' North American sales?
What factors are contributing to the decline in Michael Kors' North American sales?
North American sales have fallen due to a perceived peak in brand interest among consumers. The stronger dollar is also a factor, weakening tourist sales at key flagship stores, as Michael Kors relies more on tourist spend.
Q.How is Michael Kors performing in Europe compared to other regions?
How is Michael Kors performing in Europe compared to other regions?
Europe saw a 3.3 per cent revenue increase, a better performance than North America. The brand is less ubiquitous there, and new stores, like the one in London, are generating good trade.
Q.What is causing the decline in Michael Kors' wholesale revenue?
What is causing the decline in Michael Kors' wholesale revenue?
Wholesale revenue has decreased partly because the company is reducing exposure to channels not reflecting its brand image. Weaker traffic to North American malls, affecting many outlets, is also a reason.
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