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Michael Kors may be too basic for its own good

earnings, michael kors, stock drop
Invision/AP/Evan Agostini
Me, worry?
By Jenni Avins
Published Last updated This article is more than 2 years old.

Michael Kors, the American manufacturer of brightly colored leather handbags, gold-embellished accessories, and cotton caftans, spooked investors yesterday (May 27) with a quarterly earnings report containing a rare miss on sales.

The market was mainly focused on the news that sales at stores open at least a year had fallen 5.8% from the year-ago quarter. This included a 6.7% decline in North America, the brand’s biggest market.

That said, it doesn’t take an analyst (or even a fashion snob) to see that the brand’s clothing and accessories—and stores—are everywhere. In absolute dollars, Kors is a juggernaut. The brand reported sales in excess of $1 billion for the fiscal quarter ended March 28.

But now, those sales are slowing down, bringing to mind the apocryphal Yogi Berra saying: “Nobody goes there anymore. It’s too crowded.”

Catering to the “basics” is a strategy, to be sure, but it’s a dangerous one for a brand that has posed itself as an aspirational American sportswear label. While Coach—which shares a price point and mainstream American aesthetic with Kors—is closing its less lustrous stores in shopping malls in an effort to regain a bit of the Coach brand’s luxury sheen, Kors has been doing just the opposite.

Kors CEO John Idol defended the brand’s inclusive, mass approach in August of last year, and new store openings reflect that strategy. In the fiscal year ended in March, Michael Kors opened 121 retail stores, bringing its total to 526; it will be interesting to see if sales can catch up with the expansion.

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