The kiss of death

Michael Kors

Michael Kors

A self-styled US fashion guru expands his focus on menswear while under fire for making his luxury brand too accessible.

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Michael Kors, the son of a fashion model who dropped out of New York City’s Fashion Institute of Technology in 1977 to set up his own boutique space, has opened a 22,000sqft flagship in the hip Manhattan neighbourhood of SoHo.

Renowned for his womenswear designs since being discovered by Bergdorf Goodman a year into his career, he has dedicated the entire basement floor of the 520 Broadway store to menswear, displaying sportswear, shoes, tailoring, leather, suits, and accessories.

It’s little more than a year since Kors hired Mark Brashear to head a new menswear department, hoping to emulate the success of other brands in making the transition from women’s fashion to men’s. Now it accounts for around one third of the store space.

At ground level, shoppers can find accessories from Michael Kors and its diffusion label, Michael, including sunglasses, small leather goods, watches, jewellery, and beauty. Upstairs is ladies’ clothing.

Diffusion brands, expansion into menswear − is it a dangerous strategy? Forbes retail columnist Robin Lewis opines a convincing yes.

“The brand is becoming ubiquitous and that’s the kiss of death for trendy fashion brands, particularly those positioned in the upmarket younger consumer sectors,” Lewis wrote when the menswear divergence was announced.

He likens the strategy to the demise of Tommy Hilfiger in the late 1990s.

“The seductive thing about the Kors-type of ‘hot’ trajectory is in the initial delight of consumers as the brand becomes to stand for everything and everybody, everywhere. [But] all of a sudden, in a nano-split second, the largely young and trend fickle consumer base wakes up and realises the brand is slapped on everything and is being worn

by everybody, everywhere. And, crash! Wonderful becomes awful. The brand stands for nothing for anybody – everywhere.”

Kors has collapsed before. After launching in 1981 in Bloomingdales, Lord & Taylor, Neiman Marcus, Saks Fifth Avenue, and Bergdorf Goodman, he was forced into bankruptcy in 1993.

He fought back, aided by a reference in the movie The Devil Wears Prada, TV series, Gossip Girl, and, for dressing First Lady, Michelle Obama. He also spent five seasons as a judge on Project Runway.

Michael Kors, the company, was listed in a 2011 IPO and its store count has since almost trebled. In one quarter of 2013, same store sales soared 45 per cent.

This month, the company reported a quarterly revenue increase of 30 per cent and a profit boost of 24 per cent – no mean achievement in a still largely stifled global retail market. Same store sales rose 8.6 per cent and online sales by 76 per cent.

Tellingly, investors sent the share price four per cent south in trading after the announcement, spooked by an admission from CEO, John Idol, that the company had to commit the cardinal sin of any luxury brand: discounting.

Just like rival brand, Coach (which last year was deriving 70 per cent of its revenue from outlet stores), Michael Kors has the signs of becoming a victim of its own success.

“The discounts may be a symptom of the ubiquity problem: the trendy customer who might have paid full price for the bags a year or two ago has moved on to other brands,” wrote Sarah Halzack, the Washington Post’s national retail reporter this month.

This story first appeared in Inside Retail PREMIUM issue 2035. To subscribe, click here.

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