Michael Kors to inject newness in to handbag market – and launch smartwatch
By Yasameen Noorian

Despite being the US’s most successful handbag seller over the last few years, even Michael Kors is suffering a sales and earnings dip of late thanks to a disinterested US consumer

Aug 07, 2015
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It’s official. Lack of newness its dulling handbag sales. That’s the view of Michael Kors CEO John D Idol, and he should know. As head of the US’s most successful handbag seller over the last few years, even Michael Kors is suffering a sales and earnings dip of late, also hit by a generally disinterested US consumer and a strong dollar.

The answer? Introduce a big assortment of new handbags in the coming spring featuring the most extensive new material the company has introduced to date.

“We’re going to take a very aggressive point of view on newness for the spring season in particular,” Idol told The Wall Street Journal.

That mirrors rival sufferer Coach who told analysts “consumers are waiting for more innovation.”

Kors plans to introduce smaller handbags as well as more backpacks and shoulder bags. It also plans to introduce its first watch with “wearable” technology in the autumn.

The challenge is to counteract profits that that fell for the second-straight quarter, down 7% to $174m/87 cents a share from $187.7m/97 cents a year ago. That still beat analysts’ 75 cents estimate and its shares rose 11% in afternoon trading. They have fallen over 40% so far this year.

Total revenue, which includes department store sales, rose 7.3% to $986m, above the $944m analysts had expected. Excluding currency moves, revenue would have increased 13.4%. Wholesale revenues grew 4.2% to $424m.

Retail sales increased 9% to $523m, driven by 107 new-store openings. However, same-store sales fell 9.5% in the three months to June 27 with core North America sales up just 1.2% to $727m.

European revenue, however, grew 16.9%, and Japan sales leapt 32.7%.

Gross margin fell to 61.2% from 62.2% a year earlier because of currency shifts.

Idol said the sell through rate for new products currently in stores is the best it has been in three years although lower cost smaller bags supress the amount customers spend, he noted.

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