Kors to Shut Down 100 to 125 Stores

fabuleux

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From the Wall Street Journal:

Michael Kors to Shut 100 to 125 Stores
The closings of full-price retail stores to occur over the next two years



By Imani Moise
May 31, 2017

Michael Kors Holdings Ltd. KORS -1.33%said Wednesday that it would close 100 to 125 of its full-priced retail stores amid increasing pressure from deep discounting across the industry.

The luxury-handbag seller said the closures of its full-price retail stores would occur over the next two years and the company expects to record a $125 million charge in connection with its plans.

“Our product and store experience did not sufficiently engage and excite consumers,” Chief Executive John Idol said.
Like its peers, Michael Kors has beenstruggling to sell its bags at full price since shoppers have gotten used to deep discounts at department stores and competitors. The company has been trying to turn its brand around by reducing the flow of goods to department stores and focusing on higher quality products to persuade customers to spend more money.

The London-based company expects the move will “right-size” its fleet and produce $60 million in annual savings. However, the company said 2018 will be a transition year before it returns to long-term growth.

The company said sales for the current quarter will be between $910 million and $930 million, compared with the consensus estimate of $941.3 million from analysts polled by Thomson Reuters. Its full-year revenue estimate was more than $100 million below analysts’ expectations.

Shares plunged 7.9% to $33.42 during premarket trading, adding to a 16% decline so far this year.

For the quarter ended April 1, the company swung to a $26.8 million loss, or 17 cents per share, compared with a profit of $176.3 million, or 98 cents per share, a year earlier. On an adjusted basis the company earned 73 cents per share, down from $1.03 a year earlier. Revenue slid 11% to $1.06 billion.

Analysts had projected adjusted earnings of 70 cents per share on $1.05 billion in sales.
 

Pimpernel

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“Our product and store experience did not sufficiently engage and excite consumers,” Chief Executive John Idol said.

Store experience? What store experience? :hrmm: Maybe Vienna and Brussels are not representative, but all SAs did was hang around looking bored, they weren´t up to the latest info on models, sizes or colours, and they didn´t even seem very interested in finding out what it is you were looking for. Basically, "what you see is what we have", period... When I compare their SAs to those of Longchamp or Tumi, what a difference there is at all levels...
 

fabuleux

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“Our product and store experience did not sufficiently engage and excite consumers,” Chief Executive John Idol said.

Store experience? What store experience? :hrmm: Maybe Vienna and Brussels are not representative, but all SAs did was hang around looking bored, they weren´t up to the latest info on models, sizes or colours, and they didn´t even seem very interested in finding out what it is you were looking for. Basically, "what you see is what we have", period... When I compare their SAs to those of Longchamp or Tumi, what a difference there is at all levels...
Longchamp was my first 'fashion' job and I must say customer service was an absolute priority.
 

fabuleux

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An even better article from FORTUNE:

Michael Kors Closing Up to 125 Stores As Sales Plummet
Michael Kors (kors, -9.82%) is closing up to 125 stores this year as it continues to partially unwind an aggressive expansion that had served it well when its namesake brand was hot.

The upscale brand reported on Wednesday that sales at stores open at least a year (comparable sales) fell 14.1% in its most recent quarter, and continue to fall sharply this year. What's more, Michael Kors' wholesale business, sales largely made to the struggling department store sector, fell 22.8% in the quarter.

Shares fell 6% in premarket trading. The company operates 827 stores, meaning the closings represent up to 15% or so of its fleet.

The poor results continue a difficult stretch for the company launched in the early 1980's by the former Project Runway judge, a company that for years seemed to be able to do no wrong. Michael Kors Chief Executive John Idol in a statement blamed "a difficult retail environment with elevated promotional levels" while conceding that the product and store experience had gotten a bit stale.

Yet the company has itself to blame for most of its woes. By opening so many stores so quickly to ride the handbag boom earlier this decade and become the largest brand, Michael Kors created a ubiquity that was contradictory to a luxury cachet and hurt its ability to turn out new and exciting products.

The idea at the time was to siphon off shoppers from rival Coach (coh, -0.26%)by opening nearby stores at countless malls. For a while it worked, as Kors eclipsed the more established Coach a few years ago. But Coach, which had earlier opened too many stores and cheapened its brand, started closing stores three years ago, seeing this danger before Kors did.

The result is that the Michael Kors brand has become a fixture at off-price stores and outlets. Case in point: Michael Kors merchandise take up about a quarter of the floor space at a Bloomingdale's outlet.

Kors has said it plans to reduce its exposure to U.S. department stores, which are struggling up and down the price spectrum. But for now it has to contend with a quickly shrinking business, much as Coach had to.

Coach has now reported four quarters in a row of comparable sales growth in North America, regaining its ability to charge higher prices, and recently agreed to buy Kate Spade, making it an even tougher competitor for Kors. Michael Kors' stock market value is now less than half of Coach's.

As for Kors, it forecast revenue of $4.25 billion for fiscal year 2018. Analysts on average had estimated revenue of $4.37 billion, according to Thomson Reuters I/B/E/S. Kors also said it expects high single-digit drop in same-store sales for the fiscal year.

Total sales fell 11.2% to $1.06 billion in the fourth quarter ended April 1, while analysts had expected $1.05 billion. Net loss attributable to Michael Kors was $26.8 million, or 17 cents per share, in the latest quarter, compared with net income of $177 million, or 98 cents per share, a year earlier.
 

Alliekatt29

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I haven't been buying MK for very long as I used to hate them. I hated seeing all the signature bags everywhere which is what I hated about Coach. I only started buying MK after Reed Krakoff left Coach as their current prices are too high for me and I don't like Vevers designs. I appreciate the colors MK offers and the seasonal sales but don't buy from the outlet because I cannot stand the strong smell of perfume every time I walk by.

Hopefully, closing stores will help the company think about how to turn the brand around but I think they need more focus on improving quality vs quantity.
 
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cdtracing

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I also think there needs to be attention paid to the rather poor customer service, especially on the website. There have been some real horror stories about the online customer service lately. Customers will leave & buy other brands if the customer service is rude & atrocious.
 

Alliekatt29

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I also think there needs to be attention paid to the rather poor customer service, especially on the website. There have been some real horror stories about the online customer service lately. Customers will leave & buy other brands if the customer service is rude & atrocious.
Agreed! I don't care how great a product is, if the company or customer service treats the customers poorly, I'm taking my business elsewhere.
 

fabuleux

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As part of its efforts to improve the customer experience, Kors will offer monogramming and other customization options later this year.

The company also plans to remodel its stores in order to move away from the "all white" concept that was borrowed from the old-style Coach boutiques. The new store concept should look like the Regent Street store in London.
 
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iheart_purses

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I have not bought a Michael kors bag in over a year and a half, and I was an active collector for a period there. It's so sad they couldn't tell what they were doing with over saturation. How many of us here in TPF predicted this ??? Can't see the forest for the trees when you're in it in your own company I guess....
 

fabuleux

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I have not bought a Michael kors bag in over a year and a half, and I was an active collector for a period there. It's so sad they couldn't tell what they were doing with over saturation. How many of us here in TPF predicted this ??? Can't see the forest for the trees when you're in it in your own company I guess....
To me, Kors' biggest downfall is its failure to sell its items at full price. The constant discounting, coupons, sales, promotions have damaged the desirability of the brand. I don't blame customers for not wanting to pay full price for a bag that may be discounted just a few weeks later. There are many brands that are as ubiquitous as MK (even top luxury brands such as Hermès, Vuitton, Chanel, and Gucci). Yet they are able to convince shoppers that their items are "worth" full price.

The remodelled stores and new services (such as customization and monogramming) will help. More work needed though to change the brand perception.
 
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cdtracing

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As part of its efforts to improve the customer experience, Kors will offer monogramming and other customization options later this year.

The company also plans to remodel its stores in order to move away from the "all white" concept that was borrowed from the old-style Coach boutiques. The new store concept should look like the Regent Street store in London.
Remodeling stores & monogramming is not what I'm referring to when I say customer service. Attention needs to be paid to properly training employees on the brand & familiarizing them with company policies regarding warranty, repairs, & returns so that consumers don't get the run around. You'll get a different answer to a question depending on who you talk to, particularly when dealing with online CS. It all gives the impression of disorganization & a lack of cohesiveness within the company & brand. I do think there's too much sales & discounting. I also dislike how quickly a style will be discontinued, often times in only a few months. Sort of a here today, gone tomorrow mentality.

I haven't bought any MK lately. In fact, I haven't bought any new purses from any designer in a while. I'm pretty content with what I have, which is way too many & I really don't have any more room.
 

fabuleux

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Remodeling stores & monogramming is not what I'm referring to when I say customer service. Attention needs to be paid to properly training employees on the brand & familiarizing them with company policies regarding warranty, repairs, & returns so that consumers don't get the run around. You'll get a different answer to a question depending on who you talk to, particularly when dealing with online CS. It all gives the impression of disorganization & a lack of cohesiveness within the company & brand. I do think there's too much sales & discounting. I also dislike how quickly a style will be discontinued, often times in only a few months. Sort of a here today, gone tomorrow mentality.

I haven't bought any MK lately. In fact, I haven't bought any new purses from any designer in a while. I'm pretty content with what I have, which is way too many & I really don't have any more room.
Right. I think what you are pointing out is true across all brands as one will notice by reading through the various forums. The reason I mentioned monogramming and store remodeling is because it was discussed by John Idol multiple times in the press.
 

Quartzite

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Feb 28, 2016
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I wouldn't get anything monogrammed by MK. I had two wallets monogrammed and it was not good. On one wallet, there was an imprint where it seemed they hadn't lined up the heat stamp correctly and had pressed on the wrong area. The coloured heat stamp was in what I assume was the correct location, but now I have an ' aesthetically damaged' wallet due to the incorrectly placed imprint. I was actually shocked that they thought it was fine to send that messed up wallet to me. My other wallet, which was a folding carryall card case, had the monogram placed on the zippered coin section at the back. It didn't seem like they had ever done that before, because the heat stamp wasn't done properly. It looked as though they were unable to apply enough pressure to that area during the stamping process. Afterwards, I saw the website had a new location for the monogram on the carryall card case - at the front where the Michael Kors logo is. I'm not too bothered by these things but if I was a perfectionist about my bags and SLGs, I would be SO upset!

Please rethink getting anything monogrammed! It doesn't seem as though many customers use that service, and the employees doing it don't seem to have had enough practice.
 

iheart_purses

Member
Oct 14, 2013
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I wouldn't get anything monogrammed by MK. I had two wallets monogrammed and it was not good. On one wallet, there was an imprint where it seemed they hadn't lined up the heat stamp correctly and had pressed on the wrong area. The coloured heat stamp was in what I assume was the correct location, but now I have an ' aesthetically damaged' wallet due to the incorrectly placed imprint. I was actually shocked that they thought it was fine to send that messed up wallet to me. My other wallet, which was a folding carryall card case, had the monogram placed on the zippered coin section at the back. It didn't seem like they had ever done that before, because the heat stamp wasn't done properly. It looked as though they were unable to apply enough pressure to that area during the stamping process. Afterwards, I saw the website had a new location for the monogram on the carryall card case - at the front where the Michael Kors logo is. I'm not too bothered by these things but if I was a perfectionist about my bags and SLGs, I would be SO upset!

Please rethink getting anything monogrammed! It doesn't seem as though many customers use that service, and the employees doing it don't seem to have had enough practice.
Agree!! and there goes any resale value right down the drain. I think monogramming is a terrible idea on any bag!