Michael Kors Is Going to War With Coach for Men's Luxury
As if gobbling up market share in Coach's core women's business wasn't enough, Michael Kors just made it clearer than ever that the men's segment is firmly in its crosshairs.
On Wednesday, Michael Kors announced the appointment of Mark Brashear to the newly created role of President of Men's. Previously, Brashear served for five years as CEO and chairman of Hugo Boss' Americas division.
What's more, Michael Kors CEO John Idol reminded investors the company is set to launch a new men's fragrance, introduce a new collection of men's watches, and open its first flagship store featuring a full men's offering in SoHo in the coming months.
We knew this day would come
But this shouldn't come as a big surprise: Just over a month ago, Idol revealed that that particular store will be their largest to date at 21,000 square feet, with the lowest of its three levels to be fully dedicated to their men's full offering. At the time, Idol also teased, "We will be announcing shortly that there will be freestanding men's stores that we are going to be opening globally," while elaborating their belief that there is a "great sportswear opportunity" to drive growth over the long term.
For now, though, Michael Kors is targeting men's to be a $1 billion business -- a lofty aspiration considering it expects total revenue this fiscal year to be between $4.0 billion and $4.1 billion. By comparison, Coach is currently targeting fiscal 2014 men's sales of "just" $700 million, or good for roughly 20% growth over the same period last year.
But therein lies the rub: Coach's men's business has long remained one of its bright spots, and in each of the past several quarters has helped offset declining comps in Coach's core North American market. In its most recent quarter, for example, while Coach's sales of men's bags and accessories continued their double-digit climb, North American revenue fell 18% to $648 million on a harrowing 21% plunge in comparable-store sales.
As Michael Kors moves in, then, it seems logical to assume Coach will suffer even more.
Can't we all just get along?
But it also doesn't have to be a losing game for the iconic 73-year-old brand. After all, Coach's North American weakness is at least partially self-inflicted, as it seemed to let its women's line lapse into stylish obsolescence. And weary investors have not only taken solace as Coach's products continue to sell well overseas, but are also eagerly awaiting the September arrival of the inaugural collection from Coach's new creative director, Stuart Vevers.
At the same time, however, Coach is also undergoing a costly long-term transformation, which includes closing dozens of underperforming locations, implementing organizational efficiencies, updating its global store fleet, and realigning inventory levels. Time will tell whether Coach's plan works, but as it emerges from the other side of that transformation, it should be better poised to compete with the younger, fast-growing brands like Michael Kors that are currently causing it so much pain.
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The article Michael Kors Is Going to War With Coach for Men's Luxury originally appeared on Fool.com.Steve Symington owns shares of Coach. The Motley Fool recommends and owns shares of Coach and Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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