Michael Kors to close up to 125 stores as luxury retail woes deepen

June 7, 2017 in Latest News

 

Michael Kors said Wednesday that it would close 100 to 125 stores as the luxury retailer’s slump deepens.

The luxury retail sector’s struggles are bludgeoning Michael Kors, which also acknowledged that it had delivered an underwhelming store experience for consumers.

The company had 827 full-price or outlet stores and another 133 licensed stores for a total of 960 worldwide when its fiscal year ended April 1.

The move comes amid prolonged turbulence for the luxury retail business. Coach recently announced a deal to acquire upscale retailer Kate Spade, and Jimmy Choo put itself up for sale.

Tourist spending at U.S. stores is hurting because of the strong dollar, Chinese growth has slowed, online competition is undermining physical retailers and sales at department stores are lagging.

A Michael Kors spokesperson declined to disclose a list of store closures or number of job cuts. The company is expected to open new stores in certain strategic locations.

Sales at stores open at least a year tumbled 14.1% in the company’s fourth quarter. Total revenue fell 11.2% to $1.06 billion, compared to a year earlier, despite opening 159 net new locations.

The company faces “a difficult retail environment with elevated promotional levels,” Michael Kors CEO John Idol said in a statement.

“In addition, our product and store experience did not sufficiently engage and excite consumers,” Idol said. “We acknowledge that we need to take further steps to elevate the level of fashion innovation in our accessories assortments and enhance our store experience in order to deepen consumer desire and demand for our products.”

Despite the challenges facing the luxury industry, the sector is stabilizing, Moody’s Investor Service said Wednesday in a report.

“A return to double-digit growth for the global luxury retail segment is unlikely until at least 2020 as the Chinese consumer boom has slowed, value-conscious consumers are now less likely to stand for price hikes, and competition from other sectors like travel and fine dining remains elevated,” Moody’s analyst Vincent Gusdorf said.

Michael Kors said the store closures would help save $60 million in annual costs.

Still, the company projected that its sales slump would continue, with first-quarter revenue and same-store sales each falling in the “high-single-digit range.”

The retailer swung from a $177 million profit in last year’s fourth quarter to a $26.8 million loss in the latest period. For the full year it recorded net income of $552.5 million, down from $839.1 million a year earlier.

Michael Kors stock fell 8% to $33.38 shortly after the opening bell.

 

Source: USA TODAY