Michael Kors announced Wednesday that it will close up to 125 stores over the next two years, indicative of ongoing strife for the contemporary brand.
The move is the latest in a string of downfalls for the brand, best known for its handbags, which also reported a dip in comparable sales of 14.1 percent in the second quarter of 2017. The pending closures will bring the total number of stores to just over 700, down from 827, of which 300 were opened in the last two years.
Additionally, Michael Kors recently lost out on a prospective acquisition of Kate Spade & Co. to rival Coach, which officially purchased the company earlier this month. For both Coach and Michael Kors, the Kate Spade merger was intended to help with efforts for a potential turnaround, which Michael Kors is struggling to find.
“Michael Kors’s precipitous drop in sales does very little to reassure that the company’s nascent recovery program is on track,” Neil Saunders, managing director of GlobalData Retail wrote in a statement. “Indeed, if anything, it raises a question mark over whether management can win back customers as it tries to reinvigorate the brand.”
Trouble started brewing in August 2016, when Michael Kors CEO John Idol announced it would reduce product inventory at several major department stores, blaming excessive discounting for tarnishing the brand. As part of the effort, remaining product was also prohibited from being included in annual sales or coupons at stores like Macy’s.
“It’s creating confusion in the consumers’ mind relative to the value of the Michael Kors brand, when it’s being seen so often on sale in so many different places,” Idol told analysts last year. “We have to correct something that we think is actually having a negative long-term effect for the brand.”
Now the company appears to be taking a cue from Coach to establish brand identity, which has seen success by getting ahead of similar challenges by closing stores as early as 2014, decreasing department store inventory and reducing factory store sales. “One fundamental truth of luxury is it needs scarcity to maintain its brand equity over time,” Sucharita Mulpuru, former retail analyst at ShopTalk, told Glossy earlier this month.
