Should Michael Kors Worry About Tory Burch Stealing its Thunder?

Tory Burch, probably Michael Kors's biggest competitor, is making a push into men's accessories and activewear. What does this mean for the king of practical luxury?

Apr 12, 2014 at 9:10AM

Michael Kors (NYSE:KORS) has it all. A unique and diverse product line, a sound business strategy, strong brand awareness, and customer engagement. It has managed to knock the likes of Coach (NYSE:COH) down and outshine established rivals in primary markets like Europe. It seems as if there is nothing that can bring this design powerhouse down.

Even so, Tory Burch, probably Kors' toughest competitor so far, is slowly but surely expanding her fashion empire in just about every direction. Following her forays into cosmetics and fragrance in 2013, the designer of the ubiquitous Reva ballerina flats has a number of new product categories in the works. Tory Burch confirmed plans to tap into both the men's accessories and activewear market as soon as next year, according to Women's Wear Daily.

Does this mean that Michael Kors has something to worry about after all? 

Mk And Tb Photo

From left to right, Michael Kors photographed by Ed Kavishe for Fashion Wire Press and Tory Burch in India. Source: Wikimedia Commons

Michael Kors vs Tory Burch
The menswear market is experiencing profound growth, driving Michael Kors to make inroads into this space as well. The same stands for the sportswear market. "Activewear is not just for athletes anymore," says chief analyst at NPD Group Marshal Cohen. In fact, the segment is up 9% for the 12 months ending in December 2013, while the total apparel market is only up 2%.

Kors is pretty familiar with this market since he's renowned for his sporty aesthetic, so it's possible that there's enough room for both brands to gallop going forward. However, there are more similarities than differences between those two brands. This means that it could be difficult to differentiate themselves from each other now that Burch is expanding into these new frontiers.

In terms of marketing and target group, Michael Kors is perceived as the epitome of practical luxury and a jet setter. Burch evokes a female entrepreneur and a single mom. Nevertheless, both designers are promoting lifestyle brands that are defined by constant product developments and accessible luxury lines. Their offerings are, more or less, at a close price range.

Moreover, unlike Coach, which is not directly associated with a particular creative director, Michael Kors and Tory Burch cash in on their strong brand power that is derived from their own unique design identities and signatures. Customers are becoming more and more demanding, paying attention to the story behind the product and caring more for authenticity. A successful fashion brand is a reflection of the person who is leading it. That is exactly what provides the authenticity and enables the brand to resonate with consumers.

At the end of the day, it all comes down to personal taste when deciding what to buy. Michael Kors and Tory Burch have done a tremendous job establishing themselves as must-have lifestyle brands. With word on the street that sooner or later Tory Burch will go for an IPO on top of plans for further international expansion for both design houses, the battle may get tougher. Is there more than meets the eye, though?

The differentiating factor: Seasonality
It's not just the confluence of e-commerce and social media that gives retailers a hard time, forcing them to rethink their marketing strategies. It's also the exceptionally chilly and long winters that cause headaches for many companies. During the past few months, mainstream brands like American Eagle (NYSE:AEO), Urban Outfitters (NASDAQ:URBN), and Gap (NYSE:GPS) joined a chorus of retailers commenting on winter being a major culprit for less-than-stellar results.

Gap, for instance, saw its comparable store sales go downhill in February, posting a 7% decline versus a 3% increase last year. If not for the weather sales would have been better, the management asserted.

It's only going to get worse, too. "Less Arctic sea ice—which is caused by global warming—alters atmospheric circulation in a way that leads to more snow and ice" climate scientist Jiping Liu told National Geographic. "The result is much colder weather dipping into the spring much longer, and more forcefully, than normal."

Long winters and chilly springs translate into low foot traffic and excess inventory. It doesn't have to be that way, however. Retailers and designers can't control the weather, but they can control their ability to react efficiently to problems imposed by changing climate conditions. It's all about making the right merchandising decisions. Marshal Cohen urges retailers to pursue a "long and strong" strategy, which suggests betting on "a longer selling season on those strong selling key seasonal items that conform to the needs of the consumer."

That's where Michael Kors has the edge over Tory Burch. In the past, Kors's menswear collections have been criticized as suitable only for mid-winter. As it turns out, this could be a good thing. When measured up against Tory Burch, Michael Kors encompasses a more seasonal element in his collections and his overall esthetic. Seasonal neutrals always are an essential part of his lines. The photos below are worth a thousand words:

Spring

Tory Burch Spring 2014 collection, Photo credit: www.toryburch.com 

Spring Catalog

A look from Michael Kors' Spring 2014 catalog, photo credit: www.michaelkors.com  

Even so, seasonality is something that design houses could easily incorporate into their offerings. Michael Kors is one step ahead of Tory Burch in this area, just as he has been one step ahead of his direct peers in many other areas in the past. As an example, in a fashion industry that worships all things skinny, Kors went against the grain and branched out into the plus-size space long before others followed suit. This says a lot about his perception of style and market opportunities.

Final thought
No matter how fierce the competition, Michael Kors' up-to-date approach to style and insightful business strategy make it likely that he'll always beat his peers to the punch.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Fani Kelesidou has no position in any stocks mentioned. The Motley Fool recommends Coach, Michael Kors Holdings, and Urban Outfitters. The Motley Fool 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers