Can Michael Kors Keep Its Winning Streak Alive?

Michael Kors has been dominating the high-end fashion world, but fashion comes and goes.

May 13, 2014 at 10:05AM

A lot has been said about who can be pleased how often, but the truth of the matter is, you can please some of the people some of the time and all of the people never. In fashion, that's an important point, because when they try to please all of the people, apparel brands often just end up pleasing no one. A great current example is Coach (NYSE:COH), which has fallen on hard times after trying to grow its core business, new men's line, and international brand all at the same time.

Two brands have managed to avoid the trap of pleasing everyone by focusing on their main audiences. Michael Kors (NYSE:KORS) and Kate Spade (NYSE:KATE) have put up strong sales growth while expanding their range into markets consistent with their core demographic. Will that success continue or will the whims of fashion and the extension of the brands lead to investor heartbreak?

Kate and Kors on the growth track
Expansion is difficult. It's easy to get ahead of yourself, overextend, and end up losing more than you stood to gain in the first place. Coach was riding a solid return to the market in 2012 when it decided to make the leap into the world of men's apparel. By the middle of the year, North American sales -- what you might call the "core" of the business -- had slowed to a crawl.

By contrast, Michael Kors and Kate Spade have yet to hit the wall. Kors' comparable-store sales rose 27.8% in its last quarter  while Kate Spade's sales were up 30%. Michael Kors has been running rampant across the countryside like a band of stray dogs -- if those dogs were opening high-end stores as they ran. Over the last year, the company has increased its number of locations by over 30%, now operating almost 400 locations.

Meanwhile, Kate Spade has increased its store count by almost 40% over the last year. That's helped the former Fifth & Pacific shed its other brands and live off the success of Kate Spade alone. The company dropped Juicy Couture and Lucky Brand -- both having fallen from the "hot list" -- over the course of the last year.

The ups and downs of fashion
The danger for both Michael Kors and Kate Spade is that the companies now exist on the strength of one brand alone. Kors has always been a one-man show, but it's also been the biggest name in the game for years. Tory Burch has been surrounded by IPO rumors recently and an influx of cash for her brand could lead to plenty of new pressure on Kors.

Kate Spade is now free from the Juicy shackles, but the brand is expanding into a slightly lower market in an attempt to diversify a bit. Kate Spade Saturday is Kate Spade's answer to the younger, less affluent shopper. The idea is to get customers into the Kate Spade mind-set early on so that when they can afford more expensive pieces, they already have positive associations with the brand.

The bottom line
What it comes down to for investors is simple: Will Kors continue to be popular? The danger is that it gets overtaken by someone like Tory Burch, but that move is still a ways off, if it even happens. By that time, Kors should have the opportunity to move into more international markets, keeping itself one step ahead of Burch.

For now, Michael Kors continues to look like the dominant player in high-end apparel. Its expansions aren't hurting its core business and it has a clear path to future success. While Kors' stock is by no means cheap, I can't imagine that it's going to produce any nasty surprises in the near future.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Andrew Marder has no position in any stocks mentioned. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

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.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

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. It's also featured on several dozen 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 ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers