Michael Kors Is Going to War With Coach for Men's Luxury

Michael Kors stock, Coach stock

Watches will be one key to Michael Kors' growth in the men's segment. Image source: Michael Kors.

As if gobbling up market share in Coach's (NYSE: COH  ) core women's business wasn't enough, Michael Kors (NYSE: 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.

Coach stock, Michael Kors stock

Coach already has a significant presence in Men's. Image source: Coach.

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.

Speaking of wearables...
Coach and Michael Kors aren't the only places you can find stylish accessories. In fact, Apple recently recruited a secret-development "dream team" to guarantee its newest wearable smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3023631, ~/Articles/ArticleHandler.aspx, 8/29/2014 6:07:39 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement