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

Michael Kors just sounded another shot in its war against Coach. Here's what investors need to know.

Jul 11, 2014 at 6:09PM
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!

Steve Symington owns shares of Coach. 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.

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