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:TPR) 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?
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:
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.
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.
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.