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Do You Own the 3 Worst-Performing Consumer Goods Stocks?

By Rich Duprey – Jul 14, 2015 at 5:35AM

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Just because a stock has tanked doesn't mean it's a bad investment -- but sometimes it does.

Often, the bargain basement bin can be the best place to shop for stocks. Beaten down and otherwise forgotten, these stocks can provide investors with a rare opportunity to buy a good business that's simply fallen on hard times. Of course, there's usually a good reason these stocks were battered and bruised, but an investor who takes the time to sift through the wreckage may just find a gem.

Below are the three worst-performing consumer goods stocks of 2015 that have a market cap greater than $300 million. Let's see why these three stocks -- Michael Kors (CPRI -0.02%)Keurig Green Mountain (GMCR.DL), and Vince Holding (VNCE 1.91%) -- have fallen to this low point and whether there's hope for a recovery.

1. Michael Kors: (-42%)
While stealing the playbook from rival Coach once served Michael Kors well, the designer brand is now suffering from the same malaise that infected the handbag maker.

In short, Kors made itself too familiar. It's available in more than 4,580 retail locations today, including department stores, specialty shops, and its namesake retail outlets. That's an 80% increase from more than 2,550 locations when Michael Kors went public in late 2011. It maintains that torrid pace of increasing ubiquity, and as Coach has found out the hard way, familiarity breeds contempt.

Michael Kors is now everywhere, meaning it's more of a fashion faux pas to be seen with it.

Too much product, not enough innovation, and cheapening the brand by opening too many outlet stores helped kill the cachet Coach once held. Now it's happening to Michael Kors, which has lost the air of exclusivity essential to an affordable luxury brand. And because it doesn't appear Kors is doing much to change direction, there seems little hope it will stem the bloodletting.

Comparable sales have fallen from double-digit growth as recently as the second quarter of its 2015 fiscal year (albeit at a third of the rate it achieved back in 2013) to a year-over-year decline in the fourth quarter. Fashion is fickle so things can change, but Michael Kors doesn't seem to be keeping up with the times.

2. Keurig Green Mountain: (-47%)
Coffee maker Keurig Green Mountain knows the ups and downs of investor tastes, having ridden the single-serve appliance trend to new heights only to crash alongside the expiration of its patents that allowed knockoff coffee pods to erode its profit base.

Many consumers are choosing cheap knockoff coffee pods over Keurig-branded ones.

Keurig Green Mountain struck back with a two-pronged attack to bolster its profitability. First, it rolled out an updated machine that would only accept new, proprietary pods. Second, it began a foray into cold beverages, partnering with Coca-Cola, which bet big on Keurig and its at-home Keurig Kold appliance by buying 16% of the company.

But the Keurig 2.0 failed to catch on and the cold-beverage appliance has seemingly been priced out of the market. Worse, the collapse in the DIY soda market as represented by SodaStream International sales indicates that the market is saturated.

Keurig can change its mind about pricing, but that might not be enough to create a strong market for two at-home systems. Meanwhile, with consumers balking at paying up for a new coffee machine and pricier pods, Keurig Green Mountain may not be percolating higher anytime soon.

3. Vince Holding: (-62%)
The worst-performing consumer goods stock so far this year is Vince Holding, a retailer with a fairly narrow product line consisting primarily of pricey tops, leggings, and jackets. And though it has added shoes and gear for men, these are not exactly underserved markets. The same can be said for its decision to go into handbags.

When Vince reported fiscal first-quarter earnings last month, it said it expected to receive a lower level of full-price reorders on its merchandise because its distributors already had sufficient inventory for the demand they anticipated. It also guided for revenue growth to be flat to 3% higher despite increasing its store count by 10 or 11 new outlets and forecasting high single-digit comps at retail locations.

Because it counts on just three department stores for half of its sales -- Saks, Nordstrom, and Neiman Marcus -- Vince has a high degree of risk associated with it when any one of them falters or drops the brand.

Vince Holdings is supposed to still be a growth company, but its business is already in decline. Furthermore, the company announced this week that its CEO is stepping down. While market conditions could change, signaling a reversal of fortunes, there doesn't seem to be any reason to expect they will at this time.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Coach, Coca-Cola, Keurig Green Mountain, and Nordstrom. The Motley Fool owns shares of Coach, Michael Kors Holdings, and SodaStream and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.

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