In conversation with CBS watch magazine the reporter asked.
Q. "Fashion
is changing so quickly now. What advice would you give to a young woman who is
trying to keep up with trends?"
A. His
response was utterly priceless: "She should take the same approach she
takes to guys: There’s great fling material, and then there’s great husband
material! Apply that to your wardrobe and it means invest in the key pieces
you’ll want to spend time with season after season, the pieces that will help
define your style. Don’t invest major money in the trendy pieces that will feel
old by this time next year. Like dating that guy just for fun--it’s not to say
you shouldn’t do it, just don’t sink a lot into it!"
Great advice, I think? What is even more confusing is how fast Michael Kors (KORS) the company is growing in what should be a soft economy for a luxury brand. What are the reasons? They seem to be taking market share from their major competitor Coach (COH), KORS has 1/3 of their market share in the US and its growing. KORS is also underpenetrated overseas so while markets like Europe and China might be soft KORS can still find room to grow. It also helps that KORS bags are generally cheaper than COH and according to KORS made with better quality materials evidenced by lower margins than COH. In my opinion, the major reason is Michael Kors himself.
Michael is the key
There are a lot of fashion brands around the world. The difference is many of these fashion brands have lost their original iconic founder and
creative designer, KORS has not. Michael is 53 years old, is a major shareholder with 4% of
the company and has a lifetime non-compete agreement. He has fashion credibility from project runway and many celebrities are fans of his designs. 
Source: Retail Sails
KORS has also made the list
of the most productive retail stores in the US. Apple was not a surprise given
the dollar amount of goods they sell but Lululemon was, I thought their gear was
expensive!
Europe sales up 97%?
Overall revenue was up 74% with same store sales of 45.1%. Sales
in Europe were particularly strong up 97% year over year. The CEO John Idol was upbeat
about Europe in contrast to many other companies. “I think, by this time next year we anticipate being the number
one accessible luxury handbag company in Europe. And to really get there from four years
ago is quite an extraordinary feat.” No.1 after 4 years, I tip my hat off to
that performance.
Management's profit guidance assumes a slow-down in sales to
mid-20% same store sales growth, in our opinion a conservative assumption given
the strength and underpenetration of the brand. KORS is one company investors should put on their shopping list
as the fiscal cliff approaches.
Jason
Disclosure:
At the time of this article Decisive has no position in KORS
The
material in this article is for informational purposes only and in no way
constitutes a solicitation of business or investment advice. The material has
been prepared without regard to any client's or other person's investment
objectives. Before making an investment decision you should consider the
assistance of a financial adviser and whether any investment or service is
appropriate in light of your particular investment needs
