Michael Kors announced that it would shut down at least 100 stores on Wednesday.
According to Business Insider, the decision resulted after the company reported a significant loss in sales. BI reported the brand’s total sales fell 11.2 percent. To $1.1 billion, and same-store sales plunged 14.1 percent within the fiscal fourth quarter, which ended April 1.
Michael Kors said it will close 100 to 125 full-priced stores in hopes of improving profitability. In addition to the closures, Michael Kors plans to renovate more than 100 stores in North America.
CEO of the retail-consulting firm GlobalData Retail, Neil Saunders, called Michael Kors’ sales results “catastrophic.”
“Michael Kors’ precipitous drop in sales does very little to reassure that the company’s nascent recovery program is on track,” he wrote in a memo to clients on Wednesday.
Saunders claims customers have abandoned the luxury-handbag brand for good, despite Michael Kors’ efforts to rebuild itself via various promotions.
“Looking ahead, it is clear that Michael Kors has further to fall,” Saunders wrote.
“In truth, ranges and collections lack oomph and definition, and across many established stores levels of service and merchandising are lackluster,” Saunders continued. “In short, the brand is nowhere near where it needs to be if it wants to excite and inspire consumers.”
Michael Kors’ chairman and chief executive John Idol agreed with Saunders and admitted that the brand simply isn’t “inspiring” customers like it has in the past.
“Our product and store experience did not sufficiently engage and excite consumers,” Idol said in a statement. “We need to take further steps to elevate the level of fashion innovation in our accessories assortments and enhance our store experience.”
Going forward, the company claims that it plans to concentrate more on the markets in Asia.
According to Wells Fargo analyst Ike Boruchow, it wasn’t long ago that Michael Kors was “one of the most robust growth stories in retail with four years of 25 percent” annual sales growth.
Today, Michael Kors is delivering one of the worst performances in fashion retail history.
Idol blames the company’s poor performance on the “difficult retail environment” in which promotional pricing has ruined the brand’s status within the fashion industry.
The Problem With a Brick-and-Mortar Store
Others, however, are claiming that the company’s aggressive expansion, which resulted in 960 Michael Kors stores worldwide, is to blame. As of April 1, the company had already fallen to 827 full-price locations.
“When the brand was just sold in department stores, it did phenomenally well,” retail consultant Farla Efros, president of HRC Advisory said in a statement. “When they decided to become a stand-alone retailer, everything changed.”
America’s Research Group Chairman and Founder, Britt Beemer, also chimed in on the conversation, stating that luxury brands have failed to overcome the ever-changing landscape of retail, as shoppers gradually choose to browse online rather than visiting stores in malls.
According to Beemer, high-end consumers would shop at malls approximately 20.5 times per year. Today, those same consumers visit malls 11.5 times per year.
These high-end shoppers claim that actually going out to shop takes an increasing amount of time.
“They just don’t want to waste time,” Beemer told the Los Angeles Times.“That’s where I see to be a challenge.”
Michael Kors shares reportedly closed Wednesday down $3.09, or 8.5 percent, at $33.18. The company has declined 22 percent within the past year.
According to the New York Post, the closures are expected to save the company $60 million.
Even so, the company claims that its sales slump will continue, with same-store sales and first-quarter revenue each falling in the “high-single-digit range.”
Other accessories and fashion brands, including The Limited, Abercrombie & Fitch, Macy’s, ShoeSource, and Payless have also announced store closures for 2017.
[Feature Image by Christopher Jue/Getty Images for Michael Kors]