Michael Kors’ profits dropped 15 per cent in the quarter ended July 1. Same store sales fell 5.9 per cent. Total revenue dropped 3.6 per cent. Michael Kors is known for the popular Mercer and Hamilton handbags.
To reverse an eight-quarter slump in same-store sales, Kors is pursuing a multi-brand strategy for growth and diversifying into new products. Last month, it announced a deal to buy high-end shoemaker Jimmy Choo. The company expects the deal to add about $275 million to sales in the second half of the year ending March 2018, assuming the deal closes by the third quarter.
Kors is also adding more menswear and dresses to its shelves, shrinking the number of stores it owns and yanking a chunk of its products from department stores such as Macy's, where steep discounts to attract customers are the norm.
The efforts yielded a higher average selling price per unit, implying the company sold more goods at full price. That helped operating margins at Kors stores increase for the first time in more than eight quarters.
Once the best known names in affordable luxury, Kors has been grappling with declining same-store sales as more people shop online. Over-distribution of its products and a reliance on promotions to boost sales also eroded some of Kors’ brand value and its appeal.