Michael Kors Low Price Strategy Worries Or Repeal Coach'S Mistakes

　　 recently The The Wall Street Journal Wall Street journal "Heard On The Street" column published concerns that Michael Kors may follow the footsteps of Coach and influence the brand in the channel, resulting in the stock price fell by 3.52% to 85.67 dollars on Monday, and the stock price fell 7.27% to 79.44 dollars on Tuesday.

WSJ's column is mainly concerned about the retail mode of Michael Kors. It worries that the proportion of sales of wholesale and discount stores is too heavy, thus losing control of brands. As Coach, the embarrassment of raising prices can not be embarrassed once the price is cut down, which eventually leads to brand decline. The gross margin of Michael Kors shows that brands have already started sacrificing prices from the three and fourth quarter of last fiscal year.

Worried about the Michael Kors brand and profit margins, many investment banks and brokerages lowered their Michael Kors rating and target share price on Tuesday. Maxim lowered the Michael Kors rating from buying to holding, the target price was reduced from 109 US dollars to 85 US dollars, Citigroup Citigroup reduced the target price of Michael Kors from US $107 to US $98, and Sterne reiterated its neutral rating and raised the target price to US $92.

According to the no fashion Chinese network data, the total revenue of Michael Kors in the 2014 fiscal year ended March 29, 2014 was US $3 billion 310 million 800 thousand, but wholesale income and retail income were basically the same as US $1 billion 577 million 700 thousand and US $1 billion 593 million respectively, but the wholesale and retail income in the fourth quarter was 473 million 700 thousand US dollars and 408 million 400 thousand US dollars respectively. Michael Kors recorded a gross profit margin of 59.9% in the fourth quarter, which was 20 basis points lower than that of 2012/2013 in the same period of fiscal year 60.1%. CEO John D. Idol said at the earnings call conference that the gross profit margin of the quarter (the first quarter of the fiscal year of 2014/2015) may not be as good as expected, and it is expected that the next few quarters will be under pressure.

　　 about The concerns of these issues in the Michael Kors four quarter earnings release has caused investors to worry, Michael Kors Hodlings Ltd. (NYSE:KORS) on May, the 28 day before the opening of the U.S. stock market in the 2014 fiscal year fourth quarter and annual results, despite the continued gains in revenue and profits, but the market has always been vigilant for this "magic" luxury retail stocks, because the gross margin with the expansion may be depressed, May 28th before the stock price rose 8% Michael Kors fell sharply after the opening, down 4.9%, closed up 1.3% to 97.01 U.S. dollars, May 29th share price shocks continued, the highest decline of 5.5%, closing down 2.2%.

In July 14th and July 15th, Michael Kors's stock price trend repeated after the four quarter financial report was released, and it dropped about 10% on the two day. One of the important points is that Michael Kors was used to compare with Coach's error strategy. Coach Cox Chi has taken a low price strategy in the full price store, reducing the average selling price from $400 to $300 to raise revenue, which has achieved good results in the 1-2 quarter. However, it was quickly abandoned by consumers as the price was transferred back to $400, although Coach's huge investment in adjusting the store concept and upgrading the store was useless.

　　 Coach The error strategy of Michael is currently being adopted by Kors Michael. In order to ensure the miracle of growth, Michael Kors is sacrificing its price, and Coach's example is a warning to investors. Two the wholesale income of external Michael Kors is calculated to some extent as a discount store because of low profit margins. This is also very similar to Coach. According to Wells Fargo data, the revenue of Coach's peak discount shop accounted for 60%-65% share. Although the Michael Kors discount store accounted for only about 1/3 of the total revenue, Coach's wholesale income share was only 5%, while Michael Kors's wholesale revenue share was close to 48%. If this part of the revenue is sold in accordance with Michael Kors, the annual sales of 5 million stores will be equivalent to about 500 new stores. As of March 29, 2014, Michael Kors group has 555 retail outlets in the global market, including 405 Direct stores (including department store counters) and 150 authorized shops (including department store counters). If the wholesale channels are converted into discount stores, the discount rate of Michael Kors and full price shops has reached 2:1, which is in a very dangerous situation, or another Coach Cox.