Light Luxury Brand Ends In The Age Of Double Digit Growth.

The light luxury group led by Michael Kors and Kate Spade was once thrilled by the luxury market, which had experienced unprecedented downturn. However, the latest quarterly earnings reports released by the two major brands recently dropped by 50% over the same store sales. meanwhile Previously, the Michael Kors with high double-digit performance also has stock pressure and high operating cost. People in the industry say frankly that the so-called "luxury" can run fast and fall fast. In China, I am afraid it will be another 3-5 years.

Open shop

The era of ultra-high double-digit growth ended

In the past two years, the luxurious brand expansion of the luxury brand has failed to escape the fate of a sharp slowdown in growth. The latest earnings report of Michael Kors and Kate Spade revealed that the same store sales growth fell by more than 50% over the previous quarter. The era of ultra-high double-digit growth in light luxury market ended.

Michael Kors group's latest two quarter results show that as of September 27th, the group's same store sales increased by 16.4% in the quarter, of which the growth rate in the North American market was only 10.8%. greatly Less than 24.2% in the first quarter. However, its overall retail revenue remained impressive, at $495 million 600 thousand, an increase of 39.4%, compared with $328 million 600 thousand in the same period last year, mainly driven by 121 new store sales, and wholesale income increased by 46.1% to 514 million 100 thousand US dollars, compared with $351 million 900 thousand a year earlier.

The three quarter earnings report of another luxury giant Kate Spade showed that as of October 4th, the group's same store sales grew by only 15.2%, half of the 30.4% in the two quarter. Net sales in the three quarter amounted to $250 million, less than the $254 million expected by the market, but still increased by 29.5% over the same period last year of 193 million dollars. By comparison, sales growth in the two quarter was as high as 49%.

Now 29.5% of the sales growth is not really low, but Last year In the same period, Kate Spade exposed a sales growth rate of up to 76.4%, and the difference between the two achievements was not the same. "Over the past year, the growth of super luxury brand's double-digit performance has come from the sales support of its large number of new stores, coinciding with the upgrading stage of consumption, and consumers are keen on brand diversification and personalization. But relying on the new store to support the performance itself will not be able to get long-term benefits. Once the expansion period of the new shop is over, consumers' enthusiasm for consumption will diminish and the quality of the brand will be re examined. It is found that the luxury brand is not the real luxury brand, and the decline in performance will follow closely. Zhou Ting, President of the Institute of wealth and quality research, believes that the rapid growth of light luxury brands is to rely on the upgrading of the bonus of consumption, and the result of opening up stores can only be short-term gains.

Derogate from social status

Stock pressure spanmission, light luxury brand

The huge expansion of the road, the surge in performance at the same time, inventory pressure has gradually emerged. Beijing Business Daily reporter found that the two quarter earnings report issued by Michael Kors for example, as of June 28th, the group's total revenue in the quarter was $919 million, while the cost of sales was as high as 348 million dollars, accounting for 37.9%.

In the explanation of the cost of sales, the word "including inventory sales cost" appears in the first sentence of the explanation. According to this explanation, the cost of sales increased by 42.67% over the same period last year of 243 million dollars. This also confirms the reason why the Michael Kors has caused a backlog of inventory due to the decision of "eager for success" and the big promotion in June.

Data show that in the past two years, the performance of Michael Kors has increased sharply and rapidly expanded, and wholesale income has exceeded retail income in the last fiscal year, which means that a larger proportion of revenue comes from discounted goods or wholesale channels. Its revenue in discount stores has accounted for about 1/3.

Zhou Ting believes that a large number of new shops continue to purchase, but the market demand is gradually slowing down. This year, inventory pressure is a huge challenge for the entire retail industry, and the huge expansion of light luxury brands is the first to bear the brunt.

Store rent for one million

Operating costs account for more than half of gross profit.

Beijing Business Daily reporter found that Michael Kors's operating cost is similar to that of Gao Yuanchao's clothing brand. According to its earnings report, as of June 28th, the group's operating expenses for sales and administration amounted to 295 million US dollars, accounting for 51.58% of its gross profit of 572 million US dollars.

Such a high operating cost can be seen from the most basic store rent item in operation consumption. It is understood that only the main shopping malls with shops in Beijing Michael Kors as an example, the rental price of China World Trade Center mall is about 93-100 yuan / Ping / Tian, the East Xintiandi is 80-90 yuan / Ping / Tian, Xinguang world is 70-80 yuan / Ping / Tian, Sanlitun Taigu Li south area is 60-70 yuan / Ping / day. A 60 square meter shop has a monthly rent of at least nearly 110 thousand yuan, nearly 1 million 320 thousand yuan a year, plus the cost of water and electricity, manpower, shop technology system maintenance, shopping malls maintenance and management, etc. the cost of single store operation can be imagined.

Zhou Ting believes that a large number of new stores, store management, personnel costs will rise, and high operating costs also reflect the luxury industry profit margins narrowed the market situation.