The ubiquitous Michael Kors bag, once a fashion necessity, has become a fashion liability.
Sales have declined so abysmally over the past couple of years that the company is closing up to 125 stores this year, the company said on Wednesday during its most recent quarterly report.
“Our product and store experience did not sufficiently engage and excite consumers,” Chairman and Chief Executive John 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,” Idol added in the statement.
The company has also said that, going forward, it will concentrate more on the burgeoning markets in Asia.
It wasn’t long ago that the company was “one of the most robust growth stories in retail with four years of 25 percent” annual sales growth, according to Wells Fargo analyst Ike Boruchow.
Now Michael Kors has delivered one of the worst performances in fashion retail.
Total sales dropped 11.2 percent, to $1.1 billion, in the fiscal fourth quarter ended April 1 — while comparable store sales fell 14.1 percent.
The company lost $26.8 million in the quarter compared with net income of $177 million a year earlier.
Management also gave a bleak outlook for the upcoming year.
Idol blamed the company’s performance, in part, on the “difficult retail environment” in which promotional pricing has sunk the brand’s cachet.
Industry experts, however, point to the company’s aggressive expansion, which resulted in 960 Michael Kors stores worldwide.
“When the brand was just sold in department stores, it did phenomenally well,” said retail consultant Farla Efros, president of HRC Advisory. “When they decided to become a stand-alone retailer, everything changed.”
The store closures are expected to save the company $60 million.
While demand for handbags helped to fuel Michael Kors’ rise over the past decade, the handbag sector in general has cooled now as well — with one notable exception.
Coach, one of Kors’ chief rivals, has clawed its way back from a steep slump to four consecutive quarters of comparable sales growth.
Kors shares tumbled 8.5 percent on Wednesday, to $33.18, after hitting a 52-week low earlier in the day.
Shares are down 23 percent this year.