How Will The Competition With Michael Kors Play Out For Coach?
Posted Mar 08 2013 7:51am
How Will The Competition With Michael Kors Play Out For Coach? Intense competition from newcomers to the fashion space such as http://www.mkonlinestore.co.uk led to lackluster performance for Coach Inc. (NYSE:COH) in the holiday season. Its sales growth in North America, which accounts for two-thirds of its sales, slipped to 1% in Q2 2013. Its comparable store sales saw a decline of 2%, marking the first such drop since 2009. The results did not go down well with investors and led to almost 20% drop in its stock price since the latest quarterly results were announced. (Read: Coach Quarterly Results Disappoint Due To Weak N. American Performance) Michael Kors, which targets the same demographic of customers with a similar product offering has emerged as one of the leading competitors to Coach. Michael Kors is increasingly being viewed by many as a trendier brand, a trend which seems to resonate looking at its sales and comparable stores sales growth figures. We feel Michael Kors may take away some market share from Coach in the future, and in this article we try to evaluate the competition between the two companies. Michael Kors trumped Coach in terms of both comparable stores sales and overall sales growth throughout 2012. mkonlinestore In the most recent quarter, Coach’s comparable stores sales declined due to weak consumer demand during the holiday season. However, Michael Kors’ comp sales growth was higher in the holiday season as compared to its average growth in 2012. This indicates that while demand for Coach’s products seems to be waning in North America, Michael Kors is becoming increasingly attractive to shoppers. While Coach’s style is known to be more classic, Michael Kors is increasingly being viewed as a more trendier and fashionable brand. Moreover, as Coach has become more common among customers, it has lost some of its exclusive appeal relative to Michael Kors. The appearance of designer ‘Michael Kors’ on various shows such as Project Runway and Oprah has also contributed to the rising popularity of Michael Kors’ brand. Though Coach has more stores than Michael Kors, Michael kors outlet store - More cheap michael kors handbags online sale Michael Kors has a much larger presence within the indirect channel. In the long run, while Coach aims to have 500 retail stores in North America, Michael Kors expects to operate 400 locations in the region. We feel Michael Kors will continue to have a higher presence within the indirect channel, as Coach is more focused on its direct-to-sales channel. Owing to similar expansion plans, we feel competition will intensify between the two companies. In its latest earnings call, Coach admitted for the first time that it grew at a slower rate as compared to the overall growth in the North American women’s handbag and accessory category. Going forward, we feel Coach will find it difficult to retain its 30% market share in the US as Michael Kors continues to cross its turf.  Owing to its rapid growth and aggressive expansion plans, we feel Michael Kors might take away some market share from Coach in the future.