When luxury retailer Michael Kors listed on the New York Stock Exchange in December 2011, the debut share price was a beefier than expected US$20. Fast forward a little over two years and it is on the verge of hitting US$100. Not a bad return for those who bought early. But then, who would bet against the share price continuing to soar over the next two years? The company seems to have an unflappable knack of getting its growth strategy exactly right, and at a time when rivals are getting it wrong. Now, here is a question to get investors’ pulses racing. Who will be the next Michael Kors?
A Class Apart
There is no stopping Michael Kors. In the last quarter, the company’s sales in Europe were up by a jaw-dropping 144%. This is where the brand has muscled in on a growing appetite for affordable luxury, exploiting a gap in the market left by European players either too busy building stronger positions in China or too preoccupied with taking their portfolios upmarket. And the brand’s runaway success does not stop there. In the US, like-for-like sales were up 51% for the same quarter, fuelled by buoyant demand for luxury accessories and timepieces.
Such results would be impressive in boom times, but keep in mind that the final quarter of last year was a period when many high-profile luxury retailers struggled. Coach, a US rival in affordable luxury, reported a sales decline of 6%, for example, blaming weak demand for women’s handbags and accessories. UK luxury retailer Mulberry – not so long ago a stock market star itself - issued a profit warning in January on the back of a 3% slide in sales for the 17 weeks to 25 January. LVMH, Tod’s and Prada also reported disappointing end of year results. So, how is it that Michael Kors is succeeding where others are failing?