LONDON — A few years ago, Michael Kors (NYSE:KORS) completely exhausted and devalued its namesake brand when it opened countless stores and made growth more significant than protecting brand value. In so doing, it became a fixture in discount stores like T.J.Maxx and Marshalls (NYSE:TJX).
Michael Kors forgot the golden rule of maintaining some semblance of luxury to rein in the brand’s ubiquity.
Instead, it over expanded and relied on wholesale vendors, who in turn, have relied on heavy discounting to shift stock, resulting in dilution of the brand.
Now, Michael Kors is trying to clean up its mess by closing 125 of its stores, or about 15% of its fleet, and refocusing on higher priced bags. Furthermore, after an incredible rise and fall, Michael Kors has decided it’s time to recycle its cash into other brands with higher residual equity.
Michael Kors’s attempt to build up a portfolio of “accessible” luxury brands is very similar to Coach, rather than LVMH and Kering, who are focused on true luxury brands.
Europe’s luxury groups have always done a wonderful job of focusing on long-term brand building through maintaining an illusion of exclusivity. On the other hand, U.S. luxury houses have chased short-term sales by increasing distribution once the brand becomes trendy, then suffering blowback once the brand becomes too ubiquitous and fails.
In essence: shatter the illusion and the brand cachet is lost.
American luxury players must stop sprinting to sell as much as possible, as fast as possible, or they’re to suffer the consequences.
Unfortunately, Jimmy Choo has lost some of its lustre too because of discounting at American department stores.
But on the bright side of things: Michael Kors will be keeping Jimmy Choo independent. Chief executive officer Pierre Denis and creative director Sandra Choi, who has been with Jimmy Choo since its beginnings, will stay on. Further, indications suggest that the strategy set up by Jimmy Choo management will continue.
Nevertheless, Michael Kors will be pushing growth through sales targets, retail openings, online present, and an expanded men’s luxury footwear menu. Moreover, there is likely to be more of a focus on handbags too, given Michael Kors’s history in the handbag business.
Ultimately, Michael Kors is hoping for Jimmy Choo to become a “lifestyle brand” — a world we’re not sure that Jimmy Choos are meant to step foot in.
Michael Kors will have to tread lightly in its Jimmy Choos. It will require a lot of discipline for Michael Kors not to mimick the mistakes it made a few years ago if Jimmy Choo is to be the source of new growth it is banking on and not instead end up another once high-end devalued brand.