Big name American fashion brands like Michael Kors and Ralph Lauren have been using heavy promotions to sell their goods of late. But now they’re trying to wean customers off such sales.
Brands like these have been hurting for years as e-commerce and lower foot traffic at department stores cut into revenues. Now the brand name fashion companies are fighting back. Suzanne Kapner reports:
One way he hopes to do that is by strengthening e-commerce, where sales in North America fell 22% in the most recent quarter. Mr. Louvet said he hasn’t ruled out deepening Ralph Lauren’s relationship withAmazon.com Inc., where the luxury brand currently sells a limited number of items.
He added that other partnerships with online retailers are in the works. Ralph Lauren recently struck a deal to sell through Zulily, which is owned by the home-shopping retailer QVC Inc.
While net income at Michael Kors fell to $125.5 million in the quarter, from $147.1 million a year earlier, the results exceeded analysts’ expectations. Likewise, for Ralph Lauren, where net income totaled $59.5 million, compared with a loss of $22.3 million a year earlier.
“Results and outlook were better than expected,” wrote Jefferies analyst Randal Konik in a note to clients about the Michael Kors results. He said that management’s strategy of innovating and elevating the brand is driving sales and margins.
Mr. Idol, the Michael Kors CEO, said plans call for small increases in wholesale sales next year, providing the holiday season is strong. He also said that with the dollar weakeningagainst the euro there is hope that foreign tourists will return to the U.S.
“We are definitely seeing business improve in North America,” Mr. Idol said. Although foot traffic to stores is still weak, he said, “there’s definitely a slightly better feeling that we’re seeing with the consumers coming into the store being a bit more optimistic.”
Ralph Lauren said it expects wholesale revenue to be down about 5% going forward. The company also said declines in spending by foreign tourists had moderated.
You can see on my chart that shares of both fashion brand companies have popped in recent weeks as turnaround strategies appear to be paying off.