4 reasons Michael Kors is unbelievably hot

Sales at the luxury company grew by 40% in the second quarter, and shares have risen by 400% since the IPO.

By The Week Nov 6, 2013 2:11PM

© Larry Busacca/Getty ImagesMichael Kors (pictured) is on an epic winning streak.


Sales at his luxury company, Michael Kors Holdings (KORS), grew 40 percent in the second quarter, easily beating Wall Street's expectations, while same-store sales -- a measure of growth excluding expansion -- rose 23 percent, marking the 30th straight quarter of increases.


Wall Street is along for the ride. Since welcoming Michael Kors in 2011 with the biggest IPO in fashion history, the stock price has risen 400 percent, an impressive streak that just last week helped the company win a spot on the S&P 500.


"It's hard to find anything that's wrong with the company right now," says CNN.


Here, a quick look at what's right:


Accessories
Customers are gobbling up Michael Kors' accessories, items that span from $150 watches to $3,000 handbags, says Reuters. "By driving a frequent flow of new and innovative products through its own stores and wholesale shops, the company is generating consumer excitement in a way we've never seen in the luxury accessories category," an analyst told Reuters.


And that excitement is paying off. This quarter's success was "driven by strength across our accessories and watch offerings and strong consumer response to our jet-set in-store experience," said CEO John Idol in the earnings release.


Wearability
How does a luxury brand set itself apart in an industry based on designing eye-catching products? By consistently producing collections that are "eminently wearable." Season after season, Michael Kors makes headlines for runway shows that feature classic pencil skirts and sweater sets that even fashion-shy women can imagine in their closets.


And while other luxury brands strive to appear exclusive and aspirational, Kors embraces a more accessible image. In 2012, the company launched a digital campaign featuring videos of "real" women from the Michael Kors office showing how they wear his designs.


HENRYs
Rather than targeting the super-rich like Chanel, or the fast-fashion set like Zara, Michael Kors "was the first retailer to hit the market's sweet spot: People with money to spend but who aren't rich," said Ashley Lutz at Business Insider earlier this year.


And the timing was spot-on. This population, dubbed HENRYs ("High Earners Not Rich Yet"), helped Michael Kors thrive during a global economic recession. HENRYs, who make $100,000 to $250,000 a year, are a growing group, according to Lutz, while the wealthiest households are both making and spending less than they used to. There are now 10 HENRY households for every super-rich household, and the HENRYs buy Michael Kors accessories to splurge without being irresponsible.


Mr. Kors himself
Michael Kors is not the only brand to zero in on accessories and affordable luxury. Most notably, the company shares the space with Coach, a 70-year-old brand that is struggling under Kors' momentum, says NASDAQ's Investor's Observer. Though there are multiple theories behind Coach's slowing growth, Michael Kors has a tangible asset that its rival does not: A "face" for the brand, Mr. Michael Kors himself.


A little show on Bravo has definitely helped:

Though Michael Kors was an established designer before joining Project Runway, the show has made him a bona fide celebrity, and his TV fame could not have been an insignificant factor in his highly lucrative initial public offering nearly two years ago. [The New York Times]


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4Comments
Nov 6, 2013 5:07PM
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From a husband and fathers point of view. My daughter needed a 'purse' that would hold her 'stuff' as well as her 3 year olds. she looked at many a purse however for style, quality, size, functionality and price she chose MK for her new purse after comparing others of same level. My wife needed a  purse that had the pockets, short and long straps, smooth leather, deep enough however not overly deep, sturdy and classic style. Price was somewhat important however the whole package was more important. She also chose MK. Both of the women have Coach purses which are of good quality however they said MK has better choices as well as pricing. Me, well I just have two Geoffrey Beane trifold leather wallets purchased at Stein Mart for eight dollars each on sale.
Nov 6, 2013 2:46PM
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Reason #5: young girls will buy anything if they think it will make them popular...
Nov 6, 2013 7:44PM
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I've always loved Kors beer.....no, really.
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