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Michael Kors Advances Globally But Falters on Its Home Turf

Thanks to weak mall and tourist traffic, among other things, North American sales were down in the first three months of the year.
Michael Kors and Kate Hudson at the Met Gala in May. Photo: Mike Coppola/Getty Images

Michael Kors and Kate Hudson at the Met Gala in May. Photo: Mike Coppola/Getty Images

Per usual, Michael Kors had some pretty numbers to report when it announced its financial results for fiscal 2015 on Wednesday. In the final quarter of the year, European revenue grew nearly 60 percent, and sales in Japan jumped 65 percent. Taken all together, the company raked in $4.4 billion for the whole year, $1.1 billion more than it did in 2014. 

Unfortunately, fourth quarter profit fell below analysts' expectations, sending the company's stock price tumbling 19 percent by 10 a.m. And things weren't too great on the home front, either. Sales in North American stores that had been around for a full year dropped by nearly 7 percent in the three months ending March 28, due to a few factors, including:

  • Weak mall traffic.
  • Weak tourist traffic, particularly in February and March. According to execs, Michael Kors stores saw fewer tourists traveling to key cities in the Northeast and Southeast.
  • West Coast shipping delays, which mainly affected footwear, womenswear and small leather goods.
  • A decline in watch sales, with a shift toward jewelry. (Unfortunately, jewelry brings in less cash for the company than watches do.)
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While a dip in North American sales isn't good, Kors execs reiterated that they've known since the company went public that sales in the region were going to advance at a slower pace than in other markets. The brand's presence in Asia, for instance, is still in its "early days" and has a lot of room to expand. In Hong Kong, Michael Kors is establishing a local distribution center to ship to "select Asian customers" who were previously serviced out of North America, and it's just starting to build its retail infrastructure and strategy in Korea.