Back in November, one of the big conversation topics emerging from Michael Kors's second-quarter earnings report — among investors, at least — was the popularity of small crossbody bags among Kors shoppers. While executives seemed pleased at the opportunity to design into a clear trend, the lower price point of the bags was keeping the company's revenue down. Concerning. The plan at the time was to mitigate lower spending by raising prices on some small leather goods and bags.
With the release of the brand's third-quarter results on Tuesday, Michael Kors execs shared some updates on the crossbody situation, which they say they saw developing as early as two years ago. Indeed, the handbag category's growth was flat in dollars, but the number of units people were buying had increased. How do you tackle that? (By tackle, we mean get people to give you more money?) It's all about the upsell, the team said: When someone is buying a crossbody, sales associates should push a small wallet to go along with it, since a larger model won't fit into a little bag. And, they reasoned, that shouldn't be too difficult since interest in smaller money holders has been accelerating anyway, because "as more things end up on your phone, you need less things in your wallet." True enough.
As for the rest of the Kors business, overall revenue grew 6.3 percent to $1.4 billion, with America up just a smidge and Europe increasing by 14.3 percent. The company's stock price popped up 17 percent early Tuesday morning, with Kors updating its expected revenue for fiscal 2016 to $4.65 billion, the high end of its previously stated range.