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Michael Kors sees stores drop its bags due to returns

By Don-Alvin Adegeest

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Retail

Michael Kors will see a dent in its sales of handbags, as department store group Nordstrom discontinues the line for the majority of its stores.

According to investment firm Wedbush, the speculated reason is Michael by Michael Kors handbags are “the most returned brand”.

The financial services company said it spoke with 112 handbag managers in the US and Canada for its latest report. Another five stores said they are planning to discontinue sales of the designer bags in the next few weeks, the note said.

It comes a week before Michael Kors Holdings reports its Q4 earnings.

Discounting affects sales for other businesses

“We heard from a few managers that more stores would be phasing the brand out by the end of the year because of waning interest from customers, as well as Macy’s constant discounting of Kors’ product,” analysts wrote.

Other sources said Michael Kors was "the number-one returned handbag brand because of poor craftsmanship", and they were not surprised "Nordstrom was reducing its exposure.”

Nordstrom stores that continue to carry Michael Kors handbags are focused on the best-selling merchandise as well as items that aren’t available at Macy’s.

Many stores have sent their Michael Kors handbags to other Nordstrom locations, back to the vendor, or to an off-price Nordstrom Rack store, Wedbush said.

Some stores that have stopped carrying Michael Kors bags have replaced them with Coach and Kate Spade & Co merchandise. Others have shrunk handbag departments because of lagging demand.

Bank analysts said they weren’t surprised by the reduction in Michael Kors handbag sales because of the price matching battle with Macy’s and a lack of product differentiation between Michael Kors stores and the wholesale channel.

“Although the move will have some sales implications for Michael Kors, we feel the bigger takeaway is that the brand equity continues to wane and it will be difficult to maintain an aspirational image without Nordstrom,” the bank wrote.

Image: Michael Kors

Michael Kors