Michael Kors fall 2017 ad campaign

In a fashion retail world of fantastically low expectations, it only takes a sliver of hope to charge up Wall Street and send stocks soaring.

Shares of Michael Kors Holdings shot up 21.5 percent to $45.25 and Ralph Lauren Corp. jumped 13.3 percent to $88.53 as both transcended sales declines in their fiscal first quarters with less promotional activity translating into stronger-than-expected earnings and a hint that better times could be ahead.

Their performance helped boost the shares of other industry brands and retailers Tuesday, including Under Armour Inc., which rose 3.5 percent to $17.21 after getting beat up by investors earlier in the month; Gap Inc., 2.3 percent to $24.58; Guess Inc., 1.7 percent to $14.11, and Target Corp., 1.5 percent to $58.74. (Shares of Fossil Group Inc. rose 5.7 percent to $11.84 during the day session, but then plummeted 22.7 percent in after-hours trading as investor hopes for a stronger second quarter were dashed by a 13 percent drop in sales).

Kors and Lauren however, might, finally, be pointing a way forward for the sector, which has struggled to grab the attention of consumers and reel in sales and profits in the digital age.

“Think about Kors and think about Ralph Lauren, those are brands,” said Greg Portell, lead partner in A.T. Kearney’s retail practice. “They have clear stories. You could say they’re tied brands, you could say they are underdeveloped brands — whatever the rationale is, they are brands that have consumer value.

“They’re starting to get some traction and you’re starting to see some of the attempts they made bear some fruit, that’s how you beat expectations,” he said. “The more generic brands out there are going to struggle more. If those [two types of brands] diverge a bit, you’ll have a really interesting story because then the narrative becomes very clear, ‘Have a brand or die.’ That will be the story of retail one way or the other going forward.”

That’s not to say all is well. Comp sales for both Lauren and Kors are still declining and Portell noted, “this isn’t, life is all rosy and everybody’s happy.”

But even slightly more bullish reports from the two companies are worthy of notice.

“This is the first time in a very long time anyone has had any positive news coming out of the sector,” Portell said. “I’m not so much of a Grinch to realize we need to celebrate that a bit.”

How long the celebration will last should start to become clearer whether the perceived rebound is a figment, a false start or a widespread bounce-back as prominent companies weigh in with results this week and next.

Macy’s Inc., Nordstrom Inc. and Kohl’s Corp. kick off retail earnings season in earnest on Thursday, but the message from them could muddle the picture given that Lauren and Kors are moving ahead by distancing themselves from the department store set.

Most companies reporting in the next week or so are expected to show they are still in some kind of retreat. The company to beat might be off-price giant TJX Cos. Inc., which is projected to post a 5.2 percent sales gain and flat earnings.

In the face of continuing difficulties, investors that have been avoiding fashion and retail this year decided to dream a little, hanging their hopes on Kors and Lauren.

John Idol, chairman and chief executive officer at Kors, cited “better-than-anticipated retail comparable sales results in both North America and Europe” — good news even though the company’s overall comps fell 5.9 percent.

And Lauren’s new ceo Patrice Louvet, on his first quarterly conference call with analysts, said the company’s made “good progress with setting a strong foundation for future growth.” However, comps fell 6 percent in constant currencies.

The challenges and opportunities are for Kors, Lauren and companies across the industry are many and complex.

Louvet described the dynamic like this: “To say the retail industry is at an inflection point would be an understatement. Technology has transformed the way consumers shop and connect with retail brands. Retail store closures are near 20-year high as the fundamental shift to e-commerce continues. To stand out and compete in this environment, consumers expect an omnichannel shopping experience that’s unlike anything they’ve seen before.”

It’s a transformation that some are hoping to make away from the klieg lights of Wall Street. The Nordstrom family falls into this group and is looking to take their namesake chain private, but appears to still be on the hunt for an equity partner to help it fund the process.

But if things in retail look like they’re improving, or about to, they too might find some investors ready to once again bet on retail.

More from WWD:

Designed by Data: Fashions With an AI Eye

The New Home of Fashion? Miami’s Residential Fashion Boom

Alibaba Unveils New Membership Program, Luxury Platform

load comments
blog comments powered by Disqus