Michael Kors Holdings Ltd. is one of fashion’s social media powerhouses.
But the dollars-and-cents impact of all those followers and “likes” is starting to be questioned by analysts and could represent a cautionary tale to other brands that might be betting heavily on social media for business growth. Analysts are concerned that Michael Kors’ astronomical growth on social media isn’t translating directly into strength for the brand, as John Idol, chairman and chief executive officer, recently told Wall Street.
“The ongoing strength of Michael Kors brand is…illustrated in the growth of followers across social media sites worldwide,” Idol said, perhaps seeking to ease the blow of disappointing fourth-quarter results, after a period of rapid growth. “In the fourth quarter, on a year-over-year basis, Facebook followers increased 22 percent, Instagram followers increased 99 percent, Twitter followers increased 46 percent and Weibo followers increased 120 percent, as consumers around the globe turn to Michael Kors for lifestyle and fashion inspiration.”
Some analysts are guarded. “Brands have to grow their customer base at the same rate they’re growing distribution,” said Christian Buss, an analyst at Credit Suisse. “For Kors, they’ve been one of the fastest-growing brands online and that relationship seems to have broken down in the latter part of 2014.”
Buss pointed to a study by Credit Suisse and NetBase that tracked the online conversation of 14 handbag companies by looking at consumer posts across 200 million online pages.
The positive online sentiment attached to the Michael Kors brand, which delivered one of the most successful IPOs in fashion history, has been on the wane and is now below average for the first time, according to the study.
Michael Kors ranked as the largest brand by online volume of social posts in the study, but its overall sentiment came in at 82.9, below the average of 84.9. Tory Burch scored the highest, at 96, followed by Ralph Lauren, Kate Spade, Calvin Klein, Coach and Prada.
Buss thinks that the company’s distribution might have exceeded the growth of brand preference.
“Too much availability of a brand without an increase in the number of customers who care about the brand is a recipe for brand dilution,” Buss said.
Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, said social media followers have little to do with sales or brand strength. It’s about engagement and the number of interactions, such as comments, retweets and reposts and “likes.”
“Michael Kors is stretching a lot here…by them using ‘followers’ as a major social media proof point,” Moorhead said, adding that anyone can “spend $50 and get 50,000 followers.”
Lisa Pomerantz, senior vice president of marketing at Kors, said: “Our social community is not only large and growing, it is also highly engaged….We are very happy with the return on investment we are seeing on our Facebook/Instagram marketing investment. Facebook’s data, as well as our own, verifies that we are indeed driving measurable sales both online and in-store, as well as increasing brand awareness.”
Kors has yet to recover most of its stock losses after the fourth-quarter results cut more than $3 billion from its market capitalization last month.