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* Michael Kors announces plans to close retail stores
* The two-year plan comes after soaring sales decline
* Analysts blame poor merchandising and lack of unique designs
Michael Kors has announced plans to shut down between 100 to 125 retail stores over the next two years in response to financial struggles and dwindling sales, Business of Fashion reports.
Last Wednesday, the American luxury fashion label reported a loss of 6% in the fourth quarter during pre-market trading, with a total sales drop of 11% to 1.06 billion. In-store sales dropped 14.1 percent.
According to analysts, the company’s decision to shut down full-priced retail stores is well-advised to prevent further losses and restore any hope for staying afloat. Managing director of GlobalData retail, Neil Saunders told BoF: “we believe that Michael Kors is right to cut back on promotions and discounts, just as it is right to restrict distribution through third parties that are not able to communicate the essence of the brand. In this sense, the 17.2 percent decline in wholesale revenues is… a necessary evil to reduce the exposure of the brand in a bid to restore premium status.”
While Michael Kors is certainly not the only luxury fashion company faced with financial hardship at the moment, the future prosperity for the label seems grim. Saunders proposes that the reason behind the poor financial health is associated with lack of originality in design and poor merchandising in retail stores. “Ranges and collections lack oomph and definition, and across many established stores levels of service and merchandising are lackluster,” he said.
The company has not yet announced which Michael Kors locations will be closing, but it could be a good time to visit your favorite location for one last hurrah.