Reference no: EM131933441
Read the attachment at the bottom and comment on the following:
1. (Introductory) What metrics provide evidence that both Michael Kors and Ralph Lauren underperforming?
2. (Advanced) Briefly describe two of the primary challenges that these brands currently face.
3. (Advanced) The article describes several strategies that these brands are implementing. Select one and critically evaluate it; that is, describe both its strengths and weaknesses.
4. (Advanced) Besides the ideas mentioned in the article, what's another idea you would suggest to help either Michael Kors or Ralph Lauren (or both) strengthen their brands and performance?
5. (Advanced) What research methods would you recommend to help these companies track the strength of their brands in consumers' minds over time?
The Wall street Journal
Michael Kors Holdings Ltd. and Ralph Lauren Corp. were hurt in the latest quarter by heavy discounting and declining foot traffic to stores, challenges that are upending the way the companies do business. Michael Kors is cutting back sales to department stores in the hope that less inventory will translate into more full-priced sales. Ralph Lauren is closing retail shops, streamlining products and speeding up sourcing.
The changes have only recently been introduced and have yet to improve either company's financial performance. But they are a sign of the drastic measures some companies are taking to offset the rise of e-commerce and other changes in shopper behavior.
Michael Kors total revenue increased just 0.2% to $987.9 million in the three months to July 2, despite 221 new store openings and the acquisition of its China business. Sales at existing retail stores fell 7.4%, while sales to third parties such as department stores were down 7%. Chief Executive John Idol blamed the weakness on "the ongoing decline in mall traffic trends as well as the decrease in tourism."
Net income fell 16% to $147.1 million, compared with $174.4 million a year earlier. Shares of Kors slipped 1% in Wednesday afternoon trading to $49.57. The handbag and accessory maker has been hurt by a steep drop in wristwatch sales and lower average tickets as shoppers buy smaller satchels. The company is introducing a line of "smart" jewelry and watches and focusing more on apparel and footwear to offset weakness in handbag sales, which declined around 2%.
It is also reducing sales to department stores, where heavy discounting has hurt margins and tarnished the brand. "That channel has become very promotional, and, in fact, is causing us difficulties in our own retail channel, which is why you see our gross margin declining, because we are having to meet certain pricing," Mr. Idol told analysts on Wednesday.