In a federal courtroom on Monday, renowned fashion designer Michael Kors spoke about the difficult task of remaining relevant in a world where companies can rise and fall based on viral TikTok videos and images of handbags on the arms of superstars like Taylor Swift and Beyoncé.
The fashion industry has undergone a seismic shift in recent years, with social media platforms becoming the new runways for brands to showcase their latest offerings. This digital transformation has not only changed how consumers discover and interact with fashion, but has also put immense pressure on established designers to adapt quickly to ever-changing trends and consumer preferences. For legacy brands like Michael Kors, this new landscape presents both challenges and opportunities, as they strive to maintain their heritage while appealing to a younger, more digitally-savvy audience.
The week-long antitrust trial in Manhattan began with testimony from Kors. The Federal Trade Commission is suing to prevent Tapestry's $8.5 billion acquisition of Capri. If authorized, the purchase will combine six fashion brands: Coach, Kate Spade, and Stuart Weitzman from Tapestry, as well as Versace, Jimmy Choo, and Michael Kors from Capri.
Kors, who launched his namesake company in 1981 at the age of 22 and is now its chief creative director, was summoned by the FTC on Monday to testify. However, in his remarks, Kors noted how even legacy businesses such as his own may suffer and lose customer interest.
"Sometimes you'll be the hottest thing on the block," he told you. "Sometimes you will be lukewarm. Sometimes you'll feel chilled."
He admitted that his namesake label has fallen out of favor and requires a refresh.
"I think we've reached the point of brand fatigue," he told me.
This candid admission from Kors highlights the cyclical nature of fashion and the constant need for reinvention in the industry. Brand fatigue is a common challenge faced by many long-standing fashion houses, as consumers increasingly seek novelty and uniqueness in their purchases. The ability to recognize and address this issue head-on is crucial for brands looking to maintain their relevance and market share in an increasingly competitive landscape.
The FTC has claimed that combining the companies, particularly with Coach and Michael Kors under the same owner, would result in a bag behemoth with the ability to raise customer prices while providing the same or inferior items.
Attorneys for Tapestry and Capri, on the other hand, have questioned the FTC's representations of a centralized handbag industry. They claim that competition has increased as shoppers examine both higher-priced luxury brands and lower-priced fast-fashion names, as well as the option to shop from online-only platforms and secondhand marketplaces.
The trial comes as consumers protest excessive pricing and the outcome of the widely watched US presidential election could alter the government agency's strategy.
Capri shares, which include Michael Kors, reflect the difficult stretch indicated by designer Kors. As of Monday afternoon, the company's shares had lost almost 24% this year. This is significantly lower than the S&P 500's 18% gain and Tapestry's 17% increase.
Michael Kors' revenue fell 14.2% on a reported basis or 13.3% on a constant currency basis in the most recent fiscal quarter, which concluded in late June, compared to the same period the previous year.
These financial figures underscore the challenges faced by Michael Kors and other traditional fashion brands in today's rapidly evolving market. The decline in revenue and stock performance points to a broader trend of shifting consumer preferences and increased competition from both high-end luxury brands and more affordable fast-fashion alternatives. This financial pressure adds another layer of complexity to the proposed merger, as both Tapestry and Capri seek to strengthen their market positions in an increasingly fragmented industry.
Kors said he is still a student of the fashion industry and finds inspiration by spending time on store floors, chatting to consumers, and people-watching in locations like airports. Even as an industry expert, he stated that he must move quickly.
For example, he stated that he learnt about Aupen, a newcomer to the handbag sector, after seeing a photo of Taylor Swift wearing one of the company's bags. When he visited the company's website, it crashed, he added.
"It shows you the power of women like this," he told me.
This anecdote illustrates the immense influence that celebrities and social media can have on fashion trends and brand visibility. The ability of a single image to generate such intense interest in a new brand demonstrates the rapidly changing dynamics of the fashion industry. For established designers like Kors, staying attuned to these cultural shifts and leveraging them effectively has become an essential part of maintaining relevance in the market. It also highlights the need for brands to be agile and responsive, not only in their design processes but also in their digital infrastructure and marketing strategies.
Former Macy's CEO Jeff Gennette testified on Monday that when brands lose their luster, retailers feel it too. Gennette, who departed early this year, claimed the department store's sales suffered because it relied too heavily on Michael Kors' brand. He claimed that the reduction on Michael Kors handbags contributed to "a bad spiral Macy's was going through when I was there."
