Battle of the bags

Michael Kors Holdings is cutting 125 stores, revamping its fashions and reducing discounts, but will it revitalize the once-hot brand?

Only a few years ago, Kors was encroaching on rival Coach’s turf, stealing away its most stylish customers. But Coach has made a comeback by upgrading its products and is working to restore its cache by reducing promotions. Meanwhile, Kors ran into the same problems of overexpansion and relying too much on discounts. Kors issued a weak outlook last month after delivering a ninth straight quarter of declines in sales at established stores. This year, shares have fallen nearly 18 percent and are hovering around $35. Coach, though, has reported four straight quarters of increases in that key sales measure, following nine straight quarters of declines. That has driven its shares up 32 percent this year to about $46.

Analysts have an average “hold” rating on Kors shares in comparison to a “buy” rating for Coach, according to FactSet.

“We see the setup at (Kors) closely paralleling the reset that took place at (Coach), which has since driven significant gains in shareholder value,” says Jefferies’ Randal Konick.