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Luxury brand Michael Kors registers 73% growth in online sales in Q3

February 9, 2015 01:09 PM
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Bringing e-commerce in-house during the third quarter of fiscal 2015 paid off in the form of a 73% increase in quarterly year-over-year online sales in North America for luxury brand Michael Kors, a key driver in what turned out to be a strong quarter for the brand. Its site had previously been operated by luxury multichannel retailer Neiman Marcus, No. 41 in the Internet Retailer 2014 Top 500 Guide.

Michael Kors, which does not break out online sales, reported an overall net sales increase of 31% year over  year for Q3 2015, increasing to $1.263 billion from $964.8 million during the same period last year.

E-commerce represents 7% of net sales in North America, CEO John Idol told analysts last week on the brand’s Q3 2015 earnings call, according to a transcript from Seeking Alpha. . In the Q3 2015 earnings report, Michael Kors reported net sales of $551.840 million in North America, which would put online sales in North America at nearly $39 million.

Idol said he is pleased with the progress the brand has made online.

“We're committed to growing our e-commerce business,” he said. He predicted e-commerce would ultimately account for 20% of North American retail sales.

The multichannel retailer launched a new, in-house U.S. e-commerce platform in September. On the company’s second quarter earnings call, Idol predicted the new site would boost web sales.

“The new web site allows us to engage existing and new customers with the Michael Kors lifestyle and create innovative ways to keep the brand at the forefront of consumers’ minds,” Idol said at the time.

Bringing the e-commerce technology in-house, Idol said on the Q3 earnings call, made a huge difference in terms of driving revenue growth online.

The new MichaelKors.com home page features large lifestyle images, rather than products and prices. Shoppers can peruse various collections by scrolling through slides on the front page or scrolling vertically to see other offerings. The retailer offers free shipping and returns on all orders placed through its site.

Encouraged by the progress made in Q3 2015, Idol says investors and shoppers can expect to see greater investments in e-commerce as the brand continues to grow its global footprint.

Idol said Michael Kors will launch a new e-commerce site in Canada this year, with an eye on expanding into Europe and Japan by next year. In November, Michael Kors also stepped up its efforts to increase conversions via social media by unveiling a new #InstaKors campaign on its Instagram page, which boasts more than 3.4 million followers. The #InstaKors promotion encourages shoppers to sign up via Michael Kors’ web site. Once a shopper “likes” a photo that has the #InstaKors hashtag attached to it, the brand will e-mail her information on how to purchase it.

A spokesperson for L2 Think Tank, a research group focused on digital innovation among luxury retailers, says Michael Kors is an example of a luxury brand that “gets it” when it comes to e-commerce.

“The brand has made significant investments, including a transition to an in-house mobile optimized e-commerce site that immediately pairs visitors with their nearest store, anticipating omnichannel demands of mobile customers,” she says. “The brand is also strong across the board in social media and was one of the first companies to experiment with Instagram advertising.”

In addition to growing sales, Michael Kors also boosted its online conversion rate and overall traffic, though he didn’t say by how much. Idol told investors and analysts on the call that the growth in e-commerce is a direct result of luxury shoppers’ evolving buying habits.

“We believe that the shopping behavior of certain customers in North America is changing, and they are migrating their purchases to our e-commerce site at a greater rate than we had initially anticipated, which is impacting traffic and comps in our North American retail stores,” Idol said.

This is also in line with what luxury retail analysts are predicting.

E-commerce is the fastest-growing sales channel for luxury, growing 28% from 2013 to 2014, according to Bain & Company’s Global Luxury Goods Worldwide Market Study, which the consulting firm issued in late 2014. Bain projected apparel and accessories would account for 59% of all luxury online sales in 2014.

Other luxury brands are seeing similar gains online. Last week, Ralph Lauren Corp. reported double-digit year-over-year growth in e-commerce as well as a 40% spike in traffic from mobile devices during its Q3 2015 earnings call.

Michael Kors will expand its e-commerce investments, including internationally, Idol said.

“We continue to capitalize on the strength of the Michael Kors brand with the rollout of our global e-commerce business, the expansion of our footprint in North America, Europe and Asia,” he said.  “Bigger assortments, convenience in terms of the way that we're offering shipping, and the service, is all going to, we think, continue to drive more business to e-commerce.”

For the third quarter ending Dec. 27, 2014, Michael Kors also reported:

  • Total retail net sales, which includes e-commerce, of $689.4 million, up 36.9% from $503.4 million during the same period last year.
  • North American retail net sales of $551.8 million, up 30.2% from $423.7 million during the same period last year.
  • Gross profit of $800.1 million, up 29.2% from $619.5 million during the same period last year.
  • Net income of $303.68 million, up 32.2% from $229.64 million during the same period last year.

For the nine months of fiscal 2015, Michael Kors reported:

  • Net sales of $3.160 billion, up 38.1% from $2.288 billion during the same period last year.
  • Total retail net sales, which includes e-commerce, of $1.665 billion, up 40.5% from $1.185 billion during the same period last year.
  • North American retail net sales of $1.296 billion, up 30.5% from $993.46 million during the same period last year.
  • Gross profit of $2.017 billion, up 37.5% from $1.467 billion during the same period last year.
  • Net income of $698.38 million, up 39.6% from $500.45 million during the same period last year.
 

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