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Michael Kors' Formula 1 Deal Fuels $1 Billion Men's Push

Michael Kors is set to partner with the McLaren-Honda Formula 1 racing team, as part of a broader plan to combat decelerating growth by winning new customers outside its base of female handbag aficionados.
Michael Kors Autumn/Winter 2016 | Source: Courtesy
By
  • Bloomberg

NEW YORK, United States — John Idol, chief executive officer of Michael Kors Holdings Ltd., is on a mission to make the brand more enticing to men.

The company’s partnership with the McLaren-Honda Formula 1 racing team, announced on Wednesday, is part of a broader plan to combat decelerating growth by winning new customers outside its base of female handbag aficionados, Idol said in an interview with Bloomberg Television in the British capital.

“Michael Kors is really going deeply into the menswear business,” he said. “We’ve made a statement that we believe this will be the next great extension of growth for our company.”

Under the McLaren deal, the fashion house will create a limited-edition men’s leather jacket to be sold only at its new store in London’s Regent Street, and Michael Kors branding will be featured on the driver overalls and the McLaren-Honda MP4-31 car, the London-based company said.

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Michael Kors has been battling slowing sales growth and trying to reverse the damage that it did to its brand cache by discounting products. The menswear business will be key to that revival, with the company opening new stores and adding products in a bid to reach $1 billion in revenue and 500 locations globally, Idol said at an analyst conference this month.

Investors have cheered the turnaround efforts, sending the shares up 26 percent this year through Tuesday. Michael Kors rose 0.1 percent to $50.72 at 2:54 p.m. in New York.

Handbag Dependence

“The past year or so proved once again how important it is not to be dependent on one, relatively narrow category,” said Chen Grazutis, an analyst with Bloomberg Intelligence. “The brand is still really underpenetrated in men’s and has a huge runway there, especially in ready-to-wear and small leather goods categories.”

Michael Kors is accelerating the rollout of its menswear line with new designs in sportswear and leather goods, Idol has said. It also plans to introduce more smartwatches.

Michael Kors has been trying to combat weak demand from department-store companies such as Nordstrom Inc. and Macy's Inc., which have reported sluggish sales for handbags and a slowdown in tourist spending because of the strong US dollar. While it is trying to reduce exposure to department stores, it has no plan to cut out any partners, Idol said Wednesday.

“A little less product, a little less promotion, and I think that will get the balance back in line,” he said.

By Stephanie Wong, Odette Berg and Mark Barton; editors Nick Turner and Kevin Orland.

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