Nobody likes being duped. But in the world of fashion, "dupes"
mean coveted products that look and feel like consumers' favorite
high-end brands, at a fraction of the price.
The "accessible luxury" market -- led these days by the likes
ofMichael Kors (
),Kate Spade (
) and breakout brandVince Holding (
) -- is thriving partly because companies in it have succeeded at
creating the look and feel of luxury without the five-digit price
Kate once offered quilted bags that mimic (but don't
counterfeit) Chanel, Kors has sold brown-and-tan logo bags that
look like Louis Vuitton at a glance, and all manner of midtier
brands have tried to make bags inspired by the iconic Hermes
Vince, a master of slouchy knits, doesn't sell logowear. But
the apparel company recently hired Natalie Ratabesi as its new
creative director of women's design. Her previous handiwork at
high-end fashion houses Dior, Gucci and Oscar de la Renta will
hopefully trickle down into the brand's women's wear.
So far, consumers have flocked to these aspirational brands,
which have garnered followings as they also create unique luxury
designs of their own.
Vince, which went public in November, reported that it earned
4 cents per share last quarter, beating analysts' break-even
views. Revenue rose 32% to $53.5 million, slightly topping
estimates. Vince stock has now risen 89% from its
"We believe Vince remains one of the best growth stories in
apparel retail today," said William Blair analyst Amy Noblin in a
note. "Over the long term, we believe that Vince is an emerging
global lifestyle brand poised for sustainable long-term 20%-25%
With $60 tees and $225 crewneck sweaters, the company does
well with what some call "luxury basics," a muted, apparently
brandless apparel style that has found footing in recent years,
evocative of top-tier premium brands such as Bottega Veneta and
its logoless basketweave bags. Other high-end brands such as
Gucci and Louis Vuitton have pulled away from prominent branding
designs at the higher end of their own product lines, amid a
flood of G- and LV-covered purses on the street, particularly as
they've gained traction in markets overseas.
"Demand from emerging markets made the monogram so ubiquitous,
however, that it is now a symbol of accessible luxury rather than
exclusivity," said luxury-market research firm Ledbury
Kors And Kate Build
Kate Spade last year sold Juicy Couture, known for velour
tracksuits and bling, to Authentic Brands Group and is winding
down the once-popular Juicy business this year.
Kate Spade sales soared 33.5% last quarter to $328 million and
its namesake brand leapt 54%. The company reported an adjusted
loss of 6 cents a share vs. year-ago loss of 16 cents a
Kate Spade stock has risen 19% for the year to date. In a May
research note, Sterne Agee analyst Ike Boruchow called the
company "one of the most attractive long-term growth stories in
"While we expect KATE to generate just $0.22 of EPS this year,
we believe the company will experience very rapid bottom-line
growth from here," said Boruchow. "The primary growth driver will
likely be door growth, as the company can grow footage at a
15%-20% clip (or higher) over the next 5 years, with expansion
both domestically and overseas."
Michael Kors sales surged 54% to $917.5 million in its March
quarter as EPS jumped 56% to 78 cents. The stock has risen 10%
The handbag maker has enjoyed immense popularity for its
leather purses and accessories. Arguably the "It" bag brand for
now, its only risk is in peaking and fading away, as
accessible-luxury pioneerCoach (
) is fighting to avoid.
"All in, KORS' top-line momentum can't be denied, but with
margins potentially peaking, there are fewer ways to win going
forward," said Sterne Agee's Boruchow in a May research note.
Coach Drops Guidance
Leather-handbag maker Coach is trying to engineer a
turnaround, slashing third-party events and flash sales and
moving to semiannual sales, to counter its image of being too
accessible a brand. Coach's Q3 earnings slid 19% vs. a year
earlier to 68 cents a share. Revenue declined 7% to $1.1 billion,
and North American same-store sales plunged 21%.
Hopes are pinned on an upcoming fall collection by new
executive creative director Stuart Vevers, although analysts
think the turnaround will take at least a year or two to cement.
During a company-held analyst day on Thursday, Coach lowered its
guidance, projecting low-double-digit revenue decline and a
high-teens same-store sales percentage decline in North America
for fiscal 2015.
Shares dropped 9% at the news Thursday, leaving the stock down
36% this year.
Despite risk of getting too-accessible and losing luxury
cachet, even within the aspirational market offering a lower tier
of product helps pull in more consumer cash. Michael by Michael
Kors and Kate Spade Saturday are both less expensive lines of the
High-End Home Brands
Premium home-goods brands such asWilliams-Sonoma (
) andRestoration Hardware (RH) have been trying a similar
"Restoration Hardware is aimed at the upper end of the market.
But what's interesting is that our pricing analysis shows that
their entry-level products are more affordable than many
Americans perceive," said KeyBanc Capital Markets analyst Bradley
While prestige-reaching consumers may not yet be able to
afford Restoration's $5,000 to $6,000 sectional sets, many are
still able to swing $1,695 for a sofa that lets them feel a
little more luxurious.
Restoration Hardware Q1 revenue rose 21.5% to $366.3 million
and earnings tripled to 18 cents a share from 6 cents a share the
same quarter a year earlier.
The spectrum of brands under Williams-Sonoma's umbrella,
including Williams-Sonoma Home, Pottery Barn and West Elm, have
also helped it to appeal to a wider range of customers. Trendy
West Elm, in particular, appeals to younger 20-somethings who
have graduated from do-it-yourself IKEA furniture but can't yet
afford a $4,500 settee from Williams-Sonoma Home.
"Similar to the prior three quarters, the strongest comp was
at the West Elm brand, which is benefitting from collaborations
with designers and artisan partners," said Wells Fargo analyst
Matt Nemer. West Elm showed the best comparable brand revenue
growth at 18.8%, according to its quarterly report.
Williams-Sonoma Q1 revenue rose 9.7% over the year to $974.3
million, and earnings rose 17% to 48 cents a share.
"WSM is on to something that other retailers only dream of --
'omni-channel' harmony," said Wolfe Research analyst Aram
Rubinson in a note, meaning that the company has had success
reaching consumers through a variety of outlets, including
brick-and-mortar stores and online retail.
"Style and price points are driving the success of the brand,"
said KeyBanc's Thomas.