The success of Michael Kors means nothing for retail

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On Monday morning, Michael Kors ( KORS ) reported better than expected sales, and a host of other good numbers, all of which can be read in this article from Reuters, with the wildly assuming title What retail slowdown? Michael Kors sales soar . Now Michael Kors is, in fact, a retail company , so technically, the title makes sense, but still… when I see a broad economic trend linked to a specific datum in a headline, I expect to see some explanation for the link in the article. In this case, there is none.

In fact, the article even undercuts the supposed link by explaining, quite rightly, that Michael Kors has savaged its competitor, Coach ( COH ), taking away Coach's market share quarter after quarter. Coach, it may fairly be said, is a retail company too. In effect, the article has answered its own question: what retail slowdown? Oh, right, the one in Coach.

We won't know the truth of things we hear from the big retailers, including:


  • Walmart ( WMT ), on Thursday, Aug 14
  • TJX Companies ( TJX ), on Tuesday, Aug 19
  • Target ( TGT ), on Wednesday, Aug 20
  • L Brands (LB), on Wednesday, Aug 20
  • Gap (GPS), on Thursday, Aug 21

That said, I maintain that there is every reason to expect that this sector will disappoint. Americans still aren't making more money, but they have been borrowing heavily to buy cars . The consumer only has so much money to spend, and the numbers already appear to have accounted for any excess. Expect to see a few big misses and a few unimpressive hits. The impact on the slow recovery will be minimal.

And if I'm wrong? Well, keep in mind that I'm being optimistic. Given the amount of borrowing required to sustain it, good news from the retail sector will be worse news for the economy than bad news. 

Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC .


This article was originally published on MarketIntelligeneCenter.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Economy

Referenced Stocks: KORS , COH , WMT , TJX , TGT

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