Why are Michael Kors Insiders Selling Shares? Project Runway Watchers Know
Fashion is fickle, and the designer Michael Kors understands that better than anyone. The Long Island designer became a household name as a star judge on the show Project Runway, where every week supermodel Heidi Klum pronounced someone “in” and someone “out.”
That may explain why Michael Kors has been selling shares in his namesake company, Michael Kors (KORS), the luxury lifestyle fashion house that went public last December. Here’s a stock chart of how it has done since then, compared to competitor Ralph Lauren (RL).
The company makes apparel, handbags, shoes and everything else for people who have what it calls the “jet-set aesthetic.” It also has 237 stores. Its last fiscal year, which ended in March, it made $248 million on $1.3 billion in sales. That was up from $137 million on $803 million the prior year. It had 57.8% gross profit, up from 55.5% the prior year.
But Kors, who is honorary chairman and chief creative officer, has so far netted more than $467 million on stock sales, the Wall Street Journal reported. Other insiders have been selling too, including chairman and chief executive John Idol.
The company’s annual filing (although Kors is a Long Island boy, the company’s a foreign issuer) makes clear it’s an unpredictable business, and apparently one that doesn’t get a whole lot in writing. It doesn’t have written agreements with its wholesale customers, they buy order by order. It doesn’t have agreements with its third-party manufacturing contractors, either. Nor does it have written agreements with the agents it uses to source goods with manufacturing contractors, not even with the Hong Kong agent responsible for sourcing 17% of its purchases of finished goods.
In addition to that, Kors is basically waiting for its customers to turn up their noses at any moment. The company says it has to correctly gauge consumer needs and fashion trends, and “even if we react appropriately to changes in fashion trends and consumer preferences, consumers may consider our brand image to be outdated or associate our brand with styles that are no longer popular or trend-setting.”
Tough business. Well, if there’s anything more fickle than fashion, it’s the stock market.