Michael Kors bags are nothing if not affordable and wearable. As a result, it is not terribly surprisingly that the brand's North American revenue increased 51% to $863 million during the third quarter and European revenue increased 144% to $140 million during that same period. According to Forbes, "On a full-year basis, Michael Kors said it expects its full-year 2014 revenue to fall between $3.18 billion and $3.19 billion." It seems that Kors can do no wrong at the moment, outselling European brands in their own territory and overshadowingbrands like Coach (which is in the process of revamping its image after some major over-exposure-induced fatigue) and Kate Spade in the U.S., but implicit in the brand's success is the fact that the market, in the U.S., at least, is relatively saturated with MK bags.
As we have learned from Louis Vuitton, a period of relatively high production means two things: a temporary surge in profits and an inversely-related effect on the brand's image of luxury. While this has been to the detriment of Louis Vuitton, which depends on its high fashion image in large part to sell expensive garments and accessories, Kors has a lot less to lose due to its affordable luxury status. In high fashion, reputation matters, and overexposure plays a large role in this. It undermines a luxury brand’s identity, which is often based on ideals of grandeur and exclusivity, and often leads the luxury consumer to look to another brand that still has its image of exclusivity, and thus, luxury, in check. So, luxury shoppers grew less willing in recent years to spend upwards of $1,000 for a logo-covered Louis Vuitton speedy bag because they were on every other woman's arm (thanks to an increase in production). Kors' prices are a large step down, especially now that Louis Vuitton and others are upping their prices in attempts to distance themselves from affordable luxury brands like Kors.
Michael Kors is not necessarily banking on its luxury image to sell bags, it is banking on its reasonable prices. As a result, it likely has more legroom than a luxury brand before it has over-sold and saturated the market. Having said this, every brand has a limit and the balance between profits and exposure, and it appears Kors may be reaching that point in the near future. Thoughts?