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Question : Question Read the attachment at the bottom

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Read the attachment at the bottom and comment on the following:

The Wall street Journal

Michael Kors Holdings Ltd. and Ralph Lauren Corp. were hurt in the latest quarter by

heavy discounting and declining foot traffic to stores, challenges that are upending the

way the companies do business.

Michael Kors is cutting back sales to department stores in the hope that less inventory

will translate into more full-priced sales. Ralph Lauren is closing retail shops,

streamlining products and speeding up sourcing.

The changes have only recently been introduced and have yet to improve either

company’s financial performance. But they are a sign of the drastic measures some

companies are taking to offset the rise of e-commerce and other changes in shopper

behavior.

Michael Kors total revenue increased just 0.2% to $987.9 million in the three months to

July 2, despite 221 new store openings and the acquisition of its China business. Sales at

existing retail stores fell 7.4%, while sales to third parties such as department stores

were down 7%.

Chief Executive John Idol blamed the weakness on “the ongoing decline in mall traffic

trends as well as the decrease in tourism.”

Net income fell 16% to $147.1 million, compared with $174.4 million a year earlier. Shares

of Kors slipped 1% in Wednesday afternoon trading to $49.57.

The handbag and accessory maker has been hurt by a steep drop in wristwatch sales and

lower average tickets as shoppers buy smaller satchels. The company is introducing a

line of “smart” jewelry and watches and focusing more on apparel and footwear to offset

weakness in handbag sales, which declined around 2%.

It is also reducing sales to department stores, where heavy discounting has hurt margins

and tarnished the brand. “That channel has become very promotional, and, in fact, is

causing us difficulties in our own retail channel, which is why you see our gross margin

declining, because we are having to meet certain pricing,” Mr. Idol told analysts on

Wednesday.

1. (Introductory) What metrics provide evidence that both Michael Kors and Ralph Lauren underperforming?

Solution
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