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Kenneth Cole and Michael Kors: One Brand's Store Closing is Another's Shopportunity

One store closes and another opens in its place -- in a New York minute. Just days after Kenneth Cole (KCP) announced that it would close its flagship Rockefeller Center store (among others), Michael Kors swooped in for the snag. The move is great for Kors as he's leading an expansion charge in the U.S. and abroad. But for Kenneth Cole, it signifies the end of an era.

When we last looked in on Mr. Cole, he was at the deal table, negotiating the sale of his apparel and footwear company to Iconix Brand Group (ICON), owned by his brother Neil Cole. That deal never made it past the discussion phase.

Undaunted, KCP continued to push into new market segments with the recent launch of the exclusive REACTION Men's Sportswear collection in 150 Macy's (M) stores. Mining the twenty- to thirty-something demographic by tapping a successful department store as a distribution channel pushed wholesale sales in the third quarter up 21 percent to $62.5 million.

Yet while other retailers would be earmarking those earnings for expansion, Kenneth Cole's finance team is still dictating fiscal prudence. Eight underperforming stores will be shuttered in the coming months. Currently, Kenneth Cole operates 170 stores worldwide, 100 of which are in the U.S.

You can bet your crocodile handbag that not many of those outlets have the exorbitant lease rates commanded by the highly desirable 5th Avenue and Rock Center location. Indeed, typical prices for that tourist-laden, upscale shopping mecca are north of $2000 per square foot. So KCP's 13,000 square foot shack o' style fronting Fifth Ave. certainly forces the retailer's margins to be even more razor thin. Combined with the rising costs of raw goods this year, it's no wonder KCP's C-suite said sayonara.

But there's no denying the desirability of that venue. Michael Kors is certainly poised to raise his poshness profile quite a bit as he snuggles in across the street from the likes of Saks Fifth Avenue (SKS). Kors only scored 4,500 square feet of Cole's former space (sans broker = big savings on realtor's fees), but this makes location number four in NYC for the perpetually tanned icon of American sportswear.

The brand's global portfolio will swell to include approximately 175 freestanding stores, but Kors isn't putting on the brakes yet. A Michael Kors Collection boutique opening at the Peninsula Hong Kong, is set to be the first of 50 Kors boutiques to take their place in the Chinese retail landscape over the next three years.

Image via Kenneth Cole

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