Michael Kors watches are ubiquitous.
But now there’s a new trendy timepiece — the Apple Watch.
Analysts predicted last year that the tech-savvy watch, which launched in April at a starting price of $US349, would crush watch sales for companies like Michael Kors that sell timepieces in the price range of $US300 to $US500.
Those predictions might already be coming true.
Michael Kors reported a 5.8% decline in same-store sales for its fourth quarter on Wednesday, including a 6.7% drop in North America. Analysts had been expecting a same-store sales increase in North America — the company’s biggest market — of 3%.
In a research note last fall, Barclays analysts said they were “increasingly concerned” about Fossil, which makes watches for more than a dozen brands including Michael Kors, Marc by Marc Jacobs, and Burberry.
“We cannot overlook what is increasingly becoming a major disruption to the entire watch industry,” the analysts wrote. “Future innovation at Fossil …will largely be challenged by hype and innovative offerings from deep pocket technology-credible competitors such as Apple, Samsung and Motorola.”
Fossil has been working on its own wearable tech through a partnership with Intel, but analysts warned that it “faces an uphill battle to establish its credibility” in the space.
“We believe the Apple Watch offers an impressive list of functions that goesbeyond a classic timepiece,” the analysts wrote, citing the device’s workout apps, payment functions, and access to email, texts, and social networks.
Brian Sozzi, chief equities strategist at Belus Capital Advisors, said the Apple Watch poses a threat to every company that sells watches in the $US300 to $US500 price range.
“The versatility of the Apple Watch, as seen in its multiple straps and faces, essentially gives the consumer every watch style in the mall plus an Apple ecosystem that makes one’s life easier,” said Sozzi. “At the price point, it’s a major threat to every watch player that dumps their timepieces inside of locked counters at the likes of Macy’s, J.C. Penney, and Nordstrom.”
Apple’s new device isn’t expected to make a dent on the luxury watch market, however. Luxury watches cost upwards of $US3,000.
“For people buying [luxury] watches, it’s viewed as a long-term investment … A family heirloom in many respects,” Sozzi said. “For this group, they will own an Apple Watch and a Rolex.”
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