Michael Kors has identified a huge weakness in its business --  and it should terrify Macy's

Michael Kors’ just identified a huge weakness in its business — American malls.

Despite strong gains in the overall business, the handbag retailer says it saw a decline in North American mall traffic.

And company Chairman John Idol told investors on a conference call that he only expects things to get worse.

“We believe that mall traffic in North America is going to continue to decline,” Idol said. “And the reason for that is, is again we think that people in North America are a bit more savvy when it comes to digital shopping, and it’s just been more cultural here for a longer period of time.”

Mall traffic in Europe and Asia is stable, but that could change as more shoppers in those markets adopt e-commerce.

Idol hits on a bigger trend in retail: a move away from physical stores that threatens malls everywhere.

Macy’s is closing 40 stores in the beginning of this year.

Analysts at RBC Capital Markets believe that this is part of a larger trend in retail, as more customers shop online instead of in stores. Shoppers are also increasingly unwilling to shell out for expensive apparel, deciding instead to spend their money on electronics and restaurants.

“Macy’s announced store closings could have a number of implications on the overall retail landscape,” the analysts at RBC write. “We believe Macy’s decision will catalyze other specialty retailers and department stores to take a harder look at their boxes in these underperforming centres.

Macy’s isn’t the only retailer being hit by the trend.

Walmart’s recent decision to close stores highlights “how much the retail landscape has changed,” according to analysts at Conlumino, a New York-based research firm.

“The blunt truth is that while stores remain a vital part of the retail mix, they are not quite as relevant as they used to be,” according to Conlumino CEO Neil Saunders. “Walmart’s decision is part of a larger shift that will be played out across all parts of the retail sector over the coming year and beyond.”

NOW WATCH: It’s official: Michael Kors isn’t cool anymore

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