Are Millennials To Blame For A Slowdown In Handbag Sales?

• Snob Essentials co-founder Kelly Cook believes Millennials are to blame for slumping luxury retail sales.
• Millennials have demonstrated that they prefer to spend disposable income on experiences rather than material items.
• This behavior should have a more negative affect on the high-end luxury retail market than the accessible luxury market.

In a new report, Jefferies analyst Randal Konik discusses a recent conversation the firm had with handbag industry expert and Snob Essentials co-founder Kelly Cook. Cook revealed her ideas about the role that Millennials are playing in the slumping affordable luxury space.

Millennials To Blame For Handbag Slowdown

According to Cook, Millennials’ growing representation in the discretionary spending population is the major driver behind the slowdown in handbag sales. Cook has observed that Millennials tend to spend their discretionary income differently than older generations.

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“Saddled with high housing and healthcare costs, Millennials have lower discretionary income than in the past and are increasingly dedicating their dollars toward experiences rather than material items,” Konik wrote.

Technology will Drive Eventual Handbag Recovery

Cook believes that the growing number of small technology items that women carry around with them will maintain the handbag's position as a wardrobe staple. Therefore, it’s likely that the impact of non-materialistic Millennials will be felt more in the high-end luxury market than in the “accessible luxury” segment.

Two Leading Names

Two leading names in the handbag space, Michael Kors Holdings Ltd KORS and Coach Inc COH, are in need of a spark to turn around slumping sales and share prices.

According to Cook, it’s all about fresh ideas and creating buzz. Coach’s Spring 2016 collection has gotten lots of positive reviews and buzz following New York Fashion Week, and Jefferies is also expecting a fresh look to Michael Kors’ spring styles as well.

Jefferies has Buy ratings on both Michael Kors and Coach, but names Coach as its preferred name of the two.

Disclosure: the author holds no position in the stocks mentioned.