The once up-and-coming fashion brand Michael Kors (KORS)  has been losing favor with not only customers but big retailers like Nordstrom and Macy's. 

A Wedbush Securities report that nearly half of Nordstrom stores have stopped selling Michael Kors handbags this month and that another five locations plan to discontinue sales within the next few weeks.

Investors should heed this latest news to profit from Kors shares taking a big hit

Kors's shares have been swooning since late 2014. The company finished trading Wednesday at $41.80 a share. That's about half the price of two years ago.

Kors has been struggling over the past couple of years as its clothing and accessories have lost some of their luxury brand aura. The company has been criticized for flooding the market with handbags, which have a high profit margin and played a big role in Kors's initial success (It has also received some pushback for expanding its men's line in 2014.) But the strategy appears to have backfired, making the bags less coveted as fashion statements. 

Department stores, who represent a large portion of Kors's business, have been offering the bags at steep discounts. Indeed, the New York Post reported that Nordstrom was feeling squeezed by Macy's, which has a glut of Kors bags. The Wedbush report said that Nordstrom locations that continued to sell Kors bags would do so where they weren't being sold at Macy's locations. 

Many locations have sent their Kors items to other Nordstrom stores, Nordstrom Rack locations, or back to the vendor. Nordstrom Rack is Nordstrom's lower-priced line of stores.

In addition, seven of 36 stores that carry Michael Kors Collection bags, Michael Kors truly high end bag usually costing over $1,000, are also no longer going to carry these items.

The Wedbush analysts wrote that Nordstrom's interest in selling the bags would continue to wane. "We heard from a few managers that more stores would be phasing out by the end of the year because of waning interest from customers," Wedbush analysts wrote.

Wedbush reported on problems with quality, as well. "Michael Kors was the number one returned handbag brand because of poor craftsmanship, and they were not surprised Nordstrom was reducing its exposure," said the Wedbush report.

Kors rival, Coach, has faced a similar problem. Looking to build on its popularity as a luxury brand, the company began selling its products in outlets stores. Initially, this helped Coach's sales, but after the Coach handbag was on seemingly every shoulder, the brand took a hit and sales fell. The brand has never recovered.  

Kors has plummeted from its heady post IPO start. Just three years after being listed on the New York Stock Exchange, its share price had risen by roughly five fold to almost $100 a share. The company found a niche marketing high end clothes at prices that middle class women could afford -- luxury for Staten Island, the company proudly proclaimed.

With Nordstrom just making the move to cut its Kors exposure in May, investors shouldn't see a negative effect on Kors earnings when they are released on June 1. But it is hard to see how this will not impact future earnings. Investors should pay close attention to guidance figures and how management plans to deal with the company's current issues.


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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.