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

michael kors store

(Jonathan Alcorn/Reuters)
People waiting to enter a Michael Kors store during day-after-Christmas sales.

Michael Kors has 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 last week that he only expected 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 think 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 wrote. "We believe Macy's decision will catalyze other specialty retailers and department stores to take a harder look at their boxes in these underperforming centers.

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

Analysts at Conlumino, a New York-based research firm, said Walmart's recent decision to close stores highlighted "how much the retail landscape has changed."

"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," Conlumino CEO Neil Saunders said. "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

More From Business Insider

• The new McDonald's kale salad is worse for you than a double Big Mac
  

• One sentence reveals how teen Generation Z is killing Gap, Abercrombie, and J. Crew
  

• One of the hottest clothing start-ups is suddenly laying off 10% of its staff