On Thursday, Ralph Lauren forecast third-quarter revenue growth below Wall Street expectations, sending its shares lower. This came despite the company reporting strong demand in North America and Asia, as well as raising its annual forecast, UNN reports, citing Reuters.
Details
In early trading, shares of the New York-based premium apparel brand fell by approximately 3%. As of the close of the previous session, they had risen by approximately 16% since the beginning of the year.
The publication notes that in recent quarters, the company has performed better than the luxury-goods sector overall, as affluent American shoppers continue to spend money on chunky-knit sweaters and polo shirts. China has also become a growth driver: revenue there increased by 35% in the second quarter.
However, high expectations for maintaining rapid growth created an elevated bar, leaving Wall Street disappointed by Ralph Lauren's latest forecast.
The company expects sales to grow by 3–4% in the third quarter, below analysts' forecast of 4.2%. Investors had hoped for signs of even stronger momentum, given the brand's recent strong performance. The company attributed this to the "negative impact" of the wholesale shipment schedule, as well as a reduction in the volume of discounted sales through outlets.
According to Guggenheim Securities analyst Simeon Siegel, Ralph Lauren generally succeeds in effectively managing investor expectations and then exceeding them. The company tends to "beat forecasts, provide conservative guidance for the future — and repeat the cycle again."
The company forecasts that revenue will grow by approximately 6–7% in fiscal 2027, compared with its previous forecast of 5–6%.
Chief Executive Officer Patrice Louvet expressed optimism about the holiday season, highlighting the value of the brand and its recognizable style. He identified women and younger shoppers as the main growth drivers.
Annual operating margin is expected to increase by approximately 80–100 basis points, excluding currency fluctuations; the previous forecast called for an increase of 60–80 basis points.
In addition
The company, founded by designer Ralph Lauren in 1967, began a restructuring process approximately ten years ago by hiring its first chief executive who was not a member of the founder's family. The company managed to increase sales by shifting its focus toward more expensive apparel and attracting a younger generation of shoppers.
On Thursday, Tapestry (TPR.N) — the maker of Coach handbags — also raised its annual forecasts, counting on strong demand during the holiday period despite an overall slowdown in consumer spending across the luxury-goods industry.
According to LSEG data, second-quarter revenue rose 9% to $2.19 billion, exceeding analysts' forecast of $2.12 billion. Meanwhile, adjusted earnings per share came to $4.64, also surpassing the expected figure of $4.26.