Ralph Lauren shares drop 4 percent as investors demand even faster growth
Ralph Lauren, the New York-based clothing company, raised its yearly forecast. Wall Street wanted faster numbers for the third quarter.
Ralph Lauren forecast third-quarter revenue growth below Wall Street expectations on Thursday, sending its shares lower, even as the company reported strong demand in North America and Asia and raised its annual outlook. Shares of the New York-based premium apparel brand fell about 4% in early trading.
They had risen about 16% this year as of the previous close. The company has outperformed the wider luxury sector in recent quarters as higher-income shoppers continue to spend on cable-knit sweaters and Polo shirts, and as the brand grows its Gen Z appeal.
China has also emerged as a growth engine, with revenue up 35% in the second quarter. But expectations for the company to sustain a rapid pace of growth have set a high bar, leaving Wall Street disappointed by Ralph Lauren's latest forecast.
The company projected third-quarter sales growth of 3% to 4%, below analysts' expectations for a 4.2% rise, as investors looked for signs of stronger momentum after Ralph Lauren's recent gains. The brand is seeing resilience among its core consumers globally, CEO Patrice Louvet said on a post-earnings call, including in North America, where sales rose 6% in the second quarter despite a sector-wide luxury slowdown in recent months.
Ralph Lauren's broad price range has helped keep sales afloat as inflation-wary shoppers sidestep pricier rivals, analysts note. The company forecast fiscal 2027 revenue growth of around 6% to 7%, compared with its previous forecast of 5% to 6% growth. Founded by designer Ralph Lauren in 1967, the company launched a turnaround plan about a decade ago when it hired its first outside CEO.
It has boosted sales by refocusing on higher-priced apparel and drawing in a younger generation of shoppers. According to Reuters, Coach handbag maker Tapestry also raised its annual forecasts on Thursday, betting on holiday demand, even as the broader luxury sector grapples with a spending slowdown. Check your portfolio holdings if you track retail stocks this week.
