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What's Sending Ralph Lauren 5% Lower Thursday?

By Daniel Miller - Dec 13, 2018 at 4:19PM

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With no direct news around Ralph Lauren, this could be what's sending shares lower as the company heads into the holiday season.

What happened

Shares of Ralph Lauren Corporation (RL 1.25%), a global leader in designing, marketing, and distribution of premium lifestyle products spanning apparel, home, accessories and fragrances, are down 5% as of 3:10 p.m. EST. The stock is following other apparel retailers lower Thursday.

So what

Today's decline seems to be a continuation of pessimism surrounding many premium retailers, despite many beating estimates in recent quarters. In fact, Ralph Lauren declined 7% in early November after releasing second-quarter results that topped estimates for both the top and bottom lines. Partly behind that decline was the company's inability to drive North American results higher: Comparable-store sales in North America increased 1% in constant currency during the second quarter, despite management ramping up marketing by 30%.

A man shopping in a premium-apparel retail store

Image source: Getty Images.

With those second-quarter sales results in mind, especially heading into the holiday season, investors are likely a little concerned after seeing shares of Tailored Brands (TLRD) plunge 31% as of 3:10 p.m. EST, after its comparable-sales growth and earnings beat were offset by a guidance cut. As you can see in the chart below, premium retailers have faced declining stock prices over the past six months:

RL Chart

RL data by YCharts.

Now what

Investors should take Ralph Lauren's decline today with a grain of salt and remember that it's actually taking strides with its business. Remember that during the second quarter it grew sales in China by 13% and digital sales by 10%, all while improving adjusted gross margin by 100 basis points to 60.9%. Furthermore, management's "Writing Our Next Great Chapter" strategy should help win a new generation of consumers, drive expansion, improve core products and underdeveloped categories, and increase its digital e-commerce footprint.

Ralph Lauren is declining today with no real direct news, though uncertainty heading into the holiday season, and a large tumble from another premium apparel retailer, are difficult for some investors to shake off. But they'd be wise to focus on the long-term improvements management is making.

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Stocks Mentioned

Ralph Lauren Corporation Stock Quote
Ralph Lauren Corporation
$93.24 (1.25%) $1.15
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Tailored Brands, Inc.

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