Ralph Lauren (RL 3.29%) sees mounting costs from the spread of the coronavirus in China and the related closures of its retailing points in the country. The retailer said on Thursday that roughly two thirds of its stores in the country have been closed over the past week and that more closures, both in China and in other parts of Asia, are expected to hurt the business this year.
What's the impact?
In contrast to its early February earnings report, Ralph Lauren now knows enough to reasonably estimate the financial hit from the coronavirus outbreak and related travel restrictions. The current quarter's sales will be lowered by between $55 million and $70 million, executives said. Profits will be pressured by as much as $45 million in the Asia segment that accounts for just under 20% of the retailer's global sales and a large portion of its manufacturing base. "Our number one priority is keeping our teams, partners and consumer safe," executive chairman Ralph Lauren said in a press release.
The quickly changing facts on the ground in China make it nearly certain that the retailer will need to issue further adjustments to its 2020 outlook. The apparel specialist promised a comprehensive update to its financial targets when Ralph Lauren posts fiscal fourth-quarter results in May.