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Why Shares of These Upscale Fashion Brands Are Down Sharply Today

By John Rosevear - Mar 16, 2020 at 4:04PM

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It's all about retail foot traffic, and the lack thereof.

What happened

Shares of upscale fashion companies Capri Holdings (CPRI -2.47%), Ralph Lauren (RL -2.05%), and Coach parent Tapestry (TPR -2.21%) were all down sharply on Monday, on growing fears about retail traffic as authorities move to counter the growing virus pandemic.

As of 2:45 p.m. EDT on Monday, shares of Capri Holdings, Ralph Lauren, and Tapestry were down about 28.7%, 18%, and 24.5%, respectively, from Friday's closing prices.

So what

The story with all three stocks is a simple one: Retail store traffic in the U.S. and Europe has fallen sharply and may fall further as authorities increase measures to stop the spread of COVID-19, the illness caused by the novel coronavirus.

A sign on the outside of a Ralph Lauren store in Paris

Image source: Ralph Lauren.

All three of these companies sell apparel, shoes, and accessories through upscale department-store chains and through their own stand-alone brick-and-mortar stores. Each is facing a double threat: Declining foot traffic in their own stores, and cuts in orders from department-store chains trying to right-size inventories ahead of a likely sharp sales decline.

Now what

All three companies warned investors in February that revenue will decline because of virus-related effects in Asia:

  • Capri, which owns Michael Kors and other fashion brands, cut its revenue guidance for the fiscal year that will end on March 31 by $100 million, on similar concerns about store closings and sales declines in Asia.
  • Ralph Lauren warned that virus-related disruptions in Asia will cost it between $55 million and $70 million in revenue in the quarter that will end on March 31.
  • Tapestry, the parent company of the Coach, Stuart Weitzman, and Kate Spade brands, cut both its revenue and profit forecasts for the fiscal year that will end on June 30, saying that virus-related effects will reduce sales by $200 million to $250 million and earnings per share by $0.30 to $0.45.

It seems likely that all three companies will have to revise their sales estimates sharply downward again as efforts to slow the spread of the virus in North America and Europe take hold.

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Stocks Mentioned

Capri Holdings Limited Stock Quote
Capri Holdings Limited
CPRI
$41.01 (-2.47%) $-1.04
Tapestry, Inc. Stock Quote
Tapestry, Inc.
TPR
$30.52 (-2.21%) $0.69
Ralph Lauren Corporation Stock Quote
Ralph Lauren Corporation
RL
$89.65 (-2.05%) $-1.88

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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