What happened

Ralph Lauren (NYSE:RL) stock has badly trailed the market in the wake of the COVID-19 pandemic, with shares down over 40% in 2020 through mid-August. The wider market is up by 6%.

So what

Investors have lost enthusiasm for the luxury apparel and accessories specialist in light of major consumer shopping changes that are stressing its finances. Sales dove 66% in the fiscal first quarter, which runs through late June, the company revealed in early August. That decline led to an operating loss of $168 million compared to $143 million of profit in the year-ago period.

A woman holding shopping bags on an escalator.

Image source: Getty Images.

Ralph Lauren took a big hit from temporary store closures, but also from shifting consumer spending priorities.

Now what

With its store base almost fully operational again, it's a safe bet that Ralph Lauren will announce improving results in the fiscal second quarter as compared to the heavily pandemic-influenced Q1. But some growth pressures might remain well into 2021 as shoppers prioritize categories like home furnishings and consolidate shopping trips to just a few big-box retailers.

That tough outlook has management looking at aggressive cost-cutting and restructuring measures. Ralph Lauren is also entering the holiday shopping season with a light inventory position. Still, these advantages likely won't be enough to return the business to its pre-COVID-19 earnings power for some time -- especially if a prolonged recession hits the industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.