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How Ralph Lauren Stock Has Fared Through the Coronavirus

By Demitri Kalogeropoulos – Aug 25, 2020 at 8:16AM

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Investors are worried about persistent demand struggles as consumers reorient their shopping priorities.

What happened

Ralph Lauren (RL 0.19%) 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.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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