Falling stock prices open doors: Ralph Lauren
Steve’s breakdown: When stocks fall, people take notice and so should you. Brands needing help include Polo Ralph Lauren, Chaps and Club Monaco.
NEW YORK, NY: Apparel stocks are getting stripped naked and flogged.
Clothing companies and the retailers that hawk their threads took a beating Thursday, after Ralph Lauren and Kohl’s reported results that badly missed expectations.
Ralph Lauren led the way after cutting its sales outlook for the year. The New York-based company, whose brands include Polo Ralph Lauren, Chaps and Club Monaco, said it was undertaking a top-to-bottom review of the business — one that could result in fewer brands.
Revenues in the quarter declined 4 percent, to $1.9 billion — instead of the flat 2 percent rise the luxury retailer had predicted in November.
Ralph Lauren revenue will only be up about 1 percent this year, excluding currency swings. It had previously forecast growth of 3 to 5 percent.
The news sent its stock into a nose dive, closing down 22 percent, to $89.95.
Hurting department stores — which sell the bulk of the apparel company’s merchandise and also reported weak holiday sales — were partly to blame.
“Our recent financial performance has been very disappointing on a top- and bottom-line level, and we are asking ourselves the tough questions needed,” said Chief Executive Stefan Larsson during an earnings call.
He joined Ralph Lauren three months ago from Gap Inc.’s Old Navy chain.
Larsson is spearheading a “comprehensive assessment” of the company, the results of which will be disclosed in May, he said.
The veteran retail executive hails from the world of fast fashion, and his appointment was seen as an acknowledgment by 76-year-old Ralph Lauren that the company needs new ideas.
“H&M and others like it have taught customers that $20 jeans are available — and that makes $200 jeans much less appealing,” said Credit Suisse analyst Christian Buss, who downgraded Ralph Lauren to neutral from outperform because “we don’t see a near-term solution. It will take several years for Ralph Lauren to find breathing room.”
Ralph Lauren isn’t the only one having trouble.
Kohl’s got clobbered, finishing down nearly 19 percent, at $41.52, after the Midwest-based department store chain cut its full-year guidance.
The company, which reports quarterly results later this month, saw same-store sales in the holiday quarter tick up 0.4 percent. Analysts were looking for a gain of 0.8 percent.
The pair of downbeat reports dragged down shares of other stocks in the apparel sector.
VF Corp., which makes Lee jeans and North Face apparel, slid 3 percent. PVH, owner of the Calvin Klein and Tommy Hilfiger brands, dropped 2.3 percent.