Ralph Lauren’s Sales Impacted by Slowdown in the US Market
Ralph Lauren is facing a declining American market, resulting in a drop in its stocks. The decrease in sales in the United States is partly offset by success in the Chinese market. Market challenges in the United States are also affecting other giants like Chanel.
By Eva Morletto15 août 2023
The American fashion house Ralph Lauren is going through a challenging period. The company's executives anticipate financial performance below expectations for the current quarter. These alarming forecasts have repercussions in the stock market, where investor caution is causing a drop in shares on Wall Street, at $121.07 (-8.02% over five days).
Usually, the brand generates over half of its annual revenue from the United States. However, the luxury market across the Atlantic is sluggish. Consumers, impacted by inflation and an uncertain economy, are more cautious about spending. Ralph Lauren's sales in the last quarter reflect this, with a 10% decline in the United States.
Nevertheless, the company remains hopeful. The board of directors remains cautiously optimistic for 2024, anticipating growth in sales and revenue with an improvement of between 30 and 50 basis points in constant currency of the operating margin.
The Asian market gives a boost to Ralph Lauren, particularly in China. Following the health crisis, sales surged by 50% in the first quarter in the country, representing revenue of $378 million for the Asia region.
The international market played a significant role in achieving a net profit slightly higher than the previous year, going from $123 million for the first quarter of 2022 to $132 million for the same period in 2023. The figures for the second quarter seem to follow the current trend, with analysts projecting a 3.3% increase.
Ralph Lauren's sales slowdown highlights the challenges of the American market. Consumers are less inclined to spend on luxury products, affecting many prestigious brands, from Chanel to Armani. Philippe Blondiaux, CFO of Chanel, confirmed this observation and announced that sales in the United States had slowed since last November. In contrast, in 2022, the iconic French house achieved double-digit growth. Analysts at HSBC have looked into the issue, confirming in a note released last week that "the persistent sluggishness of the American market looms as the main point of attention for this second quarter."
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