Ralph Lauren tumbles after weak holiday hampers comeback bid

[NEW YORK] Ralph Lauren Corp plunged as much as 9.7 per cent in early trading after posting disappointing holiday-season sales, signaling that a comeback under new chief executive officer Patrice Louvet may be tougher than expected.

The preppy fashion label reported a same-store sales decline of 6 per cent last quarter, which included the crucial Christmas season. Analysts had projected a 4.3 per cent drop, according to Consensus Metrix.

Though the company topped Wall Street estimates for profit, the weak sales suggest Ralph Lauren is still struggling to regain its cachet. Louvet, who took the helm in July, has tried to make the company more discerning about where it sells its Polo shirts and cashmere cardigans.

In recent months, the New York-based brand has been withdrawing from 20 to 25 per cent of its department store distribution points and reducing overall inventory.

But the strategy has taken a toll on sales - North America revenue fell 11 per cent - and it's not clear when the company will return to growth mode. Ralph Lauren expects sales in the current quarter to drop by as much as 10 per cent, and its annual outlook calls for a plunge of up to 9 per cent.

Neil Saunders, managing director of GlobalData retail, said that while the company's sales decline seems to be flattening out, Ralph Lauren still hasn't managed to connect with shoppers.

"The main brand issues are still clarity and relevance," Mr Saunders said in a note following the report. "Many consumers are unclear about what Ralph Lauren stands for or what it has to offer; therefore, they do not see the brand as being entirely relevant to them."

The shares fell as low as US$103.22 in premarket trading following the results. Ralph Lauren had been up 10 per cent this year through Wednesday's close.

Cost cutting and pockets of growth - in Asia, for instance - helped earnings top analysts' estimates. Profit excluding some items of US$2.03 a share in the period surpassed the average estimate of US$1.87.

"There is still a lot of work to be done to return to industry-leading revenue and earnings growth, but these results give us confidence that we are on the right track," Mr Louvet said in the statement.

BLOOMBERG