Updated: Ralph Lauren raises performance expectations, but shares fall as investors anticipate faster growth

Updated stock price data in paragraph 1; additional details provided in paragraphs 5 through 8.

Neil J Kanatt/Danielle Kaye

Reuters, November 5 - Ralph Lauren (RL.N) on Thursday forecast that third-quarter revenue growth would fall short of Wall Street expectations, leading to a decline in its stock price, even though the company reported strong demand in the North American and Asian markets and raised its full-year outlook.

The New York-based high-end clothing brand saw its shares drop around 3% in early trading. As of the previous day's market close, its stock had risen about 16% so far this year.

Thanks to continued purchases of cable-knit sweaters and Polo shirts by high-income consumers in the U.S., the company has outperformed the overall luxury sector in recent quarters. China has also become a new growth engine, with second-quarter revenue up 35%.

However, market expectations for the company to maintain its rapid growth have set a high bar, so Wall Street was disappointed by Ralph Lauren's latest forecast.

The company expects third-quarter sales growth of 3% to 4%, below analysts' forecast for a 4.2% increase. Following strong performance, investors had been hoping for signs of more robust momentum. The company attributed this to a "negative impact" from wholesale shipping schedules and fewer discount sales.

Guggenheim Securities analyst Simeon Siegel said Ralph Lauren usually does a good job setting investor expectations and then beating them. The company often “beats, guides conservatively, and repeats.”

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The company forecasts its fiscal 2027 revenue growth rate at around 6% to 7%, previously projecting 5% to 6%.

CEO Patrice Louvet is optimistic about holiday sales, emphasizing the brand's value and unique style and identifying women and younger consumers as key drivers of growth.

The company expects its annual operating margin, at constant currencies, to increase by about 80 to 100 basis points, up from its previous guidance of 60 to 80 basis points.

Founded by designer Ralph Lauren in 1967, the company hired its first outside CEO about a decade ago, beginning a transformation plan. By refocusing on high-price clothing and attracting younger consumers, it has successfully boosted its sales.

Coach handbag maker Tapestry (TPR.N) also raised its annual outlook on Thursday (link), betting on holiday demand even as the luxury sector faces slowing consumer spending.

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According to data compiled by London Stock Exchange Group (LSEG), second-quarter revenue rose 9% to $2.19 billion, beating analysts’ estimates of $2.12 billion; adjusted earnings per share were $4.64, higher than the expected $4.26.

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