Ralph Lauren shares plunge as luxury fashion group slashes forecasts, blaming mild weather

 
Kasmira Jefford
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Ralph Lauren is counting on his new chief executive Stefan Larsson to revive sales (Source: Getty)

Ralph Lauren shares have plummeted by nearly 18 per cent after the US fashion brand reported a worse-than-expected decline in third quarter sales, blaming the mild winter weather and fewer tourists visiting its stores.

The luxury goods group, whose brands include Polo Ralph Lauren and Club Monaco, said net revenues fell by four per cent, or one per cent on a constant currency basis, to $1.9bn (£1.3bn) in the third quarter.

This was below the guidance it gave in November, when it forecast flat to two per cent sales growth, sending shares into a nosedive.

It has also slashed its forecast for the year to the end of March, with reported sales now expected to be down three per cent compared with flat sales growth previously forecast, also hit by the strength of the dollar.

This season's warmer-than-expected temperatures has hit retailers on both sides of the Atlantic, with Primark, Next as well as American retailer Kohl's all blaming the balmy weather for fewer sales of winter clothing.

Ralph Lauren said this together with a drop in tourist numbers and "product assortment challenges in the Lauren brand" had taken its toll on sales.

The company's net income fell nearly 40 per cent to $131m or $1.54 per share, in the third quarter. However the company pointed to its better-than-expected operating margin of 13.7 per cent in the quarter.

Stefan Larsson, who took over the role of chief executive from the company's founder Ralph Lauren in September, said:

While we are disappointed with the current business results, I was brought on board as chief executive to institute change that will drive improved performance and strengthen Ralph Lauren’s position among the top luxury companies in the world.

I am finalizing an extensive assessment into all aspects of the Company and working with my team to build a comprehensive strategic and financial plan to win. There is a lot of work to be done, but I am confident we will succeed.

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