(Bloomberg) -- Ralph Lauren Corp.’s strong sales in its latest quarter didn’t assuage investor concern the apparel company is recovering too slowly from Covid’s drag.
The shares fell as much as 6.7% in New York trading, the most intraday since May 20. The stock had advanced 25% this year through Monday’s close, outpacing the advance of the S&P 500.
Earlier, the company reported quarterly revenue that outpaced analysts’ average estimate. However, GlobalData Managing Director Neil Saunders said that while sales surged, that was “off the back of a 30% decline in the prior year.”
As expected, the company’s sale of its Club Monaco brand earlier this year and its intentional pullback from sales at some department stores and outlets has eroded revenue. “But even when these are considered, Ralph Lauren is still underperforming the market on a two-year basis,” Saunders said in a research note.
Ralph Lauren’s results highlight the progress the brand has made trying to recover from years of heavy discounting in the past decade, which dented revenue and eroded the brand’s appeal for higher-end shoppers. But the company has been slower than some of its peers to recover from the pandemic, which has squashed some of investors’ optimism going forward.
Chief Executive Officer Patrice Louvet, however, said the company outpaced its own expectations and succeeded in attracting new customers and increasing prices last quarter. That led it to boost its revenue outlook or the full year.
Ralph Lauren is focusing on younger customers who are more willing to pay full price for its products, Louvet said in an interview. “We are going to double down on that,” he said, adding the brand is seeing strong demand from shoppers for “sophisticated casual” items as well as robust growth in the sale of tuxedos and evening gowns.
In its second fiscal quarter, Ralph Lauren reported a 14% increase in the average price of the items it sells, a closely watched metric. This represents a step forward in the company’s yearslong mission of recovering from heavy discounting during the past decade.
Production in factories in Vietnam has been gathering momentum as plants work through a backlog following closures due to Covid-19. Louvet said he expects production there and in other countries where the company produces its apparel to be back to normal at the beginning of 2022. Logistical challenges tied to shipping and trucking, however, will probably last through the end of next year, he said.
“We feel well-positioned going into the holiday,” Louvet said.
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