Ralph Lauren Warns Resurgence in Virus Cases Could Derail Recovery

Ralph Lauren Warns Resurgence in Virus Cases Could Derail Recovery
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Ralph Lauren Warns Resurgence in Virus Cases Could Derail Recovery

Ralph Lauren Warns Resurgence in Virus Cases Could Derail Recovery

Ralph Lauren Corp warned on Thursday that a new wave of COVID-19 cases could hurt its sales recovery in North America and Europe, with consumer demand likely to be pressured for the rest of the year.

Ralph Lauren's shares fell 7%, taking the yearly losses to over 40%, as the company also missed second-quarter sales estimates.

The health crisis has bruised sales of luxury goods companies, which have traditionally avoided online sales, as shoppers resisted visiting physical retail locations even after lockdowns were eased.

"There is a high degree of uncertainty surrounding the second wave of shutdowns... biggest potential threat to our second half recovery," Chief Financial Officer Jane Nielsen said.

"Given the announcements of what we saw in Europe, particularly in France and Germany, and the rising case count in North America, we're not guiding for when we will return to pre-COVID levels."

Germany and France, two huge markets for luxury fashion, on Wednesday ordered their economies back into lockdown, as a massive second wave of coronavirus infections threatened to overwhelm Europe before the winters.

However, Ralph Lauren's sales are rising in China as the country's wealthy shop more online and at local stores.

China's growth could not offset the slump in demand in other parts of the world. Ralph Lauren reported a 30% drop in second-quarter net revenue to $1.19 billion, missing estimates of $1.21 billion, according to IBES data from Refinitiv.



H&M seeks to Lure US Shoppers as Fast-fashion Rivals Hike Prices Due to Tariffs

A woman is reflected next to the logo of the H&M fashion retailer in the newly opened Mall of Berlin shopping center in Berlin, Germany, in this September 25, 2014 file photo. REUTERS/Thomas Peter
A woman is reflected next to the logo of the H&M fashion retailer in the newly opened Mall of Berlin shopping center in Berlin, Germany, in this September 25, 2014 file photo. REUTERS/Thomas Peter
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H&M seeks to Lure US Shoppers as Fast-fashion Rivals Hike Prices Due to Tariffs

A woman is reflected next to the logo of the H&M fashion retailer in the newly opened Mall of Berlin shopping center in Berlin, Germany, in this September 25, 2014 file photo. REUTERS/Thomas Peter
A woman is reflected next to the logo of the H&M fashion retailer in the newly opened Mall of Berlin shopping center in Berlin, Germany, in this September 25, 2014 file photo. REUTERS/Thomas Peter

H&M is trying to win shoppers from rivals in the United States by holding prices steady while Zara and Shein raise theirs, as US tariffs disrupt the fast-fashion industry that relies on imports of low-cost clothes from China, Vietnam, and other Asian countries.

H&M CEO Daniel Erver said on Thursday constantly changing tariffs had created turbulence, with the world's second-largest listed fashion retailer planning for multiple scenarios.

In an interview, he told Reuters that the challenge in the coming months is "to understand the consumer sentiment, which we see has dropped in the US due to all the turbulence... with the fact that some will be forced to raise prices more, and what (that creates) as an opportunity".

"Different competitors are acting in different ways, some more aggressively, some more cautiously," he added.

H&M has around 500 stores across the US, its second-largest market after Germany in terms of sales, accounting for 13% in 2024.

As US tariffs add to costs for retailers, relative price positioning is front of mind for executives, and the timing of price increases is key, with companies watching the competition closely to see who will blink first.

For H&M, which is trying to improve its profitability, sticking to current prices for longer carries risks as rising costs eat into margins.

But it also provides an opportunity to take market share from rivals.

"Maybe they are going to raise prices in the US... but just to a lesser extent as compared to competitors," Pareto Securities analyst Alexander Siljestrom said.

H&M can also mitigate the tariff impact by shifting production of US-bound clothes from China, which faces the highest tariff rate, to Bangladesh and elsewhere, he said.

Across categories including dresses, jeans, and shirts, the average US price at H&M's bigger competitor Zara was up by 28% this month from a year ago, according to data from price tracking firm EDITED, while prices at H&M in the US were on average down 3% year-on-year.

Zara prices were up across the board in June compared to January this year, EDITED found, while H&M has kept prices more or less stable, even though its chief financial officer Adam Karlsson said in March that price hikes were likely to offset tariffs.

Shein, which sends clothes direct to US shoppers from factories in China, has also had to raise prices and suffered weaker customer growth since Trump ended the "de minimis" duty-free treatment of low-value parcels.

SOURCING FROM FEWER, CLOSER SUPPLIERS

As it aims to improve its supply chain and get new styles to stores faster, H&M has spent the last 18 months consolidating its supplier base, Erver said, aiming to order more from a smaller number of big suppliers who also operate factories in multiple countries.

"We look at each individual order to decide what's the best sourcing market depending on the craftsmanship, the skills, the pricing situation, but also now more than ever the geopolitical situation with trade barriers," he told Reuters.

"That has led us in certain cases to take the decision to move things to different markets."

H&M also aims to be below full capacity with all of its suppliers, so it can easily increase production if needed when an item sells well, Erver said.

As part of its "nearshoring" strategy of sourcing products from suppliers closer to main consumer hubs, H&M is looking to increase its supplier base in markets like Türkiye, Egypt, Jordan, and Morocco for Europe, Erver said.

H&M will also add suppliers in Brazil, where it is opening its first stores in the second half, he added.