Ralph Lauren warns resurgence in virus cases could derail recovery

By Uday Sampath Kumar and Mehr Bedi

(Reuters) - Ralph Lauren Corp (NYSE: RL) 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.

Neil Saunders, managing director of GlobalData, said the scale of the drop, which was worse than other high-end peers, was a sign the company was losing market share.

Coach handbag maker Tapestry Inc (NYSE: TPR) reported just a 13.7% fall in net sales on Thursday.

However, Ralph Lauren reported adjusted quarterly earnings of $1.44 per share, beating estimates of 90 cents per share.

(Reporting by Uday Sampath in Bengaluru; Editing by Shinjini Ganguli)

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