Ralph Lauren Corp., the preppy-apparel retailer struggling with a strong dollar and slow store traffic, suffered its worst stock decline in almost two decades after lowering its sales forecast.
Revenue will only be up about 1 percent this year, excluding the effects of currency moves, the New York-based company said in a statement on Thursday. It had previously predicted growth of 3 percent to 5 percent.
The company also said that fiscal 2017 revenue will be lower than in the current year, though operating margin will be higher when excluding restructuring expenses and other costs. Ralph Lauren expects foreign currency to have a $90 million negative impact in fiscal 2017.
The outlook shows the challenges facing Chief Executive Officer Stefan Larsson, a former Gap Inc. executive who succeeded founder Ralph Lauren in November. Traffic has been sluggish at malls and department stores, and the strong U.S. dollar is eroding the company’s foreign revenue.
“Everybody’s worried that they’re not OK,” said Paul Swinand, an analyst at Morningstar Inc. “The rub against these guys would be, ‘You sell to department stores and you’re a tired brand. Is it the beginning of the end?’”
The shares fell 22 percent to $89.95 at the close of trading in New York on Thursday, its biggest drop since the shares began trading in June 1997. That follows a 40 percent decline in 2015, a year when apparel companies were battered by investors.
Ralph Lauren is in the middle of a reorganization effort that will cut $110 million in annual costs by the end of fiscal 2017. As part of the changes, the company is reducing product count to keep inventory low.
“While our recent results have been disappointing, I am greatly encouraged by the changes that are already taking place since the appointment of Stefan Larsson,” Lauren, 76, said in the statement.