Although luxury sales in the United States have been strong this year, with firms able to pass on higher costs more readily than cheaper labels, recent figures suggest that Americans are beginning to cut back on spending on designer handbags and apparel. Accessible luxury businesses like Michael Kors and Ralph Lauren are expected to suffer more than higher-priced labels, as their young core consumer base seeks bargains at the lower end of the fashion range. "As we approach closer to the holidays and consumers continue to read about excess inventory everywhere, it makes logical that (consumers) are reviewing their purchases and waiting to see what the Christmas offers will be," said Simeon Siegel, an analyst at BMO Capital Markets.
Tapestry, which also owns the Kate Spade and Stuart Weitzman brands, lowered its fiscal 2023 revenue forecast from $6.9 billion to $6.5 billion to $6.6 billion, citing a "more modest revenue outlook in North America and Greater China." Ralph Lauren stated that sluggish demand in North America and Europe, where surging energy costs are also hurting consumer wallets, will hurt its Christmas quarter sales. The remarks echo a similar warning issued by Michael Kors owner Capri Holdings Ltd on Wednesday, when it lowered holiday-quarter forecasts, blaming a slowing recovery in China and sluggish demand from U.S. wholesale retailers.
This year has been a difficult one for high-end fashion companies in China, as sporadic business and movement restrictions imposed by Beijing's "dynamic zero-COVID" policy have kept customers away. Tapestry and Ralph Lauren both warned that a stronger dollar would reduce their profits. Ralph Lauren stock, which has lost nearly a quarter of its value this year, rose about 5% in premarket trading after the company exceeded second-quarter sales and profit expectations.