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Ralph Lauren Clears Investor Expectations; But It’s a Low Bar

Ralph Lauren may be the official supplier of Team USA’s uniforms, but the All-American apparel brand posted a less-than-Olympic performance during its most recent quarter.

Thankfully for Lauren, in the pole vault of Wall Street, setting the bar low enough reaps its rewards. Despite another quarter of declining sales, shares of the company jumped more than 8 percent on the news last Wednesday, and have continued to climb over the last week to a three-month high of $108.84 as of Tuesday afternoon.

Net revenue fell for a fifth straight quarter—down four percent to $1.6 billion, slightly better than the $1.52 billion analysts had predicted. Same-store sales also suffered, down six percent through the end of the company’s first quarter.

The company saw a small bright spot in its international sales, which rose 10 percent, but this was offset by a painful 11 percent drop in its U.S. sales, including a five percent drop in its wholesale accounts. The company cited weak foot traffic to stores and excess inventory as culprits.

“We, like everyone else, are facing difficult retail traffic trends in a highly promotional environment,” said Ralph Lauren CEO Stefan Larsson during the company’s earnings call.

Ralph Laren posted a net loss of $22 million in its first quarter, compared to a profit of $64 million in the year prior. Adjusted net income was $90 million, or $1.06 per diluted share, beating the 89 cents per share Wall Street had predicted.

As with other legacy apparel brands, Lauren has been hit hard on multiple fronts. The shift to fast fashion means consumers now demand constant innovation, and Larsson said the brand has not done enough to evolve “consumer offering in product, marketing, [and] shopping experience,” parroting complaints that Lauren’s offering has gotten stale.

At the same time, weak foot traffic to Ralph Lauren retail locations, where sales were down three percent in the last quarter, have hurt the brand. The company announced earlier this summer that it had cut its workforce by 8 percent.

Nonetheless, Larsson said he was satisfied with progress on the company’s “Way Forward” plan thus far, “We have made good initial progress… We will continue to balance driving near-term performance with the pursuit of our long-term vision. We have already completed the planned right-sizing of the organization and are well underway in building the leadership team that will have the strength to successfully execute the plan.”