The Exchange

Ralph Lauren Stock Withstanding ‘Made-in-China’ Olympics Gear Flap

The Exchange

Though Ralph Lauren (RL) has found itself at the center of a controversy this week as critics broke out complaints about the uniforms for the U.S. Olympic team, based on the stock's behavior, investors don't appear too concerned about any serious effects.

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On Friday, shares of the New York-based clothing designer were up 3% to $141. At that price, the stock is about $4 below where it went out last week. Before the latest session's gain, through Thursday's close it had fallen more than $7, or about 5% since July 6. While that is a steeper drop than the S&P 500 (^GSPC), which lost 1.5% over the same period, and the S&P Retail Index (^RLX), down 2.2% in that span, it doesn't suggest any particular angst on the trading side.

Some of the first negative comments pertained to the stylings themselves, both the berets -- headwear often associated more with France than with the U.S. -- and the clear display of the well-known Ralph Lauren polo player logo on the team's blazers.

The volume only increased with the topic of where the uniforms were made. That would be China. It's common knowledge that the United States has forfeited considerable ground in clothing manufacturing in recent years, as companies sent production to lower-cost factories in Asia and Latin America. Nonetheless, Ralph Lauren was drawing fire.

Along with the general public weighing in on news stories across the Internet, several politicians have objected, including Senate Majority Leader Harry Reid, House Speaker John Boehner and minority leader Nancy Pelosi, according to an Associated Press report that had a rundown of the rage. Reid, for instance, was quoted in the article as such: "I am so upset. I think the Olympic committee should be ashamed of themselves. I think they should be embarrassed. I think they should take all the uniforms, put them in a big pile and burn them and start all over again."

The U.S. Olympic Committee doesn't seem to be planning any apologies. Patrick Sandusky, who's in charge of communications for the USOC, addressed it on his Twitter feed (@PatrickSandusky), writing: "All this talk about [O]lympic uniforms made in China is nonsense. Polo RL is an American company that supports American athletes."

Called for comment, Ralph Lauren's corporate communications office said the company had no official statement on the matter.

Brian Sozzi (@BrianSozzi), chief equities analyst at Decoding Wall St., said he wouldn't be surprised if the company maintained that stance, and that in fact it was probably the proper approach.

"I don't expect them to come out and say anything. I don't know that they have to," he said. "It seems like every time a publicly traded company tries to address a controversy, it's almost seen as a sign of weakness."

Sozzi doesn't believe the uniform flap will "fundamentally alter" the prospects for the stock. According to Yahoo! Finance data, Ralph Lauren's shares are up 4.6% in the last year, 81.2% in the past two years and over five years, up 42.4%. Since the end of 2011, the stock has risen about 2.6%.

"I am more concerned with their guidance than I am this stuff that's in the news," he says. On the topic of numbers, Sozzi says the company isn't doing anything different than many other textile firms do. "They're trying to maximize profit margins ... . All consumers expect their goods to be sourced from China at this point."

Though Ralph Lauren conceivably could have sewn the uniforms in America, "they have to try to maximize things where they can."

At this point, he isn't expecting a consumer-level backlash that would noticeably hurt the company's sales or its stock price, though theoretically a campaign could gather steam in the social sphere. So far, there doesn't seem to be any organized effort to mount an anti-Ralph undertaking. As a result, Sozzi's not changing his models on the stock.

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