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Why Ralph Lauren Stock Lost 20% in May

Demitrios Kalogeropoulos, The Motley Fool

What happened

Ralph Lauren (NYSE: RL) saw its stock underperform a weak market last month as shares lost 20%, compared with a 7% decline in the S&P 500, according to data provided by S&P Global Market Intelligence.

The decrease left shareholders just below broader market returns for the year, with the stock up 7% so far in 2019.

A man holding several shopping bags.

Image source: Getty Images.

So what

Investors had been hoping for good news in the retailer's earnings report, and on May 14 the company largely delivered on those expectations. Revenue inched higher in the fiscal fourth quarter and gross profitability improved slightly.

However, Ralph Lauren returned to shrinking sales in the key U.S. market after that business grew in each of the prior two quarters. The decline suggests the chain still has work to do to stabilize its revenue base.

Now what

Investors can expect to see more modest growth and profitability metrics from Ralph Lauren over the next few quarters as the company works to lessen its reliance on price cuts while seeking to grow the brand. Those goals are somewhat at odds with each other, and so the stock's performance will ultimately depend on how well CEO Patrice Louvet and his team can balance their many rebound priorities.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.