Ralph Lauren Corporation, a luxury apparel maker based in New York, has issued a warning concerning the potential for higher supply chain costs in the coming months. The company wants to ensure that its stores are well-stocked with popular items like Polo shirts and sports jackets for the holiday season. Increased expenses related to shipping and commodity prices are anticipated.

Despite raising its full-year revenue forecast, Ralph Lauren’s shares took a hit, falling by 4% during morning trading. Unlike its European counterparts in the luxury industry, who primarily manufacture their products domestically, Ralph Lauren sources a majority of its offerings from outside the United States. Approximately 40% of its products are manufactured in China and Vietnam, which puts the company at a higher risk of shipping delays and factory closures.

The clothing industry, in general, has been severely impacted by disruptions in the supply chain. Prior to the holiday season, apparel has experienced the highest levels of online stock shortages compared to other retail sectors in the United States, as reported by Adobe Analytics. However, Ralph Lauren remains confident in its ability to meet holiday demand. The company attributes this confidence, in part, to significant investments in air shipping. Jane Nielsen, the Chief Financial Officer, stated that while inventory flows may continue to vary, the company believes it has positioned its inventories well to meet demand for the upcoming holiday and spring seasons in 2022.

Ralph Lauren has increased its constant currency fiscal 2022 revenue forecast to a range of 34% to 36%, up from the previous estimate of a 25% to 30% increase. However, the company has maintained its full-year operating margin forecast at 12% to 12.5%. This is due to the higher costs of freight and raw materials, such as cotton.

In the second quarter, which ended on September 25, Ralph Lauren witnessed a 26% increase in net revenue, reaching $1.50 billion. The resurgence in demand for luxury goods in North America and Europe helped offset some pressure in Japan and China. These two countries faced the reinstatement of virus restrictions, which affected consumer foot traffic in stores.

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