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Weak Retail Outlook Weighs on Apparel Stocks

Ralph Lauren (RL) - ★★★★ - Ranked #25 in Q2 2024 Mid & Small Cap Rankings

Levi Strauss & Co. (LEVI) - ★★★ - Ranked #70 in Q2 2024 Mid & Small Cap Rankings

Shares of prominent apparel companies Ralph Lauren (RL) and Levi Strauss (LEVI) tumbled on Tuesday, declining 5-7% amid concerns over sluggish consumer spending in the retail sector.

The selloff in these consumer discretionary stocks comes on the heels of apparel maker PVH (PVH) indicating weak wholesale revenue and also is a follow up to Ralph Lauren's fiscal 2024 third-quarter earnings report. While the company reported a 6% increase in overall revenue, its North American wholesale revenue dropped a worrying 15% year-over-year.

This significant decline in wholesale numbers, which refers to sales made to third-party retailers, is seen as a potential red flag for the retail industry. It suggests that consumer demand for apparel and fashion goods may be waning, potentially due to elevated inflation and economic uncertainty.

Levi Strauss, the iconic denim company, saw its shares drop in sympathy with Ralph Lauren's results. Investors are likely recalibrating expectations for Levi's upcoming quarterly report, scheduled for release tomorrow (April 3rd) to see if the weaker guidance is an industry wide problem or narrow in scope.

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