Ralph Lauren Corp, a worldwide luxury fashion brand, recently warned investors of higher supply chain costs as they rush to meet holiday shopping season demands. Ralph Lauren manufacturers a majority of its items outside of the United States, with about 40% of all items being manufactured in China and Vietnam. This has resulted in the company having to spend quite a lot to ensure that its stores in the United States are fully stocked with products.
However, even with this warning, Ralph Lauren also recently raised its full-year revenue forecast to rise by 34% – 36%. Previously, this forecast was about a 25% – 30% increase.
Global supply chain problems have forced businesses to spend heavily to ensure that their products are stocked in stores around the United States. Large corporations like Walmart have already made moves to have their own carriers quickly get their products to stores around the United States, as well as around the world.
The many supply chain issues have hampered the clothing industry around the world. In the United States alone, apparel items currently have the highest online out-of-stock levels. This is before the holiday season has even begun.
Ralph Lauren differs from other luxury clothing brands, in that so much of its manufacturing is done outside of its home market (the United States). In comparison, many European luxury clothing brands manufacture most — if not all — of their products in their home market. Because Ralph Lauren manufactures many of its items outside of the U.S., there is a higher chance that they could face shipping problems and delays. Factory closures, as a result of COVID-19 surges or infections, could also become a problem as the winter begins.
Many businesses around the United States are working now to fill their inventory up before the holiday shopping season officially begins. Many analysts are expecting the holiday season to go well, after a good back-to-school shopping season. Often, back-to-school shopping correlates to how consumers spend money during the holiday season. So, because consumers spent a lot for the back-to-school season, many analysts expect the same to happen for the winter holidays.
However, prices of goods may go up. While Ralph Lauren didn’t specifically say their products will rise in price as a result of their heavy spending to ship their products, other companies have already stated that the prices of their goods will rise because of global supply issues and higher shipping costs.
While the company is spending a lot of money to ensure its stores in the United States are well stocked, Ralph Lauren does expect a strong holiday season. Even with this heavy spending on shipping, and with other problems that have kept many businesses from performing well (labor shortages, material shortages, etc), Ralph Lauren is expecting high sales this season.
Global supply chain issues will likely still be an issue for so many other businesses. While large corporations like Ralph Lauren and Walmart can spend heavily to ensure their stores are stocked, smaller businesses may not have this ability.