As Ralph Lauren (NYSE:RL) prepares to announce its Q1 fiscal 2013 earnings results on Wednesday, (Ralph Lauren to announce Q1 fiscal 13 results, Source: Ralph Lauren’s IR)) investors will be keenly watching the impact of weak macro-economic situations in Europe on the company’s results. Additionally, we’ll also watch for updates in its domestic business, particularly the impact of the company’s Olympics campaign on its sports apparel segment. Ralph Lauren competes with premium apparel and accessories players like Coach (NYSE:COH), Liz Claiborne (NYSE:LIZ), Ann (NYSE:ANN) and other premium private labels.
Market remains cautious on Ralph Lauren’s European exposure
The primary reason behind the market’s cautious view is the concern regarding uneasy macro-economic conditions prevailing in Europe. As Europe constitutes a sizable portion of Ralph Lauren’s international business, the market fears that promotions in Europe to drive sales may take a toll on Ralph Lauren’s margins, thus reflecting as a decline in its earnings.
Additionally, with Europe contributing a significant percentage to the company’s wholesale business, Ralph Lauren can see a decline in its wholesale revenues too. Ralph Lauren acknowledged this in its Q4 fiscal 2012 earnings call, with the company forecasting a single digit decline in wholesale sales on account of weak demand in Europe. 
Watching Ralph Lauren’s domestic business
This will also be one of the key things to watch out for Wednesday. Ralph Lauren’s major competitor Coach’s stock crashed by 19% after the disclosure of its Q4 fiscal 2012 sales results. The primary reason behind the steep drop was Coach’s North American sales missing market expectations, citing weak spending in the U.S. luxury market. See: Coach Crashes As North American Sales Miss Expectations
How Ralph Lauren has performed domestically in similar conditions will be a big question for investors before the earnings release.
Additionally, we will also watch for updates on the impact of Ralph Lauren’s Olympics campaign on its sports apparel segment. The company drew a lot of criticism recently for outsourcing the production of the U.S. Olympics team’s opening ceremony uniforms to China. Whether the controversy has negatively impacted Ralph Lauren’s brand image or instead acted as free marketing platform for the company will be clear only after analyzing the Q1 earnings results.Notes: