Ralph Lauren closing Fifth Avenue flagship store

Ralph Lauren was among the biggest decliners on the S&P 500 on Tuesday after the American clothing line known for its preppy fashion said it would shutter its flagship Fifth Avenue Polo store and announced further job cuts as part of its “Way Forward Plan”.

The retailer expects to incur restructuring charges of about $370m. However, efforts to streamline the organisation, address its cost structure and real estate portfolio should result in $140m in annualised savings that can be reinvested for future growth.

The savings come on top of the $180m to $220m in annualised expense savings announced last year when outgoing chief executive Stefan Larsson first unveiled the plan. And the job cuts, which are a smaller portion of the restructuring charges, are in addition to an 8 per cent reduction to its workforce it unveiled last June.

Ralph Lauren, like other retailers, has seen its business hurt by a rise in online shopping and competition from fast fashion names like H&M and Zara. The company also said it will improve its e-commerce platform through a collaboration with Salesforce and explore new retail concepts.

Ralph Lauren shares, which have fallen nearly 10 per cent so far this year, were down 5 per cent to $77.38 by mid-afternoon trading. The drop also accompanied a broader sell-off in retail names with shares in L Brands and Kohl’s lower by nearly 4 per cent to $44 and $37.58 respectively. Shares in Michael Kors, Nordstrom and Coach were down about 3 per cent.

“There is a general black cloud across consumer discretionary stocks and a few headlines push that a little bit further,” said Simeon Siegel, an analyst at Nomura’s Instinet.

Elsewhere, Bank of America came under pressure after it was downgraded by analysts at Citigroup who believe that the US lender’s surge after the election has left the stock “fully valued”.

Keith Horowitz reduced his rating on BofA to “neutral” from “buy”, and cut his price target on the shares by $1 to $25. Citi also removed the North Carolina-based bank from its list of recommended stocks.

The bank’s shares have rallied by almost 40 per cent since the November election on expectations that BofA would benefit from an expected uptick in economic growth prompted by Donald Trump’s pro-business policies and interest rate rises by the Federal Reserve.

BofA has a large domestic retail banking business, meaning it is considered to be particularly sensitive to fluctuations in the US economy.

The bank’s move higher has made the stock more expensive, leaving it priced at 12.8-times expected earnings over the next 12 months, up from 10.93-times on November 8, according to FactSet data. The S&P 500 banks index trades at a forward p/e ratio of 13.10-times.

“We believe that the benefit of higher rates, the potential post-election improvement in regulatory and economic outlook are reflected in the current valuation,” said Mr Horowitz. “In our view, a material improvement in the economic backdrop would be needed to move earnings forecasts higher from here”.

BofA’s shares slid as much as 1.7 per cent to $23.20 before trimming their losses by lunchtime.

By midday, the S&P 500 was down 0.1 per cent to 2,356.82, the Dow Jones Industrial Average was up 0.1 per cent to 20,668.03 and the Nasdaq Composite was 0.1 lower at 5,890.84.