Macy's shares were down nearly 4 percent in premarket trading, while Ralph Lauren fell more than 6 percent.
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Both companies still beat Wall Street earnings estimates, as Ralph Lauren's revenue exceeded expectations and Macy's sales gains continued to outpace those of its rivals.
But Macy's gross margin slipped 0.6 percentage points to 39.4 percent during the quarter. At Ralph Lauren, it fell 1.4 points to 56.6 percent.
Macy's, Ralph Lauren and other retailers and apparel makers have raised prices in recent months to try to pass on a large part of the increase in cotton, transportation and other costs to shoppers. Reduced margins indicate that a company has had to absorb some of that.
Macy's also gave a holiday-quarter profit forecast below analysts' estimates, suggesting the threat to margins is bigger than Wall Street expected.
The company expects earnings of $1.52 to $1.57 per share for the quarter, while analysts on average were expecting $1.66, according to Thomson Reuters I/B/E/S.
Last week, Macy's, which has regularly outpaced rivals like J.C. Penney Co Inc
Macy's, whose fleet includes about 810 namesake stores and Bloomingdale's, reported net income of $139 million, or 32 cents a share, for the third quarter ended on October 29, compared with $10 million, or 2 cents a share, a year earlier.
Wall Street was expecting a profit of 16 cents a share.
The department store operator affirmed its sales forecast and still expects sales at stores open at least a year to rise between 4 percent and 4.5 percent in the current, holiday quarter.
Ralph Lauren, whose brands include Polo, Club Monaco and Chaps, said net income rose to $233.5 million, or $2.46 a share, in the second quarter ended on October 1 from $205.2 million, or $2.09 a share, a year earlier. Analysts on average had forecast $2.24 a share.
Ralph Lauren expects revenue to rise at a low-teens percentage rate this quarter, prompting it to raise its full-year sales forecast.
Shares of Macy's were down 3.6 percent at $30.99 in trading before the market opened, while Ralph Lauren fell 6.3 percent to $149.
(Reporting by Phil Wahba in New York, editing by Gerald E. McCormick and Lisa Von Ahn)