Ralph Lauren shares climb on strong China performance
The US brand reported a 1 per cent increase in third-quarter revenues to $1.8 billion, reporting low-double-digit growth across all geographical markets.
Published February, 9 2023
Ralph Lauren said third-quarter revenues increased 1 per cent to $1.8 billion, beating analyst expectations as revenues grew across all geographical markets. Shares rose 3.22 per cent in pre-market trading on Thursday morning.
China was a bright spot despite ongoing challenges in the region. The brand opened 55 new stores and concessions in China during the third quarter. Sales in Asia increased 1 per cent in the quarter to $386 million. Comparable store sales in Asia increased 8 per cent, with a 7 per cent increase in its bricks-and-mortar stores and a 21 per cent increase in digital commerce. President and chief executive office Patrice Louvet says the business has seen a double-digit rebound across mainland China.
“We see significant near and long-term opportunities in China,” Louvet says. Beyond domestic consumption, Louvet believes the business in Asia will benefit from the return of travel in regions such as Southeast Asia and Northeast Asia.
Other luxury brands have reported setbacks thanks to China. Estée Lauder, Ferragamo and Tod’s Group have all reported a slowdown in China despite strict Covid-19 restrictions easing. “We remain cautious due to headwinds — softening consumer shopping, especially in Europe, China Covid lockdowns, FX pressures and continued recession threats,” says Jessica Ramírez, senior research analysts at retail investment research firm Jane Hali & Associates, in a note.
Ralph Lauren’s North America revenue grew 1 per cent to $938 million during the period ending 31 December. Comparable store sales were up 2 per cent, with a 9 per cent increase in digital commerce. Similarly in Europe, revenues were up 1 per cent to $469 million. Comparable store sales in Europe were up 11 per cent, with an 11 per cent increase in bricks-and-mortar stores and a 12 per cent increase in digital commerce.
“Our core consumer remains resilient and our iconic products are resonating around the world — evidenced by our strong third quarter and year-to-date performance,” said Louvet. “While we remain very attuned to the dynamic global operating environment, the breadth of our portfolio of products and our multiple engines of growth create the flexibility that will enable our teams to continue to be agile, adapt and deliver even in this challenging backdrop.”
Ralph Lauren’s Polo Men’s division continues to perform well among consumers.
“We’re seeing progress on men’s consistently,” says Louvet. “We also have investments in the tailored proposition, which is where we’re seeing the consumer gravitate more and more for this elevated casual proposition.” Similarly, Polo Women’s is gaining traction as the US company continues to see growth opportunities in this category and a growing interest in casual, athleisure styles.
“The success of the brand elevation strategy remains evident in ongoing average unit retail growth as the company continues to attract younger, high-value new customers,” analyst Dana Telsey of Telsey Advisory Group says in a note.