Ralph Lauren Keeps Winning Streak Going, Raises Annual Outlook

Ralph Lauren Corp. raised its annual sales outlook after the apparel company reported another robust quarter of revenue growth that topped Wall Street’s expectations.

The company said it now expects sales in the current fiscal year to increase by a low-single-digit to a mid-single digit percentage. That excludes currency fluctuations. That’s above Wall Street’s estimate for a 3.6 percent increase and a wider range than a previous forecast.

Ralph Lauren also delivered better-than-expected sales and profit in the most recent period. The company said comparable direct-to-consumer sales in its fiscal first quarter rose 13 percent. Analysts on average expected a gain of 9.6 percent.

Shares rose 3 percent in premarket trading. The stock had surged 31 percent this year through Wednesday’s close, topping the 7.9 percent gain for the S&P 500.

Ralph Lauren has been a standout among US apparel companies, managing to steadily increase prices in recent years — even before tariffs hit – while amplifying its offering to handbags and women’s clothing and attracting more shoppers who skew younger, female, international and are less price sensitive.

China Growth

That’s helped the company decrease discounts and buffer more sluggish demand in the US with solid sales growth in Europe and Asia. Ralph Lauren generates less than 10 percent of its revenue in China and investors see potential for a continued increase in demand from shoppers in the country.

Revenue in China rose 30 percent in the most recent quarter from a year ago. Across Asia and Europe, sales increased by a double-digit percentage while North America gained 8 percent.

Ralph Lauren’s results “underlines the fact that the slowdown in luxury is concentrated at the top end of the market where much higher price points continue to push some consumers – especially middle-income segments – away,” GlobalData analyst Neil Saunders wrote in a research note. “In accessible luxury, which includes brands like Ralph Lauren and Coach, performance is far better.”

Price Increases

The investor debate around Ralph Lauren centres in part on whether the apparel company will be able to keep raising its average prices, which it has been doing through boosting how much it charges shoppers for items and also by cutting back on discounts and selling more expensive items, such as handbags.

In the most recent quarter, Ralph Lauren increased the average price of its items by 14 percent in its direct-to-consumer channel.

That growth in average unit retail, as the crucial retail metric is called, along with greater sales in more profitable geographies and lower cotton costs more than offset the cost pressures from tariffs and other items, the company said. That boosted profit last quarter.

Ralph Lauren executives have said “that only about 1/3 of the average unit retail increase since 2018 has been from like-for-like increases, which helps us get comfortable that they can still take price,” Citi analyst Paul Lejuez wrote in a research note before the company reported earnings.

By Jeannette Neumann

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