Dive Brief:
- Ralph Lauren reported a first-quarter revenue increase of 1% to $1.5 billion on Thursday, with a net income increase of 7% to $132 million.
- Sales were driven by strong performances in Europe and Asia, the latter of which saw an 18% increase in year-over-year revenue, led by China, which was up more than 50%. That growth offset declines in North America, which dropped 10% due to previously reported wholesale timing shifts and “continued inflationary pressures on our more value-oriented consumers.”
- The company also reported increased average unit retail prices of 15% across its DTC network for the quarter, on top of an 8% increase last year, and said the rise reflected its “multi-pronged elevation approach.”
Dive Insight:
The company said in its release that results exceeded expectations on both the top and bottom line, despite the challenging economic conditions. Patrice Louvet, president and CEO, said in the release that the company was reaffirming its full year outlook.
The company also continued to tout its Next Great Chapter: Accelerate strategic growth plan, which was introduced last year as a roadmap for long-term growth. “As we continue to execute on our Next Great Chapter: Accelerate plan, our teams are staying true to our creative vision while remaining agile and focused on what we can control in the context of a choppy environment,” Louvet said.
Analysts Tom Nikic and Austin Borina of Wedbush Securities said in emailed comments that amid a tough operating environment, Ralph Lauren’s reported Q1 results were solid, and said the Q2 outlook called for flat-to-slightly-up organic revenue. The analysts cautioned against what they called a “challenging domestic environment,” as indicated by the company’s decline in North American sales.
Management called out promotional activity as a main drag in the region, with digital promotions picking up year-over-year, the Wedbush analysts said. “Despite the decline in e-commerce, management called out improving trends from June onward, as they made efforts to improve conversion,” they added, noting that the company called out inflation as a factor, with outlet revenue down “meaningfully,” whereas full-price stores were positive.
“The company is showing resilience in a tough environment, but the macro environment is quite challenging at the moment, particularly in the domestic market,” Wedbush analysts said. “To us, it feels like a ‘trade sideways’ name for the time being.”
Next month, Ralph Lauren will return to New York Fashion Week after a four-year hiatus from the event, with a show scheduled for September 8 in an as-yet-undisclosed venue. That’s not to say the designer has eschewed all public displays, however. He has had several off-calendar events in the interim, including a California show last October, and a presentation at New York’s Museum of Modern Art in March 2022.
In May of this year, he also staged a Purple Label spring-summer 2024 runway show at the Palazzo Ralph Lauren during Milan Fashion Week. Additionally, the company has maintained its status as the outfitter of record for Wimbledon, a partnership which began in 2006. However, next month’s show will be the designer’s first official event on his home turf since 2019. Ralph Lauren European revenue increased 7% year-over-year, according to earnings.
