Dive Brief:
- Ralph Lauren Corporation reported a revenue increase of 6% to $1.9 billion for the third quarter of fiscal 2024, according to a company release on Thursday.
- North America revenue for the quarter was $933 million, down slightly from $937.6 million last year. While comparable store retail sales rose 5%, led by a 6% boost in brick-and-mortar sales and a 4% rise in e-commerce, wholesale revenue in the region fell 15%. Previous quarterly sales for the region declined 1% year over year in Q2 and 10% year over year in Q1.
- Elsewhere, Europe’s Q3 revenue rose 11% year over year to $522 million, due in part to double-digit increases in comparable store, brick and mortar and e-commerce sales. Asia Q3 revenue was up 16% to $446 million, also with double-digit increases across all retail sales channels.
Dive Insight:
Designer Ralph Lauren dropped off the calendar for New York Fashion Week’s fall-winter shows following the designer’s return to the official NYFW runway last year after four years away. However, the brand’s on-again, off-again show schedule doesn’t seem to have affected the company’s ability to buck earnings trends during a rocky time for luxury.
"We delivered a strong holiday, with continued progress on our Next Great Chapter: Accelerate plan and third quarter results that exceeded our expectations led by continued momentum in our direct-to-consumer channels," Patrice Louvet, president and CEO, said in a statement. "These results underscore the diversity of our strategic growth drivers around the world in a still-volatile operating environment as well as our culture of operating discipline and agility."
The company trimmed inventory 15% year over year to $1.1 billion by the end of fiscal 2024’s third quarter, and said planned declines in North America and Europe helped to offset growth in Asia in support of growth initiatives in the region.
Global DTC sales rose 9% in the quarter. Average unit retail prices rose by 9% across the company’s DTC network in Q3, on top of a 10% increase in Q2 and an 18% increase in fiscal 2022. The company has previously said the price increases are intended to elevate the brand, and in this Q3 earnings report, it said the rise in DTC sales is a reflection of “the durability of our multi-pronged elevation approach.”
An “exceptionally strong Holiday quarter” was critical to Ralph Lauren’s Q3 revenue increases, and as a result company shares were up 13% as of Thursday’s earnings report coverage, according to emailed comments from Wedbush analysts led by Tom Nikic.
For the 27th straight quarter, Nikic said, Ralph Lauren saw average unit retail prices increase year over year, but added that going forward, the company expects average unit retail growth to grow at a lower rate “because they have less inflationary costs to pass on to the consumer.”
The company said it continues to expect revenue for fiscal 2024 to increase “approximately low-single digits to last year on a constant currency basis, now centering around 2% compared to 1% to 2% previously,” with Q4 revenue growth to be “around 2% in constant currency to last year.”
“There really aren't many holes to poke here, and it's extremely impressive that management has been able to navigate the current macro environment so adeptly,” said Nikic in emailed comments. “Our only concern is that we've ‘missed it’ — shares are up nearly 45% the past 3 months.”
Nikic also said Taylor Swift may have provided some insight into Ralph Lauren’s positive numbers. He said that if more people had realized Swift wore Ralph Lauren on the cover of Time, people would have been more bullish about the company. “As a parent of two full-fledged ‘Swifties,’ we know very well the marketing power of Ms. Swift,” Nikic said.
