Ralph Lauren has posted a modest increase in sales and a surge in profit for the first quarter despite a challenging luxury market.
The company’s revenue for the quarter ended June 29 was $1.5 billion, up 1 per cent on a reported basis and 3 per cent in constant currency.
According to GlobalData MD Neil Saunders, the slight increase was delivered against a very difficult environment for luxury and consumer spending. This shows the company has “bucked the performance of many other high-end brands”, setting it apart as one of the few players still driving growth in a more subdued market.
The sales growth was led by Europe with a 6 per cent increase on a reported basis, followed by Asia with 4 per cent improvement. Sales in North America, however, declined 4 per cent as stronger direct-to-consumer performance was more than offset by planned declines in wholesale.
While Ralph Lauren will need to wait for the NA market to bounce back, Saunders believes the Europe and Asia regions will continue to drive some good numbers. The company has more control over distribution and the brand is less mature in these markets, he added.
Comparable store sales rose 5 per cent, reflecting a strong performance in a muted market. The brand is benefitting from attracting more younger consumers, while its focus on classic, quiet luxury is favourable to current trends, according to the analyst.
The results were even more robust on the bottom line, with net income jumping 27.6 per cent to $169 million. “Lower cotton costs, some better margins from a shift to retail, and general cost savings all helped to produce the outsized performance,” Saunders explained.
For FY25, the company expects revenue to increase 2-3 per cent given the current geopolitical and macroeconomic environment.
“The powerful combination of our brand strength and diverse growth drivers — together with our culture of agility and operating discipline — gives us confidence that our long-term strategy will continue to deliver even through these dynamic times,” commented Patrice Louvet, president and CEO of Ralph Lauren.
