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Ralph Lauren lifts its outlook as Asian sales grow

Ralph Lauren raised its annual sales outlook after revenue rose in its second fiscal quarter. Asia delivered the strongest regional growth, while European store sales weakened. Tariff refunds lifted reported profitability, and North American wholesale shipments included deliveries brought forward from later in the fiscal year. The company also reported lower inventories and higher direct sales.

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Overhead view of a clothing store in Asia, with shoppers browsing folded shirts and knitwear on a wooden display table beside racks of jackets.

Asia leads the sales increase

Ralph Lauren, the US clothing company, raised its annual constant-currency revenue growth outlook to 6–7 per cent from 5–6 per cent after its second fiscal quarter. The period ended on 26 September with revenue of approximately 2.2 billion dollars, up 9 per cent as reported and 10 per cent at unchanged exchange rates. Asia posted the strongest regional growth: revenue increased 28 per cent to 571 million dollars and comparable sales rose 24 per cent. That comparable-sales measure grew 23 per cent in Asian physical stores and 31 per cent online.[1], [2]

North American revenue rose 6 per cent to 885 million dollars. Wholesale revenue grew 8 per cent, with approximately 4 percentage points coming from shipments brought forward from the fiscal year’s second half. European revenue increased 1 per cent to 696 million dollars, or 3 per cent at constant currency. Comparable sales there fell 1 per cent: a 4 per cent decline in stores accompanied 9 per cent online growth.[1]

Refunds lift the reported gross margin

Reported gross margin rose 620 basis points to 74.2 per cent. Ralph Lauren attributed most of that increase to tariff refunds received during the quarter. Excluding those refunds, adjusted gross margin increased 250 basis points to 70.5 per cent. The company cited higher average unit retail, geographic mix and lower product costs for the adjusted improvement. Across direct-to-consumer channels, comparable sales grew 10 per cent and average unit retail rose 9 per cent.[1]

Inventories fall as operating expenses rise

Adjusted operating expenses rose to 54.8 per cent of revenue from 53.9 per cent. Reported operating income was 364 million dollars and adjusted operating income was 345 million dollars. The adjusted operating margin reached 15.7 per cent after a 160-basis-point increase. Quarter-end inventories were 9 per cent below the previous year. Cash and short-term investments stood at 1.8 billion dollars, against total debt of 1.2 billion dollars. The fiscal year contains 53 weeks; management expects the additional week to contribute approximately 1 percentage point to annual revenue growth.[1]

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References

  1. News sourceRalph LaurenRalph Lauren raises sales outlook as Asia revenue grows 28%↩1↩2↩3↩4
  2. News sourceRetailBossRalph Lauren raises its outlook as Asian sales grow↩
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