Ralph Lauren (RL.N) surpassed first-quarter profit estimates on Wednesday, driven by steady demand for its high-end denims and polo shirts in Europe and China, which offset slower sales in the U.S. The demand for designer fashion from wealthier consumers has benefitted companies like Canada Goose (GOOS.TO) and Miu Miu-owner Prada (1913.F), despite European rivals indicating a slowdown due to challenges in China and reduced spending by “aspirational” shoppers.
However, cautious inventory planning by wholesale retailers and slower digital sales led to a 4% decline in Ralph Lauren’s North America revenue, totaling $608 million for the quarter. “We expect North America wholesale declines to moderate through the remainder of the year,” CFO Justin Picicci said during a post-earnings call, adding that the company will keep inventory levels to meet demand for its core products.
Despite initially rising in premarket trading, Ralph Lauren’s shares dropped over 1% in early trade. Executives warned that third-quarter sales would be impacted by a shorter holiday selling window between Thanksgiving and Christmas compared to last year.
In contrast to some European luxury brands, Ralph Lauren saw its quarterly sales in Europe and Asia increase from last year. This stands in contrast to recent disappointing earnings from European luxury giants like LVMH (LVMH.PA), Hugo Boss (BOSSn.DE), Burberry (BRBY.L), and Gucci owner Kering (PRTP.PA).
Dana Telsey of Telsey Advisory Group noted, “AUR (average selling price) continued its impressive run of expansion …in the quarter, demonstrating the success, in our view, of management’s efforts to invest in the brand and attract new, younger, high-value consumers.”
Ralph Lauren’s net revenue rose 1% to $1.51 billion in the first quarter, surpassing analysts’ expectations of a 0.46% decline, according to LSEG data.