Designer brand Ralph Lauren has beaten its first-quarter profit estimates despite slow sales in the U.S. What the U.S. lacks in demand for designer brands, Europe and China have certainly seen when it comes to Ralph Lauren’s denim wear and polo shirts.
Wholesale retailers in the U.S. were extremely cautious concerning planning inventory this year. This coupled with slow digital sales has caused Ralph Lauren’s North American revenue to decline 4 to $608 million, Reuters states.
On the company’s sales, CFO Justin Picicci stated “We expect North America wholesale declines to moderate through the remainder of the year”.
Picicci has also told sources that Ralph Lauren plans to chase demand for its core products by maintaining its inventory.
Looking forward, Ralph Lauren doesn’t expect much improvement during the third quarter. Domestically, thanks to a shorter selling window between Thanksgiving and Christmas, they anticipate a drop of over 1% in early trade.
In contrast, the company’s quarterly sales in Europe and Asia increased compared to last year. While Ralph Lauren and other companies including Canada Goose and Prada have seen increased sales there, rival international fashion companies including LVMH, Hugo Boss, Burberry, and Gucci have seen the opposite.
Ralph Lauren saw its net revenue rise 1% to $1.51 billion this past quarter, a sharp contrast from the 0.46% decline LSEG data predicted.
The company also earned $2.70 per share on an adjusted basis, $0.27 higher than what was estimated, and adjusted gross margin grew “170 basis points from the prior year on the back of lower cotton costs and full-price selling”.
Despite sales internationally compensating for low domestic sales, Ralph Lauren did see a decrease in how much their average selling price (AUR) has changed. This quarter last year, Ralph Lauren’s AUR saw a 15% increase.
Dana Telsey of Telsey Advisory Group explains AUR as having “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”.
This year, the quarter’s AUR increase was only 6%.
Constant currency revenue for this quarter is expected to grow between 3% and 4%, slightly higher than the estimated 3% increase.
