Ralph Lauren shares jumped 12%. The brand reported a sharp increase in sales in China
Shares of US clothing maker Ralph Lauren jumped more than 12% following the release of its report for the fourth quarter ended March 28. Revenue and profit of the premium brand exceeded analysts' expectations. The main driver of growth was the Asian region, especially China.
What the company said in the report
- Ralph Lauren's revenue last quarter rose 17% year-over-year to $1.98 billion, beating analysts' consensus estimates compiled by Bloomberg.
- Adjusted earnings of $2.8 per share also came in above market expectations. Analysts were expecting $2.52 per share, Quartz reports citing MarketScreener.
- Sales growth was led by the Asian region, especially China during the Lunar New Year period, where the figure jumped by 31%. This dynamic contrasts with the results of other luxury players: the Chinese market, which has long been the engine of global luxury, is experiencing a downturn from which the sector has not yet recovered. For example, the organic revenue growth of LVMH, the sector's giant, in the region including China, was only 7% last quarter, which did not help the holding company to cover the decline in other markets.
- Ralph Lauren sales in Europe increased by 18% and in North America by 8%. And consumers bought up Ralph Lauren goods at full price, which exceeded the company's own forecasts and allowed the company to reduce the volume of discounts, the report said. Sales of women's apparel, outerwear and handbags, excluding currency fluctuations, grew more than 20% in each category in the fourth quarter.
- For the full fiscal year, Ralph Lauren's revenue surpassed the $8 billion mark for the first time. It totaled $8.1 billion, up 15%. Adjusted operating margin reached 16%, up 200 basis points. During the reporting year, the company attracted 6.5 million new retail customers.
- For the current quarter, Ralph Lauren expects revenue growth excluding foreign exchange in the mid to high single digits (approximately 4-9%), as well as an 80-120 basis point expansion in operating margin.
In Ralph Lauren noted that they are focused on a stable key audience, able to withstand increased duties and economic instability, reports Bloomberg. The company has successfully capitalized on fashion trends, including preppy and "quiet luxury," while making strategic investments in marketing, the publication said.
What the analysts are saying
Analysts attribute Ralph Lauren's current success to the company's positioning as a more affordable player in the market compared to many luxury competitors, Reuters wrote. "The combination of affordable premium with classic elements is resonating with consumers," wrote GlobalData managing director Neil Saunders.
Along with luxury bags costing over $3000, Ralph Lauren sells polo shirts for $118. Such a wide range of prices helped the brand to maintain its appeal even as customers began to refuse to buy goods of other major players in the premium segment due to a sharp increase in the cost of their products, experts say.
"Ralph Lauren had the advantage of leaving more room for growth in Asia and Europe than other premium clothing makers," Reuters quoted Morningstar analyst David Schwartz as saying.
After the release of the report, analysts at investment bank Needham adjusted the target price of Ralph Lauren shares from $400 to $405, maintaining a "buy" recommendation. This target implies the growth of the company's shares by 23%.
16 out of 19 analysts covering the retailer's securities recommend buying them. Two are neutral and only one advises to sell.
This article was AI-translated and verified by a human editor
