Ralph Lauren’s Q3 Sales Increase by 6% YoY, with Over 30% Growth in China

2月 20, 2024

American luxury fashion group Ralph Lauren Corp announced key performance data for the third quarter of fiscal year 2024, ending December 30, 2023. Benefiting from strong demand for cashmere sweaters, coats, and formal wear among American consumers during the holiday season, as well as a strong rebound in the Chinese market, sales revenue increased by 6% year-over-year to €1.934 billion, with a 5% increase at constant exchange rates. All regions exceeded expectations, with the greatest increase in Asia (+16%), and the Chinese market growing by more than 30% year-over-year.

Patrice Louvet, President and CEO of Ralph Lauren, stated: “We delivered a strong holiday, with continued progress on our Next Great Chapter: Accelerate plan and third quarter results that exceeded our expectations led by continued momentum in our direct-to-consumer channels,” said Patrice Louvet, President and Chief Executive Officer. “These results underscore the diversity of our strategic growth drivers around the world in a still-volatile operating environment as well as our culture of operating discipline and agility.”

After the financial report was released, as of the close on February 8, Ralph Lauren’s stock price surged by 16.77% to a near 9-year high of $171.82 per share, with a current market value of approximately $11.105 billion.

Under the drive of the Next Great Chapter: Accelerate strategic growth plan, Ralph Lauren made the following progress in the third quarter:

Enhancing and invigorating the lifestyle brand

  • Since the pandemic, the DTC (Direct-to-Consumer) business has added 1.7 million consumers, achieving the strongest growth in new customer acquisition and loyalty, and accelerated the growth of net promoter scores during the holiday quarter. Patrice Louvet stated in the post-earnings conference call, “Our brand momentum is attracting higher-value, younger consumers.
  • Establishing strong and authentic connections with consumers during key cultural moments, including hosting “Season for Dreaming” holiday events in major global cities; successfully conducting Singles’ Day events in Asia; initiating a collaboration with artist-in-residence Naiomi Glasses; and providing outfits for Taylor Swift’s Time magazine 2023 Person of the Year cover.

Driving core product development and expanding more product categories

  • In the third quarter, the DTC business’s average unit retail (AUR) increased by 9%, reflecting the sustainability of the group’s comprehensive improvement strategy.
  • Continuing to drive the development momentum of core and high-potential categories, both businesses achieved low double-digit growth compared to last year at constant exchange rates, exceeding the company’s overall growth.
  • Product highlights for the quarter include: an exclusive capsule collection with Element Skateboards, Polo Country x Element Skateboards; a limited edition Polo ID collaboration with Mr. Bags in China; and supporting the brand’s long-term commitment to cancer care through the Ralph Lauren Pink Pony series.

Success in key cities within the consumer ecosystem

  • By region, sales performance exceeded expectations at constant exchange rates: led by Asia, reporting a 16% growth, with a 17% increase at constant exchange rates, where the Chinese market grew by more than 30% compared to the same period last year. Europe grew by 11% reported, with a 6% increase at constant exchange rates. North America was essentially flat, with an improvement over the first half of fiscal year 2024 driven by strong DTC business performance.
  • In the third quarter, Ralph Lauren continued to expand its ecosystem in major cities, including opening a new flagship store at Marina Bay Sands in Singapore, opening the first Ralph Lauren store in Prague and North Carolina, launching a digital commerce flagship in Canada, and opening the first Ralph’s Coffee in Paris and the United Arab Emirates.

As of December 30, 2023, the key financial data for the third quarter of Ralph Lauren’s fiscal year 2024 are as follows:

  • The growth in gross margin was driven by lower freight costs, favorable channel and geographic mix changes, and the increase in average unit retail (AUR) across all regions, offsetting the ongoing pressure from raw material costs. With the easing of cotton costs, the pressure from cotton inflation is expected to begin to lessen in spring 2024.

By channel:

By region:

  • North America: In terms of retail channels, comparable store sales increased by 5% year-over-year, exceeding expectations, with physical stores growing by 6% and e-commerce channels by 4%. Wholesale channel revenue decreased by 15% year-over-year, in line with expectations, as the company carefully managed sales to match consumer demand in the channel. This quarter, Ralph Lauren eliminated approximately 20 sales points within department stores in North America.
  • Europe: In terms of retail channels, comparable store sales accelerated further to 11%, with physical stores growing by 10% and e-commerce channels by 12%. Wholesale channel revenue increased by 5% year-over-year, essentially flat at constant exchange rates, largely offsetting the negative impact of adjusted wholesale channel shipment timing to maximize full-price sales due to stronger reordering trends.
  • Asia: Comparable store sales increased by 14% year-over-year, with physical store sales growing by 13% and e-commerce sales by 25%.

As freight costs decrease, favorable channel and geographic mix, and the continued growth of AUR are sufficient to offset product cost inflation, the group expects the gross margin for fiscal year 2024 to increase by approximately 140 to 180 basis points at constant exchange rates (previously 120 to 170 basis points). Based on this, the group updated its fiscal year 2024 performance outlook “The Company continues to expect operating margin for Fiscal 2024 to expand approximately 30 to 50 basis points in constant currency to 12.3% to 12.5%, driven by gross margin expansion.”

| Source: Official financial report, Reuters

| Image Credit: Group official website

| Editor: LeZhi