Recently, during a conference call following the release of quarterly financial reports, Patrice Louvet, President and CEO of Ralph Lauren Corporation, joked that it wouldn’t be a Ralph Lauren’s conference if he didn’t discuss AUR (Average Unit Retail).
Indeed, as a key indicator for enhancing the brand and market positioning of Ralph Lauren, AUR is repeatedly mentioned in its financial reports. Patrice Louvet has stated that Ralph Lauren’s growth strategy primarily focuses on three metrics: new consumer recruiting, select unit growth, and AUR.
*AUR, which stands for Average Unit Retail, is calculated by dividing total net sales by the number of units sold. It’s a crucial performance metric for retailers, offering deep insights into the average selling price of products. This helps businesses analyze consumer behavior, optimize inventory, and formulate pricing strategies to enhance customer satisfaction and maximize profits. For instance, if a retailer increases the price of a product but sees the total net sales for that product remain constant or even decline in the following three months, it indicates a reduction in the quantity purchased by shoppers or a shift to competitors with lower AUR, suggesting the product might be overpriced.
In September 2022, Ralph Lauren Corporation introduced its strategic growth plan, “Next Great Chapter: Accelerate,” at an investor day in New York. The plan aims for sustainable long-term growth and value creation. Under this initiative, Ralph Lauren is committed to becoming a true lifestyle luxury group, implementing measures including closing inefficient stores, reducing promotional activities, and offering higher-priced goods.
Patrice Louvet revealed that for the quarter ending September 30, 2024, AUR once again showed growth, increasing by 10% year-over-year in a relatively intense promotional environment. This marks six consecutive years of positive growth, with a cumulative increase exceeding 70%. There is an observed increase in consumer embrace of higher-priced items, particularly those priced above $100.
Louvet added that the improvement in pricing ability supports the brand’s long-term growth strategy and allows for a swift response to recent inflation pressures. Additionally, it facilitates promotional activities targeted at price-sensitive consumers.
Apart from AUR, the performance of the Chinese market was also a focal point of the teleconference. Sales in China for the quarter grew over 20% year-over-year, exceeding management’s expectations and making it the fastest-growing market in Asia. This growth builds on a high base from the previous year when sales in China increased by over 30%.
Louvet mentioned that globally, the company opened 16 new stores this quarter, primarily in top-tier cities, with most in Asia, especially China.
The group expects continued growth momentum in Asia for the second half of the year, with China’s growth rate surpassing other countries in the region.
Louvet concluded that while operating in an uncertain world has become the new normal, Ralph Lauren knows how to tackle this challenge. The iconic brand, diversified growth engines, and agility help maintain an offensive stance.
| Source: transcript of the conference call
| Image Credit: Ralph Lauren
丨 Reporter: Wang Jiaqi
| Editor: LeZhi
