Ralph Lauren Surges After North America Sales Surpass Estimates

(Bloomberg) -- Ralph Lauren Corp. jumped the most in three months after posting sales that topped estimates globally and in North America, even as the apparel seller navigates a tumultuous environment for luxury goods in Asia.

Same-store sales worldwide increased 2% in the company’s third quarter, more than twice the average 0.8% projection, according to Consensus Metrix. Excluding some items, earnings per share also topped projections.

In its home market of North America, same store-sales soared 4%, a sign that investments in reinvigorating the Ralph Lauren brand are paying off. Analysts had estimated growth of 0.9%.

“We feel like we’re on track and we feel good about the game plan that we have,” Chief Executive Officer Patrice Louvet said in an interview. At the same time, he said, “the economic environment continues to be pretty volatile.”

The shares climbed as much as 11% to $125.21 in New York Tuesday, the biggest intraday gain since early November. The stock had dropped 3.4% this year through Monday’s close, after gaining 13% last year.

Ralph Lauren and its high-end competitors are facing a flurry of issues in Asia, a key growth market where the company gets about 16% of its revenue. U.S. tariffs on China threatened its supply chain while unrest in Hong Kong hurt sales. Now a viral outbreak has added to the mix. Same-store sales in Asia fell 1% in the quarter, and Louvet said on an earnings call that half of its 110 stores in China are closed because of the coronavirus.

Even so, the company said net revenue will increase 2% to 3% for the full year that ends in March. Three months ago, it said the outlook would be at the low end of that range. And one unknown remains: the company says the forecast doesn’t include the potential impact from the virus outbreak.

Ralph Lauren doesn’t work with any facilities in the Wuhan region, the center of the outbreak, Louvet said, though it has limited travel in China to protect its employees.

Price Increases

The preppy fashion label has worked to refresh its product lines under Louvet, who has been trying to court younger shoppers in the U.S. with updated marketing campaigns, adding streetwear collaborations and expanding denim lines.

Investments in lifting the profile of the brand have “set the stakes” for Ralph Lauren to raise the average price of its goods, said Louvet. Price increases on an assortment of products have been occurring in international markets over the past several years, and the company has recently begun the process in the U.S.

“Across the board, the mantra of the team is elevate and strengthen the brand equity,” said Louvet.

To contact the reporter on this story: Kim Bhasin in New York at kbhasin4@bloomberg.net

To contact the editors responsible for this story: Sally Bakewell at sbakewell1@bloomberg.net, Lisa Wolfson

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