Ralph Lauren Surges as E-Commerce Powers Quarterly Sales Gain

(Bloomberg) -- Ralph Lauren Corp. climbed the most in eight months after posting quarterly results that exceeded analysts’ estimates in almost every area as increased marketing paid off during the holiday season.

  • Companywide same-store sales excluding currency swings, a key performance measure, rose 4 percent last quarter, the company said Tuesday. Analysts had projected 2 percent growth.

Key Insights

  • Ralph Lauren has bounced back as executives have refocused the brand on classic styles and targeted younger shoppers through collaborations and headline-grabbing products such as a heatable moon jacket. The company said the improved assortment helped boost direct-to-consumer sales, and Ralph Lauren “continued to leverage celebrity and social influencers that resonate” with consumers.
  • Chief Executive Officer Patrice Louvet has tempered discounts and reduced inventory in order to revitalize the brand and improve margins, especially in its home market of North America where the company is most exposed to off-price retailers. As a result, Ralph Lauren expects revenue to fall slightly in the current quarter “due to a planned reduction in off-price sales.”
  • Ralph Lauren’s online strategy is gaining steam. Digital revenue grew 20 percent in constant currency terms, with North America sales surging 21 percent in the quarter.
  • Asia was saw strong growth, but was the only area where Ralph Lauren didn’t meet estimates. Asia comparable-store sales increased 4 percent. This matched growth in other regions but fell short of expectations faster growth. Analysts had seen Asia comparable-store sales rising 6.2 percent, according to estimates compiled by Consensus Metrix.
Ralph Lauren Surges as E-Commerce Powers Quarterly Sales Gain

What Our Analysts Say

The acceleration in Ralph Lauren’s digital sales both in North America and Europe is a crucial indicator that demand for the brand is increasing in these important markets.
--Chen Grazutis, apparel analyst

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Market Reaction

  • Shares of Ralph Lauren climbed as much as 12 percent to $128.53, the most intraday since May. Through Monday’s close, the stock had jumped 11 percent since the start of the year, outpacing the 8.7 percent gain in the S&P 500 Index.

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