Ralph Lauren Has Momentum, but Is Staying Agile
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Patrice Louvet said Ralph Lauren Corp. topped its first-quarter expectations and is moving fast — but staying watchful in an uncertain world.
“We know we live in an environment that is choppy and uncertain, so like we did during COVID[-19], we continue to build on our strengths and stay in touch with reality,” Louvet, the firm’s president and chief executive officer, told WWD.
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Reacting to that reality means staying agile and being ready to keep up with market changes. And with the threat of recession looming, inflation sky-high, COVID-19 still disrupting the supply chain and war in Europe, the changes could keep coming.
Louvet said the company has a balanced go-to market strategy, a diversified geographic base and a supply chain that is both broad and ready to adjust as needed.
Patrick MacLeod
Revenues for the three months ended July 2 rose 8.3 percent to $1.5 billion from $1.4 billion. And on a constant currency basis, revenues increased a stronger 13 percent, ahead of the 8 percent rise the company had penciled in.
In North America, net revenues increased 6 percent to $701 million, while Europe rose 17 percent to $416 million and Asia advanced 16 percent to $334 million. In constant currencies, both Europe and Asia were up more than 25 percent.
But the exchange rate and higher operating expenses, in part to fuel “both near- and long-term strategic growth,” bit into the bottom line.
Net income declined 25 percent to $123.4 million, or $1.73 a diluted share, from $164.7 million, or $2.18, a year earlier. Adjusted earnings per share slipped to $1.88.
The uncertainty wracking fashion companies is prevalent on Wall Street as well.
While investors at first reacted positively to the quarterly update form the company, its shares later started to fall with the market, dropping 4.3 percent to $96.77 on Tuesday.
“We’ve been repositioning the company over the past four years to really establish a strong brand, healthy foundation that puts in place a diverse set of growth drivers,” Louvet said, noting Ralph Lauren has “clear sustainable advantages.”
Chief among them is an “iconic lifestyle brand,” which Louvet noted can “offer categories from sneakers to tuxedos — we really have the ability to dial up and dial down.”
The CEO said, “We measure the brand appeal on a monthly basis in our top markets and we’re constantly seeing the desirability of the Ralph Lauren brand improve in every market.”
So far, the company’s consumers are holding up.
“In the U.S., our consumers remain solid, especially in our full-price channel, they’re clearly responding to our storytelling, clearly engaging with the breath of our portfolio,” Louvet said.
The domestic outlet business was good as well in the first quarter, but the CEO said: “We’re obviously, like others, watching the more value-oriented consumer because we’re not naive here, as you look ahead it’s likely that the inflation situation will have an impact on that consumer group.”
While sales are up, the company has been pushing inventories up even higher, looking to skirt supply chain delays that have complicated life in fashion while also meeting consumer demand.
Inventories in the first quarter rose 47 percent to $1.2 billion, primarily with an increase of goods-in-transit.
Louvet told analysts on a conference call that Ralph Lauren is ready to catch more business as consumers change.
“It’s actually really interesting to see what’s happening with the consumer right now,” he said. “And we’re actually really uniquely positioned to capture the consumers’ evolving wardrobe choices. Because what we’re seeing is a combination of reinvesting in core wardrobes. So specifically, that’s products like sweaters or denim and then a pivot toward newness and elevation and sophistication, right?
“So the pivot toward newness for us will translate into more elevated cashmere sweaters, for example.…And then you have consumers not going out during the day, right? And it’s still early days on that journey, and therefore, a need for greater outerwear and need for greater dresses and need for greater sports coats,” Louvet said.
Fashion companies have sought to make sure they have enough of their classic and staple goods on hand so they can tell their stories to consumers.
And Ralph Lauren always has a story.
Ralph Lauren, executive chairman and chief creative officer, said: “Our vision of timelessness and an authentic life well-lived continues to resonate around the world. From the elegant spirit of Wimbledon to the anniversary celebration of our iconic Polo shirt, our brand is inspiring people to step into their dreams.”
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