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Ralph Lauren jumps on brisk sales despite Hong Kong protests
[NEW YORK] Ralph Lauren Corp soared after the apparel maker reported same-stores sales growth across all three regions - including in the key North American market - even as unrest in Hong Kong continues to temper sales.
A drop in foreign shoppers in North America has recently weighed down the brand in its critical home market, but spending by domestic customers has helped counteract that decline, thanks to several investments made by management to revitalise the label. The brand has also seen more European and Brazilian travelers in its US shops, Chief Executive Officer Patrice Louvet said, even as Chinese tourists continue to pull back.
As a result, same-store sales in North America, where the company gets about half of its revenue, rose 2 per cent in the latest quarter. Analysts predicted it would drop 2.2 per cent. Globally, same-store sales increased 2 per cent when excluding currency fluctuations, beating analysts' average projection of a 1.1 per cent gain, according to Consensus Metrix.
"We're making solid progress on our plan," Mr Louvet said in an interview Thursday. "We are running the play with a higher dose of agility than before."
The shares rose as much as 12 per cent in premarket trading. They had dropped 2.5 per cent this year through Wednesday's close, compared with the 23 per cent gain in the benchmark S&P 500 Index.
In recent years, Ralph Lauren has freshened its lines with clothes, handbags and shoes that appeal to younger US shoppers. Mr Louvet said that customer base was particularly drawn in by expanded offerings in denim and outerwear, along with a flurry of marketing activity and limited-edition collections such as a collaboration with 90s sitcom "Friends." Meanwhile, management has successfully reduced the brand's presence in struggling brick-and-mortar department stores by about 25 per cent.
But there are some dark clouds for the company. Sales in Asia fell short of expectations, where same-store sales grew just 1 per cent, well below the average estimate. The company attributed that largely to a 27 per cent drop in business in Hong Kong amid continued unrest.
While Ralph Lauren still sees overall revenue growth of 2 per cent to 3 per cent this year, it said Hong Kong protests could push this to the bottom of that range. Louvet said over a 90-day period, his stores there were closed a total of 48 selling days, causing a "pretty massive" impact. The retailer is reaching out to its VIP customers in the area to encourage them to buy online. "There's not much we can do," he said.