Ralph Lauren jumps on sales gains even amid China virus fears

[NEW YORK] Ralph Lauren surged in early trading 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 per cent in the company's third quarter, more than twice the average 0.8 per cent 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 per cent, a sign that investments in reinvigorating the Ralph Lauren brand are paying off. Analysts had estimated growth of 0.9 per cent.

"We feel like we're on track and we feel good about the gameplan 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."

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 per cent of its revenue. US 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 per cent in the quarter.

Even so, the company said net revenue will increase 2 per cent to 3 per cent 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 coronavirus outbreak.

The preppy fashion label has worked to refresh its product lines under Mr Louvet, who has been trying to court younger shoppers in the US 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 US.

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

BLOOMBERG