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Ralph Lauren profit gets boost from Chinese demand; shares rise 14%

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today Nov 7, 2019
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Strong demand for Ralph Lauren Corp's Polo shirts and tweed jackets in China helped the high-end apparel retailer beat quarterly profit estimates on Thursday, sending its shares up nearly 14%.


Photo: Polo Ralph Lauren



Ralph Lauren, like other high-end fashion companies from New York, Paris and Milan, has been expanding in China, where a weakening yuan currency has pushed more wealthy domestic consumers to splurge at home rather than while travelling abroad.

Apart from opening more stores in the world's second-largest economy, the over 50-year-old company has also partnered with local e-commerce platforms such as Alibaba's Tmall and WeChat to boost online sales.

Chief Financial Officer Jane Nielsen said on a post-earnings call that revenue from Asia, which rose 4%, was driven by the company's online business expansion, store openings and marketing initiatives featuring local celebrities.

Revenue in constant currency terms rose 22% on the Chinese mainland in the second quarter. However, revenue from Hong Kong fell 27% due to ongoing protests.

A marketing strategy focused on Instagram and new pop-culture-based apparel, including a collection celebrating the 25th anniversary of the hit TV show "Friends", have also helped Ralph Lauren tap a new generation of customers and boost sales.

"A lot of the time when you refer to Ralph Lauren, people think it's your dad's brand and it's old and dated," said Gabriella Santaniello, founder of retail research firm A-Line Partners.
"But seeing stronger sales with core products - Polo shirts and khaki pants - indicates that the brand is now becoming relevant to younger consumers."

The company's adjusted net income rose 6.5% to $198 million (£154 million), or $2.55 per share, in the quarter ended Sept. 28.

Analysts had expected a profit $2.39 per share, according to IBES data from Refinitiv.

Net revenue rose about 1% to $1.71 billion , beating analysts' average estimate of $1.69 billion.

Ralph Lauren's shares were last trading 11.3% higher at $112.31 and were set for their best day since May 2018.

 

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