US apparel retailer Ralph Lauren – struggling in a lifeless home market – received a face-saving boost from Asia in the first quarter.
Revenue in Asia swelled by 18.6 per cent on a constant-currency basis in the three months to July 1 to US$378 million, underpinned by the post-pandemic reopening of China where Ralph Lauren’s sales grew by 50 per cent year on year. Comparable store sales in the region rose by 13 per cent, with a 14 per cent increase in brick-and-mortar stores and an 11 per cent in digital commerce.
Asia was by far the strongest market for the brand, with Europe far behind with a sales boost of 8.4 per cent.
Overall, however, Ralph Lauren’s revenue rose by just 0.4 per cent, and operating income by 5 per cent. That was because, in the North American market, the company’s sales fell by 9.8 per cent, with online sales down by 8 per cent and physical store sales by 5 per cent. Wholesale revenue there plunged 16 per cent.
Neil Saunders, MD at GlobalData, said some of the wholesale sales decline was a consequence of the timing shift in spring assortments, but about half of it is a result of a sharp downtick in footfall and custom at channels such as department stores.
He said the overall North American performance reflected a slowing consumer economy there, which is buffeting premium brands.
“This is a clear indication of consumer retrenchment among more affluent customers who buy directly from the brand.
“It is becoming clearer that the general economic environment will exert a negative impact on the brand and will curtail growth. As such, we expect only muted progress in the year ahead.”
Saunders said many third-party department stores selling Ralph Lauren products are doing neither themselves nor the brand any favours in the way they display and merchandise.
“The lack of even basic shopkeeping standards is off-putting for consumers and has a material impact on sales.
“Partly because of the unreliability of third-party distribution, Ralph Lauren needs to expand its own presence in the market by opening stores and leaning more heavily on its website. However, physical expansion is more difficult to justify at a time when consumers are pulling back, so we recognize that this goal may now take longer to achieve.”
He concluded that Ralph Lauren has made “pleasing progress in sharping its brand image and elevating its proposition”.
“This is delivering some good results, especially on the margin front.”
