Ralph Lauren has projected current-quarter sales below Wall Street predictions, attributing the decline to reduced demand for its premium clothing due to a broader decline in U.S. luxury spending. Affluent shoppers, previously indulgent, have cut back on luxury purchases due to high inflation and interest rates.
North America's Luxury Market Decline
Ralph Lauren witnessed a 10% revenue dip in North America, echoing other luxury brands like LVMH, Kering, and Canada Goose, which have also reported weaker demand in the region. Shrinking wholesale orders have further impacted the situation.
Cautious Outlook in North America
While Ralph Lauren's core higher-income customer base remains steady, North America's growing promotion-driven luxury sector. Nevertheless, she anticipates sequential market improvement in the current quarter.
China's Surging Sales Offset Luxury Sector Concerns
China's sales skyrocketed by over 50% in Q1 due to lifted COVID-19 restrictions, boosting Asia revenues by 13% to $378 million. However, a slower-than-anticipated recovery in China has raised worries about consumer spending, challenging the luxury sector's reliance on a robust Chinese rebound.
Challenging Landscape for Luxury Brands
Analyst Jessica Ramirez notes that slowed U.S. discretionary spending and China's uncertain recovery have contributed to cautious luxury brand forecasts for 2023's second half. Shares dipped slightly in early trading.
Ralph Lauren's Projections and Performance
Ralph Lauren predicts flat or slightly increased Q2 revenue YoY, contrasting with the estimated 3.3% rise by analysts. The company reaffirms its annual sales forecast. Q1 net revenue slightly rose to $1.50 billion, surpassing expectations for a marginal drop. Adjusted earnings of $2.34 per share also exceeded Refinitiv's estimated $2.13.