Capri Holdings and Ralph Lauren, two prominent players in the fashion industry, have recently announced strong demand and earnings for the first quarter. Despite facing challenges such as supply chain issues and the need for increased inventory, both companies have demonstrated resilience in the face of inflation, as affluent shoppers continue to invest in luxury goods.
Ralph Lauren witnessed a net revenue increase of 8% to $1.5 billion, with revenue in North America rising by 6% to $701 million. Comparable store sales in retail also experienced a growth of 5%. Europe revenue saw a significant boost of 17% to $416 million, with comparable store sales in retail increasing by an impressive 34%. Asia revenue grew by 16% to $334 million, and comparable store sales rose by 19%.
Despite these positive figures, Ralph Lauren’s profits were impacted by higher freight costs and global supply chain delays. The company’s gross profit stood at $1 billion, with a gross margin of 67.2%. Operating income amounted to $175 million, resulting in an operating margin of 11.8%. However, adjusted operating income was $190 million, with an operating margin of 12.7%, marking a 410 basis point decrease from the previous year. Net income for Ralph Lauren was $123 million, a decrease from $165 million in the previous year.
Capri Holdings, the parent company of renowned brands such as Michael Kors, Versace, and Jimmy Choo, reported a total revenue of $1.36 billion, marking an impressive 8.5% increase compared to the previous year. Income from operations stood at $231 million, resulting in an operating margin of 17%, a decrease from $258 million and 20.6% in the prior year. Net income for Capri reached $201 million, compared to $219 million in the previous year.
Within Capri’s portfolio, Versace experienced a revenue increase of 14.6% to $275 million compared to the prior year. Jimmy Choo saw a substantial revenue increase of 21.1% to $172 million, while Michael Kors witnessed a growth of 4.8% to $913 million.
Despite their strong performance, both Capri and Ralph Lauren faced challenges in the Chinese market due to COVID-19 lockdowns, which ultimately led to a decrease in their share prices. Additionally, both companies had to bolster their inventories, with Capri witnessing a 66% increase and Ralph Lauren experiencing a 47% increase by the end of the first quarter. This strategic move aimed to avoid the supply chain delays encountered in the previous year, but it also resulted in higher freight costs, impacting their profits despite implementing price increases in stores.
Nevertheless, the continual demand for luxury goods presents a promising future for both Capri and Ralph Lauren. These companies have benefited from the fact that rising prices have had minimal effect on middle- and high-income households. Affluent shoppers are prioritizing the purchase of luxury goods for special events and occasions as they emerge from lockdowns, which has significantly contributed to the strong performance of these fashion companies. Analyst Jessica Ramirez from Jane Hali & Associates noted that “high-income consumers are shopping in a way that is different from other times of inflation,” placing luxury goods companies in a favorable position.
Useful Links:
1. Capri Holdings Official Website
2. Ralph Lauren Official Website
