Ralph Lauren Corp has experienced a significant upsurge in profits, largely due to a surge in demand in China. The high-end fashion retailer has exceeded quarterly profit expectations, causing its stock to jump by nearly 14%.
Key to this success is the popularity of Ralph Lauren’s Polo shirts and tweed jackets in China. This trend reflects a broader pattern of Chinese consumers choosing to spend more within the country due to the devaluation of the yuan. As a consequence, luxury fashion brands from major fashion hubs such as New York, Paris, and Milan are increasingly prioritizing expanding their presence in China.
Having been in operation for more than five decades, Ralph Lauren has made remarkable progress in the Chinese market. Alongside opening more brick-and-mortar stores, the company has partnered with local e-commerce platforms like Alibaba’s Tmall and WeChat to enhance online sales.
During a post-earnings call, Chief Financial Officer Jane Nielsen praised the company’s success in Asia, pointing out that revenue in the region grew by 4%. This growth can be traced back to the firm’s ramped-up online presence, addition of new stores, and localized advertising campaigns featuring popular celebrities. Revenue in mainland China surged by an impressive 22% in the second quarter on a constant currency basis.
However, revenue from Hong Kong took a hit, showing a 27% decline amid ongoing protests in the region. To appeal to a younger demographic, Ralph Lauren has implemented a marketing strategy centered on Instagram and trendy pop-culture-inspired attire. For instance, the brand recently launched a line commemorating the 25th anniversary of the beloved TV series “Friends”.
Gabriella Santaniello, the founder of retail research company A-Line Partners, emphasized that Ralph Lauren’s efforts to engage with younger shoppers are yielding positive results. Notably, sales of staple items like Polo shirts and khaki pants indicate that the brand is resonating with a fresh cohort of consumers.
In the quarter ending on Sept. 28, Ralph Lauren recorded a 6.5% rise in adjusted net income, amounting to $198 million, or $2.55 per share. This outperformed analysts’ projections of $2.39 per share. Net revenue for the same period climbed by around 1% to $1.71 billion, surpassing analysts’ forecasts of $1.69 billion.
Given these robust financial outcomes, Ralph Lauren’s shares saw an increase of 11.3% to $112.31, marking the company’s strongest performance since May 2018. The brand’s triumph in China and endeavors to engage with a fresh audience are evidently paying dividends, positioning Ralph Lauren for sustained growth and triumph in the global market.
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