By Savyata Mishra
(Reuters) – Ralph Lauren (NYSE:RL) raised its annual sales forecast on Thursday, on strong holiday demand for its expensive cashmere sweaters and shirts as wealthy customers remain undeterred by price hikes.
Shares of the luxury retailer rose 5% in early trading as the company also beat its second-quarter results.
Predominantly younger, higher value and less price-sensitive shoppers drove demand, even as the global operating environment remained choppy, CEO Patrice Louvet said on a post-earnings call.
Larger European fashion houses such as Hugo Boss (ETR:BOSSn), Kering (EPA:PRTP) and luxury bellwether LVMH have been pressured by a broader luxury sector slowdown, especially due to slow spending in China.
But Ralph has seen strong demand in China, which represents about 8% of the company’s business, due to a relatively smaller exposure than others.
“As the holiday season gets underway, we have momentum and we are still firmly on offense,” Louvet said.
The company has been focusing on higher full-price selling and lower promotions.
“In the near-term, Ralph Lauren’s reliance on price hikes to increase brand cachet appears to be working, as customers for the time being are willing to pay premiums for its clothing,” said Emarketer analyst Rachel Wolff.
The average selling price in the quarter ended Sept. 28 increased 10% from a year earlier, and adjusted gross margin expanded 160 basis points to 67%.
Net revenue rose 6% to $1.73 billion, above analysts’ average estimate of $1.68 billion, according to data compiled by LSEG.
This was helped by a 3% rise in revenue from North America, which contributes a little less than half of Ralph Lauren’s total sales, and 7% growth in Europe.
On an adjusted basis, it earned $2.54 per share, beating estimates of $2.41.
The company now expects 2025 revenue to increase about 3% to 4%, compared with its prior forecast of a 2% to 3% rise.