This past week, Ralph Lauren reported a revenue increase of +6% for its North American stores; Ralph’s outlet comparable-store sales returned to positive, with a turn up in traffic (we show this channel in the figure below). Sales were bolstered by a strong contribution from average unit retail (i.e., product “elevation’). The company's wholesale segment revenue was down -15%, reflecting a lower rate of sell-in to “align with consumer demand in the channel.” While that may suggest soft results for Macy’s, Dillard's, and Nordstrom, management did say that sellout was down only mid-single-digits; which assuming no market share change would be an improvement from Q3 2023’s results.
Like LVMH and Hermès, Kering (Gucci, Yves Saint Laurent, Bottega Veneta, etc.) reported a better Q4 2023 for its U.S. stores, a turn that we pointed to in our holiday outlook as prestige luxury spend was “repatriated” for the holiday. However, for Gucci--which has a large base of “aspirational luxury” customers--revenue was still down by -11% for the quarter and -18% for the year. On the start of the year, Kering CFO Armelle Poulou said, "[W]e don't see significant changes [in North America] compared to Q4 2023, although 2024 started on the more muted trend.“ Yves Saint Laurent CEO Francesca Bellettini said, “It's a cautious approach, the one that we have for 2024 and it is more cautious on the aspirational client segment for all of the brands. Still, on the upper part of the clients, we still see encouraging trends. Some brands like Bottega Veneta, for example, are having a very, very strong last quarter in the U.S., gaining market share. And for all of the other brands, the trend in the Q4 2023 is improving versus the previous one, driven by the attention of all of the teams on the higher segment of the consumers.” (YSL has a more aspirational customer mix).
For both Ralph and Kering, their wholesale businesses were significantly dented by withdraws from non-strategic wholesale accounts. Kering’s wholesale was down high-twenties. Ralph plans to open more U.S. stores this year and next, both to set a new elevated brand expectation by consumers and to capture the retail markup; with that is a continued withdrawal/clean-up from wholesale accounts.
