Ralph Lauren: Canters Ahead, Can It Make The "Ascending Oxer" in the 2H22?
Ralph Lauren's 2Q22 sales grew +13% (organically) – ahead of expectations – and in all regions, with mid-teens comp-store sales increase. Earnings were also ahead of plan and its full fiscal year (ending in April 2023) guidance was reiterated, including high-single-digits sales growth and +100 basis points of operating margin improvement. However, that outlook now "incorporates increased caution around our value-oriented consumers in North America, notably the potential for softer traffic and conversion rates through the end of the year" (i.e., customers at its 192 Polo Factory store locations). On that segment, CFO Jane Nielsen said, "We're not naive about what's happening to that consumer from a macro standpoint and wanted to make sure that we were building that into [the] overall [plan].
- North America comparable store sales increased +5% and its wholesale business increased +13% (on an underlying basis) with most of that growth coming from higher average unit retail prices (AUR), which increased +12%. Traffic at the Ralph Lauren stores (46) improved.
- CEO Patrice Louvet: "The U.S. still represents significant white space opportunity for us. We're going to double down on that opportunity." We previously commented on Ralph Lauren's store opening plans here.
- Sell-out by its North American wholesale customer grew faster than the +13% sell-in rate. These results suggest that the affluent segment of U.S. department stores remains positive.
- Comparable store sales increases at the Polo Factory stores were modest. Placer.ai data (below) shows that the drop-off at outlet stores visitation trends is an industry-wide headwind. Unfortunately for Ralph, inventory levels are high (+47%), as is prevalent across apparel.