Ralph Lauren's Q2 revenue growth beats expectations

Ralph Lauren Corporation reported earnings per diluted share of 2.18 dollars on a reported basis and 2.23 dollars on an adjusted basis for the second quarter compared to 2.57 dollars on a reported basis and 2.62 dollars on an adjusted basis, for the same quarter of fiscal 2022.

In the second quarter, revenue increased by 5 percent to 1.6 billion dollars on a reported basis and was up 13 percent in constant currency compared to analysts' forecast of 1.56 billion dollars according to Refinitiv IBES data.

The company said that its outlook is based on its best assessment of the current macroeconomic environment, including ongoing global supply chain and other inflationary pressures, foreign currency volatility, the war in Ukraine, Covid-19 variants and other Covid-related disruptions.

"Our multiple engines of growth helped drive solid second quarter results with outperformance on both the top- and bottom-line as we continue to navigate a highly dynamic global operating environment with agility and a relentless focus on building our brand momentum," said Patrice Louvet, the company’s president and CEO.

Ralph Lauren’s performance across core geographies

Ralph Lauren’s North America revenue increased 3 percent to 727 million dollars. In retail, comparable store sales in North America were flat, with a flat compare in brick and mortar stores and a 1 percent decrease in digital commerce. North America wholesale revenue increased 8 percent.

Europe revenue in the second quarter was flat to last year at 494 million dollars on a reported basis and increased 15 percent in constant currency. In retail, comparable store sales in Europe were up 3 percent, with a flat compare in brick and mortar stores and a 15 percent increase in digital commerce. Europe wholesale revenue increased 9 percent on a reported basis and 24 percent in constant currency.

Revenue in Asia increased 17 percent to 316 million dollars on a reported basis and 33 percent in constant currency. Comparable store sales in Asia increased 25 percent, with a 25 percent increase in brick and mortar stores and a 22 percent increase in digital commerce.

Ralph Lauren expects negative impact of currency fluctuations

For fiscal 2023, the company continues to expect constant currency revenues to increase approximately high-single digits to last year or about 8 percent, on a 52-week comparable basis. Based on current exchange rates, foreign currency is now expected to negatively impact revenue growth by approximately 730 basis points in fiscal 2023.

On a 53-week comparable basis, Fiscal 2023 revenue growth is still expected to be negatively impacted by approximately 100 basis points due to the absence of the 53rd week compared to the prior year.

The company expects operating margin at the low end of its previous range of 14 percent to 14.5 percent in constant currency. Foreign currency is expected to negatively impact operating margin by approximately 200 basis points. Gross margin is still expected to increase approximately 30 to 50 basis points in constant currency on a 52-week comparable basis. Foreign currency is expected to negatively impact gross margins by approximately 170 basis points in fiscal 2023.

For the third quarter, the company expects revenue to increase low to mid-single digits in constant currency to last year. Foreign currency is expected to negatively impact revenue growth by approximately 780 basis points.