By Anuja Bharat Mistry and Danielle Kaye
May 21 (Reuters) – Ralph Lauren shares surged about 10% in early trading on Thursday after the high-end apparel brand beat quarterly revenue estimates, buoyed by strong sales in China as affluent shoppers continued to buy Polo shirts and cotton cable-knit jumpers.
The revenue growth was led by sales in Asia, the company said, with particular strength in China during the Lunar New Year. Wall Street investors are focused on how luxury brands are performing in the Chinese market, where consumers have shown signs of strain in recent months and luxury spending has faltered.
Sales in China were “exceptionally strong”, CEO Patrice Louvet said in a call with analysts, pointing to more than 50% sales growth in the country.
The nearly 60-year-old American label reported quarterly revenue of $1.98 billion, above analysts’ estimate of $1.85 billion.
Founded by designer Ralph Lauren in 1967 as a line of ties before rising to the top ranks of American fashion, the brand is among companies that have recently bucked the trend of a slowdown in the global luxury sector. It embarked on a turnaround plan about a decade ago and analysts attribute its recent success in part to the brand’s growing appeal among a younger generation of shoppers, while maintaining a multi-generational consumer base.
Under the leadership of CEO Patrice Louvet, who took over in 2017, Ralph Lauren has made a concerted effort to lure in a new generation through youth-focused products and social media engagement.
Analysts have also attributed Ralph Lauren’s recent momentum to its market position as a value player compared to many luxury competitors.
Ralph Lauren sells $118 polo shirts and $498 leather bags – in addition to bags that well exceed $3,000. Its range of price points has helped maintain its appeal, analysts noted, even as shoppers balk at price hikes from major luxury players.
“Ralph Lauren has had the benefit that it had more room to grow to Asia and Europe as compared with other luxury apparel firms,” said David Swartz, analyst at Morningstar.
The company now expects first-quarter revenues to increase in the mid- to high-single digits on a constant currency basis, compared with analysts’ estimate of a 6.9% rise, according to data compiled by LSEG.
It also expects annual constant currency revenues to increase by about mid-single digits over last year, centered around 4% to 5%.
On an adjusted basis, Ralph Lauren posted earnings per share of $2.80 for the reported quarter, topping an estimate of $2.55 per share.
The company, which implemented selective price hikes over past quarters, sees gains from strong full-price sales across its apparel and accessories brands.
(Reporting by Anuja Bharat Mistry in Bengaluru and Danielle Kaye in New York; Editing by Pooja Desai)
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