Ralph Lauren tops Q2 targets as cashmere sweaters, jackets pull shoppers

By Deborah Mary Sophia

(Reuters) -Ralph Lauren on Wednesday beat Wall Street estimates for second-quarter results as U.S. shoppers snapped up its pricey sweaters and jackets and China demand recovered steadily, defying a wider luxury industry slowdown.

The company has been strengthening its direct-to-consumer (DTC) business, acquiring new, younger and less price-sensitive shoppers through its website and stores, amid weaker U.S. wholesale demand that has hit several global brands.

Customers are going after cotton and cashmere cable-knit sweaters, Oxford shirts, jackets and other popular collections, Ralph Lauren CEO Patrice Louvet said on an earnings call.

“The consumer (is) really gravitating towards this sophisticated, casual, more elevated style … They want to invest in pieces that are timeless, that they can wear beyond one specific season.”

Ralph Lauren drew 1.3 million new customers to its DTC business, aiding a 6% jump in global DTC same-store sales in the second quarter though September.

“(Ralph Lauren) is a brand that the customer is loyal to … so when they’re (spending cautiously), they’re likely to go to brands that they trust,” said Jessica Ramírez, senior research analyst at Jane Hali & Associates.

The company’s China business recovered steadily, with a more than 20% jump in sales, even as other luxury players such as LVMH and parka maker Canada Goose saw feeble demand.

Shares of Ralph Lauren rose 3% as better stock planning helped the Polo-shirts maker enter the holidays with a leaner inventory, ruling out the need for excessive promotions.

Ralph Lauren largely maintained its annual revenue outlook, but its forecast for third-quarter sales to grow 1-2% came in below market expectations, due to caution around wholesale demand.

Net revenue in the second quarter rose more than 3% to $1.63 billion, beating analysts’ average estimate of $1.61 billion, while adjusted per-share profit of $2.10 also surpassed expectations of $1.93.

(Reporting by Deborah Sophia in Bengaluru; editing by Milla Nissi and Shinjini Ganguli)