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Ralph Lauren forecast annual revenue growth below market expectations on Thursday, grappling with subdued demand for its pricier apparel in the United States. The company also named insider Justin Picicci, its new chief financial officer.
Market Challenges:
The apparel maker’s shares reversed course to rise marginally after it beat estimates for fourth-quarter revenue and profit. However, demand for pricier apparel in the United States has been choppy as consumers become increasingly particular about quality, style, and value on their stressed discretionary budgets.
This has particularly affected Ralph Lauren’s and its peers’ wholesale business, as retailers and department stores limit orders.
Shift to Direct-to-Consumer Channels:
The company has worked to attract more customers to its stores and digital sales, and its direct-to-consumer channel now comprises about two-thirds of its total revenue.
Ralph Lauren expects annual revenue to rise in the low single digits, centering on about 2% to 3%, below market expectations of a 3.98% increase to $6.89 billion, as per LSEG data.
Fourth Quarter Performance:
However, the company’s fourth-quarter revenue of $1.57 billion edged past estimates of $1.56 billion, benefiting from robust demand in its direct-to-consumer channel in Europe and Asia.
Ralph Lauren saw robust demand for its premium sweaters and shirts in China, with sales growing more than 25%.
Profit Beat Expectations:
It also beat expectations for quarterly profit, with gross margin rising 480 basis points on lower freight costs and better sales for its core products, such as cable knit crew necks and mesh polo shirts.
“Ralph Lauren has a history of issuing conservative guidance. The margin improvement is more important than the sales growth,” said David Swartz, senior analyst at Morningstar Research.
Leadership Change:
Justin Picicci, who most recently served as Ralph Lauren’s Enterprise CFO, succeeds Jane Nielsen. Nielsen joined the company as CFO in 2016 and took on the role of chief operating officer in 2019. She will remain as the apparel maker’s COO.
