China and South Korea helped Asia continue its momentum for Ralph Lauren Corporation in the three months to June, despite headwinds from Japan, the fashion company’s biggest market in the region.
Mainland China saw sales rise during the period — the company’s first quarter of fiscal 2022 — by more than 50 percent year-on-year and more than 70 percent, compared to the first fiscal quarter of 2020 (at constant currency).
Overall, strong growth across every region, including North America and Europe, in Q1 delivered net revenue of $1.4 billion, a surge of 182 percent. Actions to elevate the brand, strengthen-yet-simplify the portfolio, and reduce off-price penetration enabled net income to reach $165 million after a loss of $128 million during the same quarter last year.
The sale of Club Monaco to Regent also was competed as planned at the end of Q1, while the Chaps brand is on track to transition to a licensed business in Q2. These moves enabled Ralph Lauren to focus on its namesake brands, and markets responded positively this morning, with the stock up by almost 10 percent in early trading.
Emblematic flagships launch in China
Partnering with Tencent, Ralph Lauren opened its first digital-led ‘emblematic’ retail concept in Beijing’s Sanlitun Mall this April. Another store is set to open “in just a few weeks” in Shanghai, according to the company’s president and CEO, Patrice Louvet
In an earnings call today, he said: “These stores have a smaller footprint than existing flagships around the world, but the format offers consumers an elevated, immersive brand experience using a significantly lower investment.”
The Beijing store, which features a Ralph’s Coffee space, integrates smart retail and digital activations, including endless aisle technology, virtual try-ons, and an in-store treasure hunt that uses QR codes. Also present are customization stations where consumers can use Ralph Lauren’s WeChat mini-program to order customized products from their mobile phones.
Louvet added: “Though still early, the Beijing store has significantly outperformed our initial expectations. China continues to be a significant long-term growth opportunity for us.”
The units were part of 18 total store openings during the first quarter in priority spots globally but mostly in Asia. Eleven locations were closed in the same period. They add to existing smaller-format Polo boutiques, concessions, and a digital presence on Ralph Lauren’s sites and partner sites like Tmall.
Globally, Ralph Lauren is pleased with its progress. “Against the backdrop of stronger than expected re-openings across North America and Europe, our teams delivered exceptional performance this quarter,” Louvet continued. “We are back on the offense.”
In the 12 months to March during the pandemic, Asia helped keep Ralph Lauren somewhat buoyant. It was the only region to show growth — one percent versus declines of 29 percent in Europe and 37 percent in North America. The results even put sales in Asia at almost level pegging with Europe.
But the three months to June have turned the tables somewhat. With an incredible growth of 301 percent in North America and 194 percent in Europe versus Asia’s 68-percent rise, the regional balance has been restored. However, compared to a year ago, Asia is where the company plans to add new, directly-operated stores and expects long-term growth.
Asia’s ascendancy — especially China’s — will likely continue as conditions stabilize and marketing spending on the Mainland shifts to local shoppers and regional tourists as well as digital commerce.
CFO Jane Nielsen told financial analysts: “We are now focused on capturing more domestic travel opportunities coming out of the pandemic and building our business with the Chinese consumer within China.”
“We’ve noticed our Sanlitun store performing well in a tourist market like Beijing, and we are also leaning into local domestic travel to some of our flagships.” Nielsen also added that the company had doubled its marketing budget to engage with these consumers before they start traveling.