Ralph Lauren continues to expect net revenues to increase 2% to 3% in fiscal 2020, but warned it now forecasts results at the low end of this range

Ralph Lauren continues to expect net revenues to increase 2% to 3% in fiscal 2020, but warned it now forecasts results at the low end of this range

US apparel giant Ralph Lauren Corporation has maintained its fiscal 2020 full-year revenue guidance in the wake of better-then-expected second-quarter, helped by strong demand in Asia – and especially China – but warned of "intensifying headwinds" in Hong Kong.

In the three months to 28 September, the company reported a 7% rise in net income to US$182m from $170m last year. On an adjusted basis, net income was $198m, excluding restructuring-related and other charges, compared with $186m the year before.

Gross margin was 61.5%, with adjusted gross margin 60 basis points above the prior year on a reported basis and up 80 basis points in constant currency. Ralph Lauren said gross margin benefitted from favourable channel, geographic, and product mix and better pricing and promotions.

Net revenue, meanwhile, increased by 1% to $1.7bn on a reported basis and was up 2% in constant currency, driven by Europe and Asia. Foreign currency negatively impacted revenue growth by about 130 basis points in the second quarter.

North America decreased by 1% to $881m in the period. In retail, comparable store sales in North America were up 2%, driven by a 2% comp increase in brick and mortar stores and 2% increase at ralphlauren.com.

Europe revenue rose 3% in the second quarter to $480m on a reported basis and 8% in constant currency. In retail, comparable store sales in Europe were up 3%, driven by a 2% increase in brick and mortar stores and a 13% increase in digital commerce. 

While in Asia, revenue climbed 4% to $255m on a reported basis and 5% in constant currency, driven by solid growth in retail. Comparable store sales in Asia increased 1%, reflecting growth in both brick and mortar and digital commerce operations, partly offset by declines in Hong Kong.

CEO Patrice Louvet said the company delivered second-quarter results slightly ahead of its overall expectations, including better than expected revenues.

"Our progress was driven by a continued focus on brand elevation and creating immersive lifestyle experiences that are amplified across our stores and digital marketing and commerce channels around the world, while also maintaining expense discipline."

Looking ahead, the company continues to expect net revenues to increase 2% to 3% in fiscal 2020, but warned it now forecasts results at the low end of this range, primarily based on ongoing unrest in Hong Kong. Foreign currency is expected to negatively impact revenue growth by about 130 basis points in fiscal 2020.

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