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Ralph Lauren (RL) Posts Strong Q4 As High-End Fashion Beats Inflation

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Updated 24 May 2022

Key points:

  • Ralph Lauren shoppers aren't phased by inflation, with the company posting a strong Q4
  • Revenue came in at $1.52B, with earnings pegged at $0.49 – both beating the Street consensus
  • Expects gross margin to increase between 30 and 50 points for fiscal 2023

It’s been a mixed last week of earnings, with high-street retail giants falling widely off the mark, but with a surprise earnings beat from Home Depot. We’ve also had an insight into consumer spending during the first quarter, illuminating that consumer habits aren’t as black and white as they seem when it comes to fiscal tightening.

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High-end fashion label Ralph Lauren (NYSE: RL) reported before the opening bell this morning, and it seems that not all consumers are bothered about soaring inflation, as shoppers continue to flock to its clothing and accessories across North America and Europe. 

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Resilient consumer demand coupled with the looser spending power of higher-income earners has created an almost impenetrable moat for Ralph Lauren’s product pipeline. Unaffected by rising costs, customers are still splurging on fashion as social events come back into full force after pandemic restrictions. 

The company posted revenue of $1.52B for the fourth-quarter, beating analyst estimates of $1.46B. Earnings were pegged at $0.49 per share, again passing the Street consensus of $0.36 per share. 

Looking forward, Ralph Lauren is raising prices to tackle increasing product and freight costs; the company forecast fiscal 2023 gross margin to increase between 30 and 50 points on a comparable, constant currency basis. The brand followed by announcing it expects revenue to increase in high single digits, likely beating the Street expectation of a 3.6% increase. 

For Ralph Lauren investors, it’s a welcomed outlook amid a backdrop of poorer earnings reports and extra-cautious guidance. Wealthy shoppers don’t necessarily feel the brunt of inflation, hence normal high-end purchases tend to continue through times of financial difficulty; a strong framework for Ralph Lauren investors.