Ralph Lauren expects its margins to rise as wealthy customers ignore inflation

A man walks past Ralph Lauren Corp’s flagship Polo store. on Fifth Avenue in New York, U.S., April 4, 2017. REUTERS/Brendan McDermid

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May 24 (Reuters) – Ralph Lauren Corp (RL.N) expects higher sales and improved margins for the year as demand for its luxury apparel in its biggest markets in North America and Europe remaining strong at a time when inflation is weighing on earnings at major US retailers.

The purchasing power of high-income customers has not been affected by the rising prices of basic necessities, and they are now splurging on fashion as they venture more with the easing of restrictions COVID-19 around the world.

“Consumers start going out during the day, so there is a need for sports coats, outerwear and dresses. And then they go back to social activities in the evening or on weekends,” the director said. General Patrice Louvet during a call for results on Tuesday.

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The 55-year-old brand is also forecasting a single-digit revenue increase, as Wall Street expects a 3.6% increase, according to Refinitiv IBES.

Ralph Lauren, which said it may raise prices further to counter rising freight and product costs, forecasts gross margin for fiscal year 2023 to increase 30 to 50 basis points on a foreign exchange basis. comparable and constant.

The big discount chains, meanwhile, have seen their profits dwindle. Walmart Inc (WMT.N), Target Corp (TGT.N) and Kohl’s Corp (KSS.N) cut their earnings forecasts.

Shares of Ralph Lauren fell 2% amid broader declines, after the company also forecast lower gross margin for the first half of fiscal 2023 due to higher expenses and a strong dollar.

The brand said its forecast takes into account potentially weaker consumer sentiment in Europe and the impact of Chinese lockdowns. Still, Ralph Lauren expects its business in China to expand this year.

For Ralph Lauren, which increased its quarterly dividend by 9%, fourth-quarter net sales rose 18% to $1.52 billion, beating estimates of $1.46 billion. Adjusted earnings per share were 49 cents, above estimates of 36 cents.

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Reporting by Praveen Paramasivam in Bengaluru; Editing by Shinjini Ganguli

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