Asia Demand Momentum Boosts Fashion Brand Ralph Lauren's Q2 Earnings; North America Wholesale Revenue Falls 7%

Ralph Lauren Corp RL reported second-quarter FY24 sales growth of 3% year-on-year to $1.63 billion, beating the analyst consensus estimate of $1.61 billion.

Revenue in North America decreased by 1% to $718 million, Europe increased by 7% to $527 million, and Asia grew by 10% to $348 million.

Adjusted EPS of $2.10 beat the consensus estimate of $1.93.

Gross profit was $1 billion, with a gross margin of 65.5%. Adjusted gross margin was 65.4%, 80 basis points above the prior year on both a reported and constant currency basis.

Operating margin was 10.1%, and operating income for the quarter decreased by 20.4% to $164 million. Adjusted operating margin was 10.5%, 290 basis points below the prior year.

The company held $1.5 billion in cash and equivalents as of September 30, 2023. Operating cash flow for six months totaled $343.6 million.

Outlook: Ralph Lauren continues to expect revenues to increase approximately low-single digits to last year on a constant currency basis, centering around 1% to 2%, reflecting slightly increased caution around the wholesale channel.

The company continues to expect FY24 operating margin to expand 30-50 basis points in constant currency to 12.3% - 12.5%, driven by gross margin expansion.

For Q3, the company expects revenue to be up 1% - 2% to last year on a constant currency basis. The company sees operating margin to be roughly flat in constant currency, with about 10 basis points of foreign currency benefit.

Price Action: RL shares are trading higher by 2.13% at $115.26 on the last check Wednesday.