Ralph Lauren Q3 income, sales beat Street on strong holiday sales

Ralph Lauren Corp. turned in a strong quarterly performance fueled by a big marketing push and an online surge.

Net income totaled $120 million, or $1.48 per share, after a loss of $81.8, or $1 per share, in the year-ago period. Adjusted EPS was $2.32, ahead of the Street’s estimate of $2.15.

Ralph Lauren’s revenue rose 5.1% to $1.73 billion, beating analysts’ estimates of $1.66 billion. North American sales rose 3%, with a 4% increase in same-store sales. North America wholesale revenue was down 3% as the company continues to cut back on sales to the off-price wholesale channel. Sales in Asia rose 11%.

Online sales surged 20% in the quarter, with strength across all regions. Digital comp sales rose 21% in North America and 13% in Europe.

The company increased its marketing investment by 18% in the third quarter, with a focus on driving brand awareness and engagement over the holiday season.

“Solid execution on our key initiatives, especially during the important holiday period, delivered better-than-expected results for the third quarter as we drove higher average unit retail and continued to improve quality of sales overall,” said Patrice Louvet, president and CEO. “These results give us confidence that our strategic investments in brand-building, product, digital, and global expansion are on the right track, while the strength of our balance sheet will continue to be a competitive advantage as we manage through an increasingly volatile global environment.”

In comments, Neil Saunders, managing director of GlobalData Retail, noted that brand affinity to Ralph Lauren was the strongest in over five years this holiday season. Brand recall and awareness were also higher, including among younger consumers.

“Some of this is the result of increased marketing spend but, in our view, a lot of it also comes down to a more targeted approach,” he said. “Initiatives like the launch of the Palace label have provided the brand with greater visibility among consumers looking for edgier, contemporary designs. There is clearly more work to be done, but this progress represents a good platform on which to build.”