By Savyata Mishra
(Reuters) -Ralph Lauren beat first-quarter profit estimates on Wednesday as steady demand for its pricey denims and polo shirts in Europe and China offset slower sales in the U.S.
Resilient demand for designer fashion from wealthier consumers has benefited companies such as Canada Goose and Miu Miu-owner Prada (OTC:PRDSY), even as their European rivals hinted at a slowdown due to challenges in China and a pullback in spending by "aspirational" shoppers.
Cautious inventory planning by wholesale retailers coupled with slower digital sales led to a 4% decline in Ralph Lauren (NYSE:RL)'s North America revenue to $608 million during the quarter.
"We expect North America wholesale declines to moderate through the remainder of the year," CFO Justin Picicci said on a post-earnings call, adding that the company will maintain inventory to chase demand for its core products.
Shares of the company reversed premarket gains to drop more than 1% in early trade, with its executives warning that third-quarter sales will be impacted by a shorter holiday selling window between Thanksgiving and Christmas, compared with last year.
Ralph Lauren's quarterly sales in Europe and Asia grew from last year, contrasting a recent string of bleak earnings from European rivals including the world's biggest luxury group LVMH, German fashion house Hugo Boss, Burberry and Gucci owner Kering (EPA:PRTP).
"AUR (average selling price) continued its impressive run of expansion ...in the quarter, demonstrating the success, in our view, of management's efforts to invest in the brand and attract new, younger, high-value consumers," said Dana Telsey of Telsey Advisory Group.
The Polo Bear sweaters maker's net revenue rose 1% to $1.51 billion in the first quarter. Analysts on average had expected a decline of 0.46%, according to LSEG data.
It earned $2.70 per share on an adjusted basis, beating estimates of $2.47, with adjusted gross margin growing 170 basis points from the prior year on the back of lower cotton costs and full-price selling.
Ralph Lauren's AUR rose 6%, compared with a 15% increase in the same quarter last year.
For the current quarter, it expects constant currency revenues to grow in the range of 3% to 4%, higher than estimates for a 3% rise.
The company also reaffirmed its fiscal 2025 sales and margin expectations.