Ralph Lauren Corp and Michael Kors-owner Capri Holdings blew past earnings projections, highlighting wealthy buyers’ unshakable appetite for luxury goods and handbags despite red-hot inflation.
Soaring costs have had no effect on middle- and upper-income households, which have been cheerfully splashing on designer brands with money saved during the pandemic, when everything from international vacations to eating out came to a standstill.
“High-income consumers are shopping in a way that is different from other times of inflation,” Jane Hali & Associates analyst Jessica Ramirez said.
“Their priority is to shop for events they are returning to now after coming out of lockdowns and this is putting luxury goods companies in a good place.”
Nonetheless, shares of both firms declined approximately 3% in a sluggish overall market, as sales in China remained a sore place owing to periodic COVID-19 lockdowns.
Capri CEO John Idol expressed “reduced optimism” regarding the pace of demand recovery in the major luxury goods industry. In New York, a guy walks past Ralph Lauren Corp.’s flagship Polo store on Fifth Avenue.
Meanwhile, European rivals LVMH and Gucci-owner Kering have enjoyed significant increases in sales, owing to some luxury spending transferring to Europe as U.S. tourists took advantage of a higher currency.
Capri and Ralph Lauren saw a rise in stocks of 66 per cent and 47 per cent, respectively, at the conclusion of their first quarters, as the brands accelerated seasonal product shipments to avoid last year’s supply chain delays.
Despite raising pricing, Capri and Ralph Lauren’s gross profit margins fell due to increased freight spending to deliver products to shelves faster.
In the first quarter, Ralph Lauren’s revenue increased 8.3 per cent to $1.49 billion, while Capri’s revenue increased 8.5% to $1.36 billion, both exceeding analysts’ estimates.
According to Refinitiv IBES statistics, Capri made $1.50 per share, exceeding forecasts of $1.36, while Ralph Lauren earned $1.88 per share, exceeding expectations of $1.75.
(Adapted from USNews.com)