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Ralph Lauren wins after strong in-store sales lead to higher profits

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Ralph Lauren Company (NYSE: RL) beat estimates with its fourth quarter earnings report, as revenue rose 18% to $1.5 billion on a reported basis and 22% in constant currency.

North America business revenue increased by 19% during the quarter to reach $674 million. In retail, comparable store sales in North America increased 21%, with a 27% increase in digital commerce and a 19% increase in physical stores. North American Wholesale revenue increased 1%. Wholesale results included a significantly higher level of negative impact from strategic distribution resets and Chaps’ transition to a licensed business compared to the first three quarters of the year, as expected. RL noted that it will mitigate the majority of these impacts beginning in FY23. North America operating profit in the fourth quarter was $90 million on a reported and adjusted basis.

European business revenue increased 26% to $467 million on a reported basis and 34% at constant currencies. Same-store sales were up 77%, with a 145% increase in brick-and-mortar stores more than offsetting a 2% drop in digital commerce from a tough comparison last year with a 79% growth pandemic. Europe operating profit in the quarter was $91 million on a reported basis and $94 million on an adjusted basis.

Revenue from the Asian business increased 20% to $346 million on a reported basis and 26% in constant currency. Same-store sales in Asia increased 12%, with a 10% increase in our physical stores and a 46% increase in digital commerce.

Adjusted gross margin was 63.3% of sales versus 62.9% last year. Foreign currencies negatively impacted gross margin by 80 basis points in the fourth quarter. Gross margin expansion was primarily driven by AUR growth across all regions as well as favorable channel and geographic mix changes that more than offset higher freight input costs, raw materials and labour.

Update from the CEO: “As we continue to navigate a very dynamic global macroeconomic environment, our growth will be supported by the strength of our brand and our multiple drivers – from recruiting new high-value consumers to developing categories. of high-potential products and geographic and channel expansion.”

Ralph Lauren (RL) shares rose slightly 0.69% in premarket trading on Tuesday following the earnings peak and guidance update.