Ralph Lauren on Thursday said the company is seeking growth through digital initiatives that will include "rental, subscription, and resale models," according to a company press release. That includes a tie-up with Urban Outfitters' new Nuuly rental effort, executives said on a call that morning.
In the second quarter, net revenue rose 1% to $1.7 billion, driven by Europe and Asia. North America revenue fell 1% to $881 million. In retail, total comparable store sales rose 2%; comps in North America, driven by a 2% comp increase in brick-and-mortar stores and 2% increase online, also rose 2%. North America wholesale revenue fell 6%.
Gross profit reached $1 billion and gross margin expanded to 61.5%, with adjusted gross margin up by 60 basis points year over year, thanks to "favorable channel, geographic, and product mix and better pricing and promotions." Net income rose to $182 million from $170 million a year ago. Executives said the company is planning price increases to offset tariff hits and is also scaling back promotions.
There may be nothing more confident than a retailer willing to raise its prices in a competitive and — as Ralph Lauren CEO Patrice Louvet noted, volatile — market.
Louvet said Ralph Lauren has already begun doing just that, along with pulling back on promotions, which have both boosted margins and will help elevate the brand. The company is keenly focused on digital initiatives, where it's seen particular success, but Louvet said that its wholesale operations, while diminishing, remain important nevertheless. In the second quarter, the company's global digital revenue growth was in the low teens year over year, "driven by more than 30% growth in International and modest growth in North America," the company said in its release.
In fact, the executives on Thursday painted a picture of balance in all things — in brick and mortar versus digital, investments versus efficiencies, and retail versus wholesale. Louvet said that the digital initiatives, including working with Nuuly and Rent the Runway in apparel rental, and Nordstrom's Trunk Club in subscriptions, are key to reaching younger consumers, which he pointed out as a key growth tactic. Last month, Ralph Lauren also launched a curated collection of vintage pieces, dubbed "Re/Sourced," with UK-based fashion marketplace app Depop, sourced by that site's sellers.
And, while executives noted the company's many challenges, including macro headwinds like tariffs and currency exchange rates that have hurt its U.S.-based tourist sales, they also expressed confidence in their efforts to improve assortments and productivity while also boosting prices. Analysts appear to find that confidence well founded, with Credit Suisse analyst Michael Binetti on Thursday noting in a client note: "[T]he macro didn't hold RL back."