By Sabrina Escobar

Ralph Lauren stock jumped by double digits Thursday after the luxury apparel maker's fiscal third-quarter earnings barreled past expectations and management raised its full-year financial guidance.

Ralph Lauren's adjusted earnings for the quarter ended December were $4.82 a share, handily topping the consensus expectation for $4.53 a share among analysts tracked by FactSet.

Revenue rose 11% from a year earlier to $2.1 billion, exceeding the consensus call for $2 billion, increasing 11% from the year-ago quarter.

Shares of Ralph Lauren were up 14% at $283.86 in premarket trading Thursday. Futures tracking the S&P 500 were 0.2% higher.

The company achieved its first uptick in wholesale revenue from North America after six straight quarters of declines, with a gain of 6% from a year earlier. Total North American revenue increased 7% this quarter.

"We know that channel is still a secularly pressured channel, but it's a big milestone for us to stabilize that business and we're happy to see that come to fruition," said Justin Piccici, Ralph Lauren's chief financial officer, on a call with Barron's Thursday.

Wholesale distribution has been under pressure for a while. For one, consumers are shopping less at department stores, who buy the company's apparel and resell it to the public. Second, Ralph Lauren has been cutting its exposure to lower-tier stores cut wholesale channels and increasing its presence in higher-end retailers.

Repositioning the brand weighed on growth in wholesale, executives have said, but the company is now seeing stronger performance among those top-tier department stores. Think Saks Fifth Avenue, Bergdorf Goodman, Nordstrom, and Neiman Marcus.

"All of a sudden there's an expanded picture for Ralph Lauren, so we are adding in that space," Piccici said. "And again, early, early days. Our business, you know, it's not concentrated there today, but that's the direction of travel."

The better performance in North American wholesale, coupled with surprisingly strong results in Europe, gave management the confidence to increase its forecast for revenue for fiscal 2025, ending in March, Piccici said. Revenue will increase between 6% and 7% from last year in constant currencies, up from a previous call for 3% to 4% growth. Analysts had factored in a 3.6% gain.

The company increased its margin projections as well. It now sees operating margins increasing about 1.2 to 1.6 percentage points, slightly higher than past projections of 1.1 to 1.3 percentage points.

Helping margins was that Ralph Lauren pulled back on discounts "massively" across the board last quarter because its higher-income shoppers were more than happy to pay full price for its products, Piccici said. Third-quarter operating margin was 18.7%, 2.3 percentage points higher than the prior year.

"Our core consumer is a little bit less sensitive, more of a full price consumer, and that's where we're seeing, indeed, our strongest growth from," he said.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 06, 2025 09:17 ET (14:17 GMT)

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