Ralph Lauren Corporation (NYSE:RL) Q3 2024 Earnings Call Transcript

But outerwear outperformed for us again this quarter, teams doing a great job developing a line of products across different outerwear categories that’s really resonating. And as we look ahead, we still see a lot of runway, particularly on women’s outerwear. Moving forward, strong performance with our handbag business. We launched the RL888, which was hard to miss in a number of our key cities around the world, very nice response to that. with continued momentum on the Polo ID bag and the little partnership or not little, but the partnership we had with Mr. Bag in China. And also good progress on home with new capability building as we bring in our new licensing partner on furnishing. All in all, all these categories are AUR accretive. So if you think about the different categories I laid out, when you look ahead in terms of what’s going to be accelerators for the company, both in absolute top line and from an AUR and margin standpoint.

We look forward to continuing to build on the momentum that we have in these spaces.

Operator: Your next question comes from Dana Telsey with Telsey Advisory Group.

Dana Telsey: Hi. Good morning, everyone, and nice to see the nice results. Just as you think about your channels of growth and obviously, DTC being so much more important than wholesale, or the interesting things on wholesales, the stronger results that you saw in Europe this quarter with the reorder trends. Anything we should be thinking about the wholesale business and reorder trends in Europe and what it could mean for North America? Is there anything to parse apart on North America? And then just lastly on the whole digital side of the business, what are you seeing in terms of the mix, whether is it AUR growth? Is it new customer activation? Is it more from existing customers and how you see that growing as a percent of sales? Thank you.

Jane Nielsen: So just in terms of what we saw in Europe in wholesale, we were really pleased with what we saw overall in wholesale, especially as we look at Europe growth on an underlying basis, where it was even stronger. I think as we step back the differentiator in Europe is the wholesale channel itself is more elevated. And our Ralph Lauren Consumer is also more elevated. And that doesn’t mean we don’t have learnings that can apply in North America. I think as we look at assortment composition and as we look at marketing opportunities with our wholesale partners, Europe has some great best demonstrated practices and there’s certainly an opportunity to cross-pollinate those issues. But those are the primary differences in what we see in terms of performance.

Patrice Louvet: And then, Dana, on the digital front, let’s start with North America. So North America comps were up 4% digital. It was really driven by traffic, all right? That was the key traffic. We saw improvements on conversion basket size. What’s really exciting in the new consumers that we are recruiting. And I mentioned in my prepared remarks, we’re up 1.7 million new consumers this last quarter is the momentum we have on brand is attracting higher value younger consumers, and we’re seeing that play out very clearly in digital. If I look at the other regions, we were super pleased with the performance in Europe with digital at 12%. This was also driven by very strong traffic during the holiday events and new capabilities that the teams have put in place there.

And then, finally, Asia, which is a smaller base and newer flagships also a very strong momentum, up 25% versus plus 21% last compare. And I think same thing new consumers, higher-value consumers, younger consumers, progress on conversion. And listen, as we look at this channel for the future, we still see significant runway. This business is a little less than 30% of our total company. We had guided to continued acceleration within this channel. As we build new capabilities, we just launched a new search engine in the U.S. also we mapped our product presentations, we expect to see continued progress in this space. So we feel good about the results that the teams are achieving across all three regions with more to come.

Operator: Our final question comes from Rick Patel with Raymond James.

Rick Patel: Good morning, Jane. I will add my congrats as well. How should we think about the flow-through of outperformance as we go forward? Because for the year, it looks like you raised guidance for gross margins, but less so on operating margins. So curious which areas might be getting incremental spend here? And then, secondly, just zooming out which areas of the business will you look to distort investments to as we think about continuing the strong momentum?