(Reuters) -Ralph Lauren Corp raised its full-year revenue forecast on Tuesday, signaling strong demand for high-end apparel entering the holiday season, even as surging freight costs pinch the company’s profit margins. The luxury goods industry has bounced back sharply this year from pandemic-driven weakness in 2020, as consumers return to socializing and splurging on their wardrobes. Ralph Lauren’s European peers, including LVMH, Brunello Cucinelli and Hermes, have also reported strong increases in sales, despite concerns of a slowdown in Asia and scarce tourist shopping- a key source of revenue for the sector.
The retailer said it expects constant currency fiscal 2022 revenue to rise 34% to 36%, compared with a prior forecast of a 25% to 30% increase.
Ralph Lauren said sales in North America, its biggest market, rose 30% to $703.1 million in the second quarter ended Sept. 25.
However, Ralph Lauren kept its full-year operating margin forecast unchanged at 12% to 12.5%, flagging higher shipping costs as apparel companies struggle with global supply chain bottlenecks.
Ralph Lauren, unlike its European luxury peers which manufacture the bulk of their products in their home market, sources the vast majority of its offerings from outside the United States, making the company more susceptible to shipping delays and factory closures.
About 40% of its products are manufactured in China and Vietnam alone.
Ralph Lauren’s net revenue rose 26% to $1.50 billion in the second quarter. Analysts on average had expected revenue of $1.47 billion, according to Refinitiv IBES data.
Excluding certain items, Ralph Lauren reported a profit of $2.62 per share, beating analysts’ expectations of $2 per share.
The company’s shares were trading marginally higher premarket.
(Reporting by Uday Sampath in Bengaluru; Editing by Krishna Chandra Eluri)
