What the Luxury Markets EPS Slide Can Tell Us About Ralph Lauren’s Earnings and Sales – TradingView News

Ahead of the opening of US markets today, well-heeled US fashion brand Ralph Lauren announced its fourth quarter 2024 earnings.

As earnings season comes to an end, many people who are not active Ralph Lauren or fashion investors may not have tuned in.

However, the company’s profits say a lot – not only about Ralph Lauren, but about the entire American economy.

What do Ralph Lauren’s earnings say about the economy and markets?

Interest in luxury must-have items, such as designer fashion and accessories such as Ralph Lauren, is an important indicator of how economies use (or do not use) shopping.

But why are we looking at Ralph Lauren specifically? Why not another luxury brand?

Many of the world’s luxury brands have their strongest ties to Europe rather than America – think LVMH, Hermes and Kerig. And it is the American economy that is probably in trouble right now.

In contrast, the European Central Bank seems to be winning the fight against inflation, with CPI getting closer to the hallowed 2% and interest rate cuts expected already in June.

Ralph Lauren’s connection to economic sentiment

At the beginning of the year, Ralph Lauren announced positive third-quarter results for fiscal 2024. It reported revenue of just under $2 billion, up 5.6% year-over-year and a good 3% more than the market expected.

At that time, America was still expecting six or even seven rate cuts in 2024 and seemed to have just achieved the so-called the “soft landing” that the Fed was aiming for, but analysts warned was unlikely.

But that was then. Currently, economists are warning of a potential recession that could hit the United States between the end of 2024 and the beginning of 2025. And profits in such conditions could look much different.

Today’s earnings

Today’s quarterly results showed that revenue increased 2.0% year-over-year to $1.60 billion, while earnings per share also improved from 48 cents to $1.38 per share.

Ralph Lauren also reported year-over-year growth in direct-to-consumer comparable store sales in the fourth quarter, which ended with $902 million in inventory, down 16% from a year ago.

What the results mean

Ralph Lauren has a history of exceeding expectations during earnings season. Analysts had low expectations this quarter. Revenues were flat, with growth of only about 1% year-over-year in the quarter and earnings per share (EPS) down by about $1.60 or less.

The fact that EPS and comparable store sales were lower than total revenue is a pretty dismal performance report for a company known to be beating expectations. This suggests a tightening of the belt of the average American consumer, which is unlikely to benefit the luxury sector in recent months.