Ralph Lauren, Burberry Stay Optimistic Despite China Setbacks | Jing Daily

Ralph Lauren, Burberry Stay Optimistic Despite China Setbacks | Jing Daily

Headwinds from COVID-19, the war in Ukraine, and inflationary pressures were just a few of the challenges brands encountered in 2022. But while fourth-quarter earnings took a hit — especially from China’s tough lockdowns — luxury players are shrugging off the losses and relying on their investments in the market to buoy their bottom lines. Below are how three companies weathered the storm.

Ralph Lauren 

Over fiscal year 2022, Ralph Lauren’s revenue increased 41 percent to $6.2 billion on a reported basis, with North America contributing $3 billion and Asia generating $1.3 billion. Double-digit growth was seen across all regions, as the Polo shirt maker continued to execute its Next Great Chapter plan.

To win over a new generation of shoppers, Ralph Lauren spent the year leveraging key brand moments: everything from dressing Team USA at the 2022 Winter Olympics in Beijing, to making its runway return at New York’s Museum of Modern Art. Notably, the American company started selling digital products for the first time on Zepeto, the largest metaverse in the Asia-Pacific market, and later launched a winter-themed world on gaming platform Roblox. Thanks in part to these efforts, total digital sales (including websites and social commerce) grew more than 40 percent compared to last year.

Back in the physical world, the luxury house strengthened its connection with local consumers by unveiling its first emblematic concept stores in Beijing and Shanghai. In collaboration with Tencent, the new location at Beijing’s Taikoo Li Sanlitun uses a WeChat mini-program to provide immersive experiences like augmented reality photo ops. The store is also home to the first Ralph Café and Ralph Lauren Home set-up in the mainland and signals the company’s expansion into wider lifestyle categories.

Even with recurring store closures, Chinese demand remained strong. During key events like Singles’ Day and 12/12 in Q3, the brand ranked No. 2 on both Tmall’s Luxury Pavilion and JD Luxury. Meanwhile, its Lunar New Year performance “significantly outpaced the competition,” CEO Patrice Louvet noted on an earnings call.

Carried by this momentum, Ralph Lauren is bullish on its China business and still expects strong double-digit growth in the market for Q1.

Burberry

Even with COVID-19 closures battering March results, Burberry managed to post a record operating profit of £523 million ($635 million) and grow its revenue by 21 percent to £2.8 billion pounds ($3.5 billion). In the year ended April 2, the British heritage brand focused on increasing its full-price business, doubling its performance in the US and increasing store sales by 54 percent in mainland China compared to 2020.

In terms of brand activity, Burberry invested in retail expansion and a large number of pop-ups. In Q3, the brand known for trench coats created a traveling trench cube inspired by its Shenzhen social retail store to showcase its immersive shopping experience across the mainland. In November 2021, Burberry also revealed a new flagship store at Plaza 66 in Shanghai and later opened a one-year anniversary exhibition of the Burberry Generation project at TX Huaihai in January 2022.

Burberry displayed the works of young Chinese artists at TX Huaihai in January. Photo: Burberry’s Weibo

However, Burberry warned of a challenging trading environment in the new financial year. With 40 percent of its Mainland China distribution affected by lockdowns, business in the country declined 13 percent in Q4 versus last year. “We’re expecting a rebound in China once restrictions are lifted, and will continue to invest ahead of the recovery, which is likely to lead to a more pronounced phasing in group profits between half one and half two compared with a typical year,” explained CFO Julie Brown in an earnings call.

Outside of China, Brown pointed out that the rest of the business was growing at around 20 percent year-on-year. Given this, plus the 65 new concept stores and £400 million share buyback program that’s to come, Burberry is in good shape to achieve high single-digit revenue growth in the medium term.

Estée Lauder

Estée Lauder reported net sales of $4.25 billion in the third quarter ended March 31, driven by double-digit growth in the Americas and EMEA region. However, mainland China sales fell by mid-single digits as the 25 percent growth in online sales failed to offset fallen foot traffic. Social restrictions in Shanghai and curtailed tourism to Hainan further dampened what would have otherwise been a strong quarter.

Up until the second half of March, Estée Lauder stated that Chinese demand was “very solid,” particularly for the high-end luxury brands in its portfolio like La Mer and Tom Ford. The US prestige beauty giant also noted strong Lunar New Year and Valentine’s Day performances in China, with flagship brand Estée Lauder wrapping its hero products in themed packaging and livestreaming on Tmall for the romantic holiday.

Estée Lauder leveraged key shopping moments in China, including Lunar New Year and Valentine’s Day. Photo: Estée Lauder’s Weibo

As such, CEO Fabrizio Freda assured that there was “no doubt” that issues in China were temporary. “Looking ahead, we are confident in the resilience of the Chinese consumers and the untapped opportunity driving our investments in the market,” he said in an earnings conference. 

Among these investments, Estée Lauder plans to open an R&D center in Shanghai to significantly increase its ability to innovate and serve Chinese consumers. The beauty conglomerate also has plans to tap into upcoming shopping moments in the next quarter, such as 618 and Mother’s Day. With these initiatives brewing, even as it lowers its expectations for Q4,  Estée Lauder still expects to deliver “another record year” in fiscal 2022.

 

 

Source Credit: This article originally appeared on Jing Daily by Jing Daily. Read the original article - https://jingdaily.com/ralph-lauren-burberry-china-earnings-fy2022/