The premium apparel rebound is in full swing. On Tuesday morning, Ralph Lauren (RL -0.76%) announced another quarter of surprisingly strong sales as it gained market share in a booming niche. There was more good news in the report than just that top-line success, though.
With that in mind, let's look at a few metrics that capture how the business is capitalizing on strong demand today.
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1. $1.5 billion in sales
Ralph Lauren thrilled investors three months ago when it announced a triple-digit revenue spike. While this week's report showed much slower growth (compared to improving sales results a year earlier following pandemic closures), the boost was still stronger than expected.
Revenue increased 25% after adjusting for currency swings, easily beating management's August prediction of 20% to 22% growth. That success was powered by several factors, including solid execution on the inventory and supply chain fronts. But the biggest lift came from its booming digital segment.
Management was especially pleased with the above-average growth rate. "Ralph Lauren remains on offense," CEO Patrice Louvet said in a press release. "Our market share is growing and we are increasing our investments to deliver on further opportunities for growth."
2. 17.1% operating margin
Investors didn't see much of an impact from the soaring costs that have tripped up many peers in the apparel industry. Instead, Ralph Lauren managed to boost its gross profit margin as price increases offset higher expenses. Operating margin jumped higher by 4.5 percentage points, too, even as the company spent more on marketing.
These improvements allowed adjusted net income to land at $197 million, or $2.62 per share, compared to a net loss of $39 million, or $0.53 per share a year ago. Again, the digital segment was a key contributor here, with operating margin jumping 13 percentage points year over year.
3. 15% higher sales projected in fiscal Q3
Management's updated outlook was packed with good news for shareholders. Ralph Lauren should see sales rise by about 15% over the holiday season, which will allow revenue gains to land between 34% and 36% this year. Three months ago that annual forecast was between 25% and 30% growth.
The retailer also lifted its outlook on profit margin and earnings, leading to a significantly improved financial path. Executives plan to direct some of the excess cash to shareholders, too, with stock buyback spending set to resume early in Q3.
Management was careful to stress the fact that COVID-19 challenges could still impact short-term sales and earnings, and so investors should take the new outlook with a grain of salt.
But the company's market share gains across several geographies, including the U.S. and China, imply accelerating demand for its brand of premium apparel and accessories. The success of its digital niche also gives it room to boost profitability by selling more directly to its customers.
Overall, those factors could indicate further growth in the second half of Ralph Lauren's fiscal year -- and potentially higher returns for investors into 2022.
