Global luxury brands deliver balanced performance in Q2 & Q3 FY25

Four luxury companies, two Italian and one each from the US and Canada, reported their financial performance for the period ended September 2024. The reported period from July to September was the second quarter (Q2) for two companies, while for the other two, it was their third quarter (Q3); hence, they also reported nine-month aggregate performance. With two 'Strong' and two 'Weak' performances, the luxury segment delivered a balanced result.

Strong: Growth In Both Sales & Profits

Ralph Lauren (NYSE: RL)

Ralph Lauren Corporation, a global leader in the design, marketing, and distribution of luxury lifestyle products, reported a diluted earning per share (EPS) of $2.31 ($2.19 in Q2, FY24), increasing by 5 per cent on a reported basis and $2.54 ($2.10 in Q2, FY24), up 21 per cent on an adjusted basis, excluding restructuring-related and other net charges, for Q2 of fiscal 2025 (FY25), in an early November release.

This NYSE-listed company’s Q2 ended on September 30, 2024, during which revenue increased by 6 per cent on both a reported and constant currency basis, ahead of expectations led by Europe and Asia. Its global D2C comparable store sales grew by 10 per cent. The adjusted gross and operating margin expansion exceeded the company’s outlook, with brand elevation and expense discipline more than offsetting planned investments in marketing and key city expansion. A gross profit of $1.2 billion translated into a gross margin of 67 per cent, with an adjusted gross margin also being 67 per cent—160 basis points above the previous year. Operating income was reported at $179 million, and the operating margin was 10.4 per cent on a reported basis. For the third quarter, the company expects constant currency revenues to grow approximately 3 – 4 per cent, and the operating margin to expand by ~100 to 140 basis points in constant currency.

The company also raised its full year FY25 revenue and adjusted operating margin expansion outlook, reflecting confidence in brand momentum and business trends. For FY25, the company now expects constant currency revenues to increase in a range of approximately 3 – 4 per cent, inclusive of foreign currency’s negative impact of approximately 40 to 60 basis points. The company’s expectation for operating margin is to expand by approximately 110 – 130 basis points and gross margin to increase by ~80 to 120 basis points, both in constant currency.

Brunello Cucinelli S.p.A. (BIT: BC)

The board of directors of Brunello Cucinelli S.p.A. reported a turnover of €300 million (~$317.28 million), up 9.2 per cent, for the third quarter ended September 30, 2024. For the nine-month period, the revenues were €920.2 million ($973.19 million), growing 12.4 per cent at current exchange rates and 12.7 per cent at fixed exchange rates compared to the first nine months of 2023. The company reported excellent and well-balanced results achieved in the western markets of the Americas and Europe. The Americas grew by 17.6 per cent and Europe by 8 per cent.

The highlight of Eastern market performance was an increase of 12.2 per cent in Asia. Revenue also increased in both sales channels: the retail channel grew by 13.3 per cent with a double-digit increase also in the third quarter, confirming strong and solid continuity in sales; and the wholesale channel, which increased by 11 per cent with increased shipments of the Fall/Winter 2024 collections in Q3 compared to last year. However, the profitability performance was not reported.

Both the very interesting results for the first nine months of the year and the great sales of the F/W 2024 collections fully confirmed the company’s forecast growth of approximately 10 per cent in 2024, with healthy and balanced profit. Furthermore, the company is expecting to double the turnover of 2023 by 2030.

Brunello Cucinelli S.p.A. is an Italian Casa di Moda, founded in 1978 by the eponymous designer and entrepreneur. The brand specialises in producing cashmere goods and is considered one of the most exclusive in chic prêt-à-porter.

Weak: No Growth In Sales & Profits

Canada Goose Holdings Inc (NYSE & TSE: GOOS)

The performance luxury outerwear, apparel, footwear, and accessories brand Canada Goose reported a 5 per cent (6 per cent in constant currency) decrease in total revenue to CA$267.8 million (~$189.72 million) for Q2 FY25, which ended on September 29, 2024. Both direct-to-consumer (DTC) and wholesale segments saw decreases in revenue. The gross profit of CA$164.1 million (~$116.26 million) also reflected a decrease of 9 per cent, with the gross margin dropping from 63.9 per cent in the same quarter last year to 61.3 per cent for the reported quarter. The operating income decreased to CA$1.6 million compared to last year’s CA$2.3 million.

The Toronto-headquartered company revised its earlier FY25 outlook of August 1, 2024. It now expects total revenue growth to stay between a low-single-digit decrease to a low-single-digit increase, against an earlier expectation of a low-single-digit increase, and adjusted net income per diluted share growth to be in a mid-single-digit increase, against an earlier mid-teens-digit increase. However, no change was reported in the consolidated gross margin, which is expected to be similar to that of FY24.

Salvatore Ferragamo S.p.A. (EXM: SFER)

Salvatore's total revenues for Q3 2024, amounted to €221 million ($233.73 million), down 7.2 per cent at constant exchange rates and 9.6 per cent at current exchange rates compared to Q3 2023, penalised by a weak Asia Pacific market, secondary channel, and wholesale environment.

On a nine-month basis up to September 30, 2024, the group’s total revenues amounted to €744 million (~$786.84 million), down by 9.8 per cent at constant exchange rates and down by 11.9 per cent at current exchange rates versus the same period in 2023. The company, not reporting the profitability performance for the reported period, foresees the operating results for the full year to be at the lowest end of its current estimates, considering the persisting uncertainties over the demand by luxury consumers.

Salvatore Ferragamo S.p.A. is the parent company of the Salvatore Ferragamo Group, one of the leaders in the luxury industry, whose origins date back to 1927.

ALCHEMPro News Desk (SB - WE)