While luxury struggles, Ralph Lauren is selling more at higher prices

Consumers happily spending more for a brand’s products and continuing to ask for more? In this economy? Sounds like a retailer’s dream, but that’s where Ralph Lauren finds itself after another blockbuster quarter.

Its Q1 revenue jumped 14% YoY to about $2 billion, outpacing Wall Street’s expectations, while DTC comparable sales grew by low double digits.

Perhaps more notable, though, was what shoppers were paying. Average unit retail (AUR) across Ralph Lauren’s DTC network was up 15%, as the company continued to cut promotions and lean into full price. At the same time, Ralph Lauren added 1.5 million new DTC consumers, per the brand.

For Michael Prendergast, managing director in the consumer and retail group at global consulting firm Alvarez & Marsal, the results are the payoff of a strategy years in the making.

“They’ve had this long-term elevation strategy that they’ve had the fortitude and conviction to stick with, and it’s really paid off for them,” he told Retail Brew. “You take one of the most iconic American brands in all of branded history, and you manage it appropriately, and the results are spectacular.”

Trading up: Ralph Lauren’s push toward higher prices has also included cutting back on discounting, cleaning up distribution, investing in stores and marketing, and focusing more heavily on more expensive categories. Women’s apparel, outerwear, and handbags, for instance, grew more than 20% in constant currency last quarter.

That’s a crucial point for Prendergast. “When the brand is the most successful, it’s a ubiquitous approach to the American lifestyle for all genders, all categories,” he said. “I think when the brand has had softer moments, it relied more on individual categories—i.e., men’s, i.e., accessories. However, to have the women’s business working, performing, and producing, as well as some of the other categories, is just phenomenal.”

The result is a retailer that has increasingly hit that mid-priced sweet spot between affordable fashion and luxury.

Emarketer VP Suzy Davidkhanian called Ralph Lauren “aspirational, but premium,” noting that the diversity in the range of prices has allowed consumers to enter through products like its signature polos before entering other categories.

“They’re able to get people to come in to love the brand and then to continue their journey with the brand,” she told Retail Brew.

It’s also why Ralph Lauren is doing better than some other luxury brands that have stuck to higher price points across the board. Ralph Lauren instead goes from relatively accessible products to bags that can retail for thousands of dollars and its Purple Label apparel.

“Ralph is hitting its stride right now with newness, with elevation, with a cleaned-up distribution pattern, with new categories coming online that the customer is responding to,” Prendergast said. “It’s firing on all cylinders: great product, great branding, directly in line with the brand ethos.”

Davidkhanian agreed, adding that Ralph’s Coffee, the Polo Bar, sporting events, and other experiences are a part of a broader ecosystem that introduces younger shoppers to the Ralph Lauren lifestyle without abandoning its Americana identity.

But the strategy isn’t limited to the US. Asia revenue rose 24% last quarter, while China sales surged more than 40%, following more than 50% growth in the country in the previous quarter. The company has also been investing in experiences there, including its first Ralph Lauren Polo Cup in Beijing.

“It starts with a coffee or going and grabbing a salad at the Polo Bar, and then you start to become part of that fold,” Davidkhanian said.

Flying high: Still, elevation has its limits. For Prendergast, the “magic question” is how far Ralph Lauren can increase prices before customers start questioning its value.

“At some point, you find yourself as a luxury brand elevating out over a red line where your customer loves the products, loves the branding, but that price-value equation starts to weaken,” he said.

Davidkhanian sees another risk: pursuing younger shoppers and expanding its lifestyle umbrella without forgetting the core customer.

“If they chase every trend, and if they start to think about their lifestyle brand in a non-sort of core heritage way, then I think they risk losing the older core customer, which is an important piece of their business,” she said.

Prendergast believes Ralph Lauren offers a lesson for other legacy brands with their own elevation strategies. “You can’t elevate your brand and continue to rely on revenue with a material percent to your total that’s done at a promotional price,” he said. “You’ve got to do what’s right for the brand to get into this success cycle that they are [in].”