Is This Premium Retailer Worth Your Money?

U.S. consumers seem to have started opening up their wallets again, as reflected by a 0.5% increase in retail sales for the month of September. Many retailers are also witnessing increased demand for their products, resulting in great quarterly numbers.

For example, Michael Kors , a luxury retailer, posted second-quarter results that topped Wall Street's expectations. Driven by increased demand for its fashion accessories, the company's revenue surged 39% to $740.3 million and earnings jumped 45% over last year to $0.71 per share.

Kors witnessed increased customer traffic in its stores, leading to comparable store sales growth of 23%. The company experienced growth in all regions, especially Europe where revenue doubled over last year throughout all segments. Moreover, Michael Kors gave a great outlook .

However, not all companies are able to attract customers so easily. Ralph Lauren's second-quarter results were not as bright as those of its peer and the company was weighed down by unfavourable currency movements. It did manage to meet analysts' expectations, though.

Details of the quarter
Revenue increased a meager 3% as sales growth in Europe and America was offset by weaker demand in Japan. Same-store sales dropped 1%, mainly because of currency fluctuations and lower traffic in its stores, especially in the months of July and August. The company did witness improving sales in September, however .

Earnings for the quarter dropped 4% as a result of higher investment costs due to store expansion and a new technology platform .

The company managed to report sales growth in both the wholesale and the retail segments because of new stores opened during the quarter and growing traffic on the company's website.

Ralph Lauren is not the only company to face difficulty in selling its products, either--Coach also reported a lackluster quarter last month. Its revenue decreased 1% to $1.15 billion since its customers shifted to Michael Kors' stores for their needs. As a result, the company's same-store sales decreased by 6.8% due to lower store traffic. Nonetheless, Coach plans to undertake a number of measures to boost its revenue such as expanding its international footprint, enhancing its products, and improving its promotional efforts.

Expansionary measures
Although Ralph Lauren's results were not so attractive, its efforts were. It expanded its product line by offering new products to its customers. The luxury retailer launched the soft Ricky Bag, the Steel Link Stirrup watch, and the Safari watch. These new products should help the company to boost its sales in the fall season.

Its new accessories will also be accompanied by marketing campaigns, which will also help stir demand. Increased efforts in advertising and promotion might prove beneficial for the retailer.

Ralph Lauren's expansion is not limited to products--it has been investing heavily on infrastructure and opening new retail stores. E-commerce operations have also been one of the key areas of focus. The company has launched its e-commerce operations in new countries such as South Korea. It has expanded its distribution center for e-commerce in North America. These efforts should reap rewards in the future.

Final views
Ralph Lauren has been undertaking the right strategies and is set to grow in the coming months. Its new stores will help the company to grow its revenue. Its new product introductions along with higher marketing will help to attract customers in the upcoming holiday season. With an improvement in consumer spending in U.S. as seen in September, this luxury retailer will be able to perform well. Investors should take note of this.

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Pratik Thacker has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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