American Luxury Brands: Can Ralph Lauren and Coach Keep Growing as Spending Slows?

(PHOTO: THE BUSINESS OF FASHION)

The luxury fashion industry is going through a challenging period, and American luxury brands are feeling it too. Consumers are becoming more selective about expensive purchases, and US credit card spending on luxury brands fell 6% year over year in September, the third straight monthly decline, according to Citi data reported by Reuters. The picture is mixed, though, because spending on leather goods and ready-to-wear improved compared with August, while watches and jewellery weakened. Citi has also said that brands with more exposure to wealthier shoppers should stay relatively resilient.

Ralph Lauren: Classic Style for Everyday Wardrobes

Ralph Lauren has built its identity around classic American style, from Polo shirts and knitwear to accessories and lifestyle products. Its appeal is not based only on expensive statement pieces, but on a recognisable look that customers can wear every day. The company’s first-quarter revenue rose 14%, and it raised its full-year outlook, with CEO Patrice Louvet saying the company was “off to a strong start” in the second year of its strategic plan.

Coach: Accessible Luxury

Coach, meanwhile, has strengthened its position in handbags and accessories. Its products are generally more accessible than those of Louis Vuitton or Chanel while still offering a recognised designer name, and the brand has worked to attract younger shoppers. Tapestry, Coach’s parent company, grew full-year revenue 14% to $8.0 billion, but its outlook for the new year came in slightly below Wall Street forecasts, and the shares fell on the news.

Why are these American brands managing to stand out? Part of the answer may be their position between everyday fashion and traditional high-end luxury, because they offer recognisable names at prices that feel more accessible while shoppers are cautious. That does not make either company immune to a wider slowdown.

What Comes Next

Ralph Lauren will release its second-quarter results on 5 November, and Tapestry will report its first-quarter results the same morning. Investors will be watching whether sales growth continues despite weaker consumer spending, and Tapestry itself has guided to revenue of $8.4 billion to $8.5 billion for the year. Shoppers may still want quality, style and recognisable brands, but they are becoming more selective about how much they spend, and whether that preference keeps helping these labels remains to be seen. This article is for information only and is not investment advice.