The news: Ralph Lauren and Tapestry reported standout Q3 results as the strength of their brands and product assortments helped insulate them from broader weaknesses in the luxury and apparel industry.

• Ralph Lauren’s sales rose 17% YoY to $2.01 billion, outpacing expectations for $1.89 billion. The company had double-digit growth in every market, with North America revenues up 13%, Europe up 22%, and Asia climbing 77%.
• Tapestry posted record quarterly revenues of $1.7 billion, a 13% increase YoY. The company’s outperformance was driven by strong demand for Coach, which had a 22% jump in sales on a reported basis.

Capri Holdings also had a strong quarter, with full-price comparable sales at Michael Kors turning positive for the first time in several quarters as shoppers responded favorably to new collections.

Key trends: Ralph Lauren’s and Coach’s ability to outperform the rest of the luxury industry reflects strategic merchandising and savvy investments in brand building.

• Both brands are executing on a product level, delivering items that are on-trend as well as those that are more timeless.
• A more desirable assortment enables the two brands to minimize discounting and encourage shoppers to trade up, boosting margins.
• At the same time, Ralph Lauren and Coach are raising brand awareness and desirability through what the former called a “rolling thunder” of activations, which includes sports sponsorships and hospitality ventures.

Our take: The Q3 successes of Ralph Lauren, Tapestry, and Capri show that demand for accessible luxury is recovering. But they also demonstrate the challenge of appealing to consumers’ lofty expectations. With more immediate concerns like grocery prices and labor market uncertainty pressuring discretionary purchases, companies need to be laser-focused on delivering high-quality, on-trend assortments.

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