Ralph Lauren on Thursday forecast current-quarter sales largely below Wall Street expectations, as demand for its pricey sweaters, shirts and outdoor wear tapers amid a broad slowdown in US luxury spending.

After a robust spending spree last year, affluent shoppers in the US have now cut back on luxury goods purchases as sticky inflation and high-interest rates have spooked even the wealthy.

Ralph Lauren saw a 10 percent drop in quarterly revenue in North America, joining luxury names from LVMH and Gucci-owner Kering to Canada Goose in reporting weaker demand in the region, also hurt by shrinking wholesale orders.

While Ralph Lauren’s core higher-income customers remained resilient, chief financial officer Jane Nielsen said the company was cautious on North America, where the sector was growing increasingly promotional.

But she added the market was expected to improve sequentially in the current quarter.

Meanwhile, sales in China surged more than 50 percent in the first quarter that ended July 1, as demand picked up following the lifting of Covid-19 restrictions. That drove Asia revenues up 13 percent to $378 million.

However, China’s recovery has been slower than expected, with concerns mounting around consumer spending, in a hit to the luxury sector that had heavily banked on a sharp China rebound to bolster sales.

“Going into 2023, luxury brands were expecting the second half of the year to be better. But as the US consumer has really slowed down on discretionary spending, that really has added to the conservatism (in forecasts),” said senior analyst at Jane Hali & Associates, Jessica Ramirez.

Shares were down marginally in early trading.

Ralph Lauren expects second-quarter revenue to be flat or rise slightly from a year earlier, compared to analysts’ estimate for a 3.3 percent rise. It reiterated the annual sales forecast.

Net revenue rose slightly to $1.50 billion in the first quarter, while analysts had expected a marginal drop. Adjusted earnings of $2.34 per share also topped Refinitiv estimates of $2.13.

By Deborah Sophia; Editor Milla Nissi

Learn more:

Ralph Lauren to Keep Raising Prices in Brand Elevation Push

Ralph Lauren plans to keep lifting the average price of its products, a sign the US apparel company is doubling down on efforts to elevate the cachet of its brands and to sell higher-priced items such as home goods.