You will be redirected back to your article in seconds
Skip to main content

Ralph Lauren Reports Better-Than-Expected 1Q Results

Ralph Lauren Corporation (RL) reported better-than-expected financial results for its first fiscal 2016 quarter earlier this week, three months after announcing a major global brand management structure.

Despite declining by five percent on a reported basis, net revenues of $1.6 billion were in line with the prior year period on a constant currency basis, driven by double-digit international growth, new store openings and global e-commerce expansion. Wholesale segment sales declined six percent on a constant currency basis, negatively impacted by retail customers’ receipt plans due to an earlier Easter this year which was partially offset by double-digit constant currency growth in Europe. Reported wholesale segment sales declined nine percent to $642 million. Retail sales increased three percent on a constant currency basis in the first quarter over the prior year period, driven by contribution from new stores and e-commerce expansion. Reported retail sales declined three percent, negatively impacted by foreign currency movements. Consolidated comparable store sales decreased two percent on a constant currency basis and eight percent on a reported basis.

Licensing revenues of $41 million in the first quarter were six percent above the prior year period in constant currency and grew three percent on a reported basis, reflecting higher royalties from increased sales of Ralph Lauren, Polo and Lauren products worldwide.

Gross margin declined by 120 basis points to 59.8%, reflecting unfavorable foreign currency effects.
Excluding restructuring and related non-cash charges, net income for the first quarter dropped 41 percent to $95 million, or $1.09 per diluted share, down from $162 million, or $1.80 per diluted share, in the prior year period, beating analyst expectations of $1.00 per share.

Related Story

“Our better-than-expected first quarter profitability reflects the strong progress we have made on our key strategic initiatives,” said Jacki Nemerov, president and chief operating officer. “The decisive actions we are taking around our global brand reorganization, infrastructure investments, e-commerce re-platform, and product pricing will position the Company for future growth and generate substantial operating efficiencies.”

The company also announced significant progress on the transition to the new global brand management organizational structure. In the 90 days since the announcement of a new global brand management organizational structure, the company established six global brand groups and filled the global brand president roles, as well as the key regional and channel positions. The company is on track to achieve $100 million in annual expense savings associated with the restructure.

“We are making the right strategic decisions and investments to support the future growth of the Company,” said Ralph Lauren, chairman and chief executive officer. “I am confident that our new organizational structure will allow us to make our already powerful brands even stronger, and the investments we are making today will create significant value for shareholders over the long term.”

The company ended the first quarter of fiscal 2016 with 467 directly operated stores, comprised of 140 Ralph Lauren stores, 65 Club Monaco stores and 262 Polo factory stores. The company also operated 558 concession shop locations worldwide at the end of the first quarter. In addition to company-operated locations, international licensing partners operated 79 Ralph Lauren stores and 24 dedicated shops, as well as 124 Club Monaco stores and shops at the end of the first quarter.