Profits at the iconic Americana brand tumbled from $124 million to $41 million in the fourth quarter as its wholesale division experienced a 6 percent decrease in sales to $942 million, mostly due to a decline in North America, while consolidated comparable store sales fell 6 percent.
But on the bright side, licensing revenue was up 8 percent to $40 million in the three months ended April 2, reflecting higher royalties from increased sales of Ralph Lauren, Polo Ralph Lauren and Lauren products worldwide.
To that end, total revenue was down in the quarter, from $1.89 billion in the year-ago period to $1.87 billion, and inventory increased from $1.0 billion to $1.1 billion, which the company attributed to investments made to support new stores and concession shops.
Ralph Lauren reported similarly dismal results for fiscal 2016: profit fell from $702 million to $396 million, or $4.62 per diluted share, as net sales decreased to $7.2 billion in the 12 months ended April 2, causing revenues to drop to $7.41 billion.
However, this poor performance beat Wall Street predictions and the company’s shares edged up 3.6% to $87.50 before the market opened Thursday.
“Fiscal 2016 was a year of significant change for our company as we established a new organizational structure and appointed a new CEO,” stated Ralph Lauren, executive chairman and chief creative officer, who stepped down from the top spot late last year. “I am greatly encouraged by the changes that have already taken shape over the past several months under Stefan’s leadership and he has my full support as he and his team build and implement our new strategic growth plan.”
Indeed, Larsson has been making his presence felt since moving to Ralph Lauren from Old Navy in November. In February, the president of global brands position was eliminated. A month later, H&M’s former head of new market expansion, Fredrik Hjalmers, was brought on to oversee distribution and expansion as well as global real estate and product licensing. Then last week news leaked that multiple executives would be leaving the company this month and Valerie Hermann would take up the role of global brand president for luxury, women’s collections and accessories.
“We have made great progress over the past few months in developing our long-term growth strategy,” Larsson said. “Immediately following the comprehensive assessment work we undertook after I arrived at the company, we started developing our new strategic plan and building the foundation to start executing.”
This plan will be shared at Ralph Lauren’s upcoming investor day, set to take place June 7.
“We are confident that our new strategic plan will strengthen the brand, drive sustainable profitable sales growth and deliver shareholder value,” Larsson added.
Ralph Lauren’s board of directors also authorized an additional $200 million stock repurchase program, permitting the company to purchase shares of Class A common stock, subject to market conditions. According to a press release, this amount is in addition to the $100 million available at the end of the fourth quarter of fiscal 2016, as part of a previously authorized stock repurchase program. This brings the company’s total current authorization to $300 million.