Ralph Lauren Corp. is at the start of its Next Great Chapter strategic plan, as well as celebrating its 50-year milestone, as it continues to focus on operational efficiencies and product innovation.
In a Nutshell: Ralph Lauren, executive chairman and chief creative officer, said, “As we celebrate our rich history, we are even more inspired and motivated to continue to build the future for our company, and I am so proud of the work our teams are doing to deliver for consumers around the world every day.”
According to Patrice Louvet, president and chief executive officer, the company is off to a good start on its Next Great Chapter plan. He said that in its first year, the company has “outperformed our commitments across key metrics, including revenue, quality of sales, operating income and EPS.”
The CEO said the company has increased marketing investments by 13 percent to last year, and that it has elevated the brand as well as connected with new consumers through collaborations, such as the one with U.K.-based skate brand Palace. The company has updated it core styles as key icon merchandise has continued to be key drivers of improved sales trends. Moreover, the company continues building its high-potential but underdeveloped categories such as denim and outerwear, which had sell-out trends that accelerated in the fall holiday season.
Net Sales: The company reported a net revenue decline of 1.6 percent to $1.51 billion from $1.53 billion for the quarter ended March 30.
In North America, sales fell 6.7 percent to $708.4 million, while wholesale revenue was down 10 percent. Comparable store sales at retail were down 4 percent, comprised of a 7 percent decline in brick-and-mortar sales and a 6 percent rise in digital commerce.
Revenues in both Europe and Asia saw gains at up 3.5 percent to $434.9 million and 6.5 percent to $273.5 million, respectively. European retail comps were up 5 percent, while whose in Asia rose 4 percent. While sales were strong across every Asian market, the company said growth was led primarily by a 30 percent constant currency gain in Mainland China.
The company reported gross margins at 59.9 percent for the quarter.
Earnings: Net income fell 23.5 percent to $31.6 million, or 36 cents per diluted share, from $41.3 million, or 50 cents per share, a year ago. Excluding restructuring-related and other charges, adjusted diluted earnings per share was $1.07, or 18 cents above consensus.
Wall Street was expecting adjusted diluted EPS of 89 cents on sales of $1.61 billion.
For Fiscal 2020, the company guided net revenue to increase 2 percent to 3 percent on a constant currency basis. First quarter net revenue is expected to rise 3 percent to 5 percent, also in constant currency. The company said it is planning capital expenditures at $300 million for the fiscal year.
CEO’s Take: Louvet said: “We returned to revenue growth one year ahead of plan, average unit retail was better than we expected across all regions and channels as we continued to elevate the brand, and we saw particular strength across our international regions as we invested in product, marketing and distribution.
“Looking ahead, we will continue to put the consumer at the center of everything we do, elevate and energize our brands and drive operational efficiency to achieve long-term, sustainable growth and value creation,” the CEO said.