Advertisement
11/02/2017

Ralph Lauren Q2 beats Street; profit surges

Image
Ralph Lauren Corp.'s effort to streamline and restructure its business, which includes cutting back its exposure in department stores and reducing shipments to off-price channels, is beginning to pay off.

The company reported fiscal second-quarter net income of $143.8 million, or $1.75 per share, up from $45.7 million, or 55 cents per share, for the year-ago period. Adjusted earnings were $1.99 per share, ahead of the FactSet consensus of $1.89 per share.

Revenue fell 9% to $1.66 billion, down from $1.82 billion, but better than analysts had expected. Revenue in North America fell 16% to $877 million. The company said the loss was driven by initiatives to reduce promotional activity, brand and distribution exits and lower consumer demand.

“I am pleased with the progress we are making as we continue to strengthen the foundations of our business and elevate the expression of our iconic brand,” said Ralph Lauren, executive chairman and chief creative officer. “Patrice has already proven to be an invaluable partner who is embracing our core values, bringing unique expertise and uniting and empowering our capable teams.”

It's been a period of transition for the company. In July, former P&G executive Patrice Louvet took the reins as CEO following the departure of former CEO Stefan Larsson. Larsen, the company's first chief executive besides Ralph Lauren, left after 15 months on the job, reportedly after clashes with Lauren over the restructuring program.

In comments, Neil Saunders, managing director of GlobalData Retail, noted that one of the positive takeaways from the company's first and second quarters is that Ralph Lauren and Louvet seem to be working well together. "The dynamic between the two gentlemen is crucial as it will ultimately determine whether the turnaround plan succeeds or fails," Saunders said. "As the founder and iconic head of the brand, Ralph Lauren's input and vision are vital, but it remains important that he allows a CEO to steer the business towards more fruitful waters. After some false starts, this now seems to be happening."

Looking ahead, Ralph Lauren is maintaining its guidance. It expects revenue to 8% to 9% for fiscal 2018, and a 6%-to-8% decrease in third-quarter revenue. But the company boosted its operating margin guidance for the full year to 9.5% to 10.5%, up from 9% to 10.5%.