FINANCE

Ralph Lauren Q4 earnings top Street amid global growth

BY Marianne Wilson

Ralph Lauren Corp. reported better-than-expected top- and bottom-line growth in its fourth quarter as global growth helped make up for declining sales in North America.

Net income totaled $31.6 million, or 39 cents per share, in the quarter ended March 30, down from $41.3 million, or 50 cents per share, in the year-ago period. Adjusted EPS was $1.07, easily topping analysts’ expectations of 89 cents.

Revenue in the quarter fell 1.5% to $1.51 billion, also beating Street estimates, from $1.53 billion last year. Revenue for the full year increased to $6.31 billion from $6.18 billion.

In North America, fourth-quarter revenue fell 7% to $708 million, with wholesale revenue down 10% due to weakness in some spring fashions and planned reductions in off-price sales.

North American total same-store sales fell 4%, with a 7% decline in stores and a 6% increase in e-commerce.

Commenting on the quarter, analyst Neil Saunders said that, similar to many other brands, Ralph Lauren is having to contend with softer consumer sentiment, particularly among middle-income consumers. But he also said the brand’s offer has room for improvement.

“We believe that Ralph Lauren has much further to go in creating compelling assortments and ‘must have’ products,” Saunders said. “We also believe that more creativity and excitement is needed to connect with even younger shoppers. We note, for example, the upcoming limited collaboration between Vineyard Vines and Target. While this vehicle may not have been entirely appropriate for Ralph Lauren, it is an example of the type of ‘out of the box’ thinking that Ralph Lauren does not always employ.” (For more, click here.)

With the ending of its fourth quarter, Ralph Lauren has completed the first year of its “Next Great Chapter” turnaround strategy which includes attracting younger shoppers, energizing core products and accelerating the growth of underdeveloped categories. It also includes reducing off-price distribution and leading with digital. The company said that global digital revenue grew 11% in its recently completed year, with strength across every region.

“Our Next Great Chapter plan is off to a good start — in its first year, we outperformed our commitments across key metrics, including revenue, quality of sales, operating income and EPS,” said Patrice Louvet, president and CEO. “It has been an exciting year of progress and continuous learning in our multi-year journey. 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.”

As of Mar 30, 2019, Ralph Lauren had 501 directly-operated stores and 653 concession shops globally. The directly-operated stores included 121 Ralph Lauren, 75 Club Monaco and 305 Polo factory stores.

Additionally, the company’s global licensing partners operated 108 Ralph Lauren stores and 58 Club Monaco stores, bringing the total number of licensed stores to 166. It also had 119 licensed concession shops in operation.

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