- Angela Gonzalez-Rodriguez |
ANALYSISAfter pumping up the global luxury goods market, Chinese savvy – and wealthy – consumers are paying the athleisure niche a similar favour. Data from Euromonitor International revealed that the sportswear market in China is expected to grow to 43.1 billion dollars by 2020, surpassing the luxury-goods market.
Furthermore, according to market experts, the Chinese sportswear market has been growing quickly in the past few years, eating into the luxury-goods market after the latter suffered the consequences of a more severe anti-bribery policy and the first aftermaths of the country’s economic slowdown.
To this point, Reuters reported earlier this year that "GPS sport watches, compression leggings, and hydration packs are the new must-haves for wealthy Chinese, pumping up the multibillion-dollar sportswear industry at a time when China's elite are reining in spending on more traditional luxury brands."
Aiming to gain a competitive edge in such a promising market, U.S. companies have been the first in tapping on such a fast-growing opportunity. Adidas is leading the charge with the announcement of 3,000 more stores opening in the country in the next five years, expanding from 9,000 to 12,000 stores.
Running and cotton, a winning combo in the buoying Chinese athletic apparel market
But, what are the main drivers behind this new market? Euromonitor International performed a Sportswear in China survey in which it found running to be increasing in popularity because “it does not require a specific field or equipment, with very low entry barriers for ordinary consumers. Meanwhile, runners can eagerly and easily share their successes via their personal social media accounts such as WeChat, to have a sense of accomplishment. The rising passion for running amongst average consumers gave rise to the rapid growth of running footwear and apparel.”
This passion for running has proven a fruitful one for the leading sportswear brands, which have seen their sales and profits soar in Western Europe and North America after a similar fever hit the fitness-conscious Millennials.
Like Westerns, the Chinese don’t wear their activewear exclusively for exercise. The Activewear study shows they also wear it for running errands (40 percent), shopping (42 percent), around the house (39 percent), out to eat or a movie (33 percent), and doing yard work outside (27 percent). Nearly 6 out of 10 consumers (59 percent) choose activewear for other activities because it’s comfortable.
Part of this frenzy is also to be explained by this search for comfortable garments, which has further push cotton consumption. The same research indicates in this regard that, regardless of activity preference or exercise level, cotton (47 percent) is by far the overall fabric preference for activewear, followed by cotton blends (20 percent). In fact, 69 percent of polled Chinese consumers said it’s “the only fabric/one of the few fabrics they consider” when shopping for athletic apparel. Other fibres sought after yet significantly less are rayon (7 percent), and polyester (4 percent), according to the Activewear study.
Looking ahead, data shows that more growth is to come as Chinese consumers currently do not own a lot of activewear pieces. On average, they own 2.5 T-shirts, 2 compression or tight-fitting shirts, 2 tank tops or sleeveless shirts, 2 pairs of shorts, and 2 pairs of trousers.
Celebrities, the best bait for Chinese sportswear consumers
In a recent survey, Prosper Insights & Analytics found that generally, Chinese brands are preferred by 68 percent of consumers. That compares to 26 percent who seek U.S. brands, 20 percent who prefer Korean styles, 18 percent who look for European labels, and 13 percent who buy Japanese brands.
Aware that Chinese consumers prefer Chinese brands, foreign labels such as Nike, Puma or Adidas are seeking for celebrities’ endorsement to gain market share. More than 4 of 10 Chinese consumers (41 percent) say celebrity endorsements are “somewhat influential,” according to the Activewear study.
However, Matt Powell, sports industry analyst for research firm The NPD Group, stressed in a recent interview with ‘Forbes’ that savvy marketing and a high-profile celebrity endorsement isn't enough: the gear needs to be compelling too.
The Activewear study finds Nike (26 percent) and Adidas (20 percent) are the top activewear brands purchased in China by all consumers, followed by local brands such as Li-Ning (16 percent), Anta (10 percent), 361 (7 percent), Xtep (4 percent), and Qiaodan (2 percent).
Meanwhile, other Western names are on the rise, with Under Armour expecting its sales in China to increase 25 percent per year until 2018.
Adidas and Nike sales growth over time
Image: Adidas Facebook
- Prachi Singh |
Fourth quarter net sales at Deckers Brands decreased 2.4 percent to 369.5 million dollars compared to 378.6 million dollars for the same period last year. On a constant currency basis, net sales decreased 1.5 percent. Full year net sales decreased 4.5 percent to 1.790 billion dollars compared to 1.875 billion dollars last year. On a constant currency basis, net sales decreased 4.1 percent.
Commenting on the company’s performance, Dave Powers, President and CEO, said in a statement, "Over the course of the last year, the organization has been hard at work identifying margin enhancing initiatives and detailing plans that significantly improve the profitability of the company. We now anticipate that the 150 million dollars cumulative savings plan announced in February 2017 will drive a 100 million dollars operating profit improvement by fiscal year 2020."
Fourth quarter and full year financial highlights
Gross margin was 43 percent compared to 40.9 percent for the same period last year, while non-GAAP gross margin was 43 percent compared to 42.3 percent for the same period last year due to less domestic promotional activity and supply chain improvements, partially offset by foreign exchange headwinds from the strengthening of the US dollar.
Gross margin for the full year was 46.7 percent compared to 45.2 percent last year. Non-GAAP gross margin was 46.7 percent compared to 45.4 percent last year. Operating loss was 1.9 million dollars compared to 162.1 million dollars last year. Non-GAAP operating income was 165.6 million dollars compared to 195.7 million dollars last year.
Fourth quarter operating loss was 30.9 million dollars compared to 27.9 million dollars for the same period last year. Non-GAAP operating income was 5.1 million dollars compared to 5.7 million dollars for the same period last year. Diluted loss per share was 0.49 dollar compared to 0.73 dollar for the same period last year. Non-GAAP diluted earnings per share were 0.11 dollar compared to 0.11 dollar for the same period last year.
Diluted earnings per share for the year were 0.18 dollar compared to 3.70 dollars last year, while non-GAAP diluted earnings per share were 3.82 dollars compared to 4.50 dollars last year.
UGG brand net sales for the fourth quarter decreased 1.1 percent to 243 million dollars compared to 245.6 million dollars for the same period last year. On a constant currency basis, sales increased 0.2 percent. The company said, decrease in sales was driven by a decrease in domestic wholesale sales, partially offset by an increase in international wholesale and DTC sales. For fiscal 2017, UGG brand sales decreased 4.8 percent to 1.451 billion dollars and on a constant currency basis, sales decreased 4.2 percent.
Teva brand net sales for the quarter decreased 13.3 percent to 51.3 million dollars compared to 59.1 million dollars for the same period last year. On a constant currency basis, sales decreased 13.2 percent. The decrease in sales was driven by a decrease in global wholesale sales, partially offset by an increase in DTC sales. For fiscal 2017, Teva brand sales decreased 11.5 percent to 117.7 million dollars. On a constant currency basis, sales decreased 12.2 percent.
Sanuk brand net sales for the fourth quarter decreased 16.1 percent to 32.3 million dollars compared to 38.5 million dollars for the same period last year on both a reported and constant currency basis. The decrease in sales was driven by a decrease in global wholesale and DTC sales. For fiscal 2017, Sanuk brand sales decreased 13.6 percent to 91.8 million dollars. On a constant currency basis, sales decreased 13.7 percent.
Combined net sales of the company’s other brands for the quarter increased 21.2 percent to 42.9 million dollars compared to 35.4 million dollars for the same period last year. On a constant currency basis, sales increased 22 percent. The increase, the company said, was primarily attributable to a 9.3 million dollars or 32.7 percent, increase in sales for the Hoka One One brand compared to the same period last year. For fiscal 2017, combined sales of the company’s other brands increased 16.2 percent to 129.6 million dollars. On a constant currency basis, sales increased 16.3 percent.
Wholesale net sales for the quarter decreased 5.8 percent to 219.1 million dollars compared to 232.7 million dollars for the same period last year. On a constant currency basis, sales decreased 5.2 percent. For fiscal 2017, wholesale sales decreased 8.7 percent to 1.124 billion dollars, while on a constant currency basis, sales decreased 8.6 percent.
Direct-to-Consumer (DTC) net sales for the quarter increased 3 percent to 150.4 million dollars compared to 145.9 million dollars for the same period last year. On a constant currency basis, sales increased 4.3 percent. DTC comparable sales for the fourth quarter were flat compared to the same period last year. For fiscal 2017, DTC sales increased 3.4 percent to 666.3 million dollars and DTC comparable sales increased 2.6 percent. On a constant currency basis, DTC sales increased 4.5 percent.
Domestic net sales for the quarter decreased 4.3 percent to 230 million dollars compared to 240.4 million dollars for the same period last year. For fiscal 2017, domestic sales decreased 6.4 percent to 1.141 billion dollars. International net sales for the quarter increased 0.9 percent to 139.5 million dollars compared to 138.2 million dollars for the same period last year. On a constant currency basis, sales increased 4.1 percent. For fiscal 2017, international sales decreased 1 percent to 648.8 million dollars. On a constant currency basis, sales increased 1.6 percent.
The company forecasts total sales to reach 2 bn dollars by 2020
In its long-term outlook, the Deckers Brands expects total sales of approximately 2 billion dollars, operating margin of 13 percent and ROIC over 20 percent.
The Company’s fiscal year 2018 outlook includes targeted savings which are expected to result in over 17 million dollars of operating profit improvement. Net sales are expected to be in the range of down 2 percent to flat for FY18, gross margin to be approximately 47.5 percent, non-GAAP diluted earnings per share to be in the range of 3.95 dollars to 4.15 dollars.
Net sales for the first quarter are expected to be up low single digits over the same period last year, and a non-GAAP diluted loss per share of approximately 1.70 dollar to 1.65 dollar compared to a non-GAAP diluted loss per share of 1.80 dollars for the same period last year.
Picture:Deckers Brands website
- Angela Gonzalez-Rodriguez |
Shares of Abercrombie & Fitch were trading higher Wednesday afternoon on reports that there may be an offer for the teen retailer. Its competitor American Eagle Outfitters and private-equity company Cerberus are reported to be working on a takeover bid.
According to Dow Jones, A&F’s rival American Eagle Outfitters would have joined forces with Cerberus to approach Abercrombie with a takeover offer.
The ‘Wall Street Journal’ highlighted the compelling aspects of a potential joint Cerberus-AEO approach given the investment firm’s power and the apparel retailer’s ability to generate synergy savings from the deal. Express is also thought to have joined the race for the once favourite teen fashion brand.
American Eagle Outfitters and Express, the likely buyers
Sources close to the matter however cautioned that there is no guarantee that the group would make a bid.
Earlier this month, Abercrombie & Fitch made it to the news as it was said to have hired investment bank Perella Weinberg Partners to handle potential takeoverapproaches. However, today there is no certainty that any deal will occur, the sources added.
Market experts pointed out back then that as A&F's stock trades at a 17-year low, it has become a vulnerable acquisition target. At Wednesday’s close, the company’s market value stands at 860.1 million dollars. The stock enjoyed this week’s brief rally, although still down nearly 48 percent over the last year.
Photo:Sea & Be Seen, Swimwear Collection, Abercrombie U.S. Web
- Angela Gonzalez-Rodriguez |
Turkish clothing retailer Mavi Giyim, manufacturer of celebrities’ favourite denim collections in the region, is getting ready to list on Istanbul's stock exchange. This will be the first initial public offering (IPO) of shares on the Turkish bourse after a coup attempt ten months ago.
The offering will see 50 percent of the company sold by the founding Akarlilar family and Turkven, a private equity fund which invested in Mavi in 2008. They may also sell up to an additional 15 percent, Mavi said in an official statement earlier this week.
It’s worth highlighting that Turkven also holds investments in shoe retailer Flo and fast fashion chain Koton.
Mavi shares will be offered to international institutional investors, and domestic retail and institutional investors, Mavi said.
Goldman Sachs is acting as global coordinator and, together with Bank of America Corp's Merrill Lynch, as joint international bookrunners. Turkey's Is Yatirim is acting as domestic coordinator and bookrunner for the global offering.
Mavi’s IPO, a test for the battered post-coupe Instanbul’s stock exchange
Last year Mavi registered a consolidated revenue of 1.31 billion lira or 368.11 million dollars, and an EBITDA of 170.2 million lira. Yavuz declined to disclose the target valuation but said the company viewed Inditex and H&M as comparable, as well as local players, reported Reuters over the weekend. In March, Bloomberg, quoting anonymous sources with knowledge of the move, reported that the IPO could value the company at about 800 million dollars.
In a note to the market, the company’s CEO Cuneyt Yavuz said 82 percent of Mavi's business comes from Turkey, which has a growing and young population. However, the country is still recovering from a coup attempt that took place last summer.
After the political crackdown, the Istanbul Stock Exchange has seen a sharp decline in listings. As revealed by Thomson Reuters data, the amount raised in IPOs since then has plummeted from 119.9 million dollars a year ago to this year’s to date 14.3 million dollars.
When explaining why now, Mavi’s CEO explained that "Our company has come out to be very resilient in terms of the ups and downs of the Turkish market."
Photo:Mavi Jeans, US Web
- Angela Gonzalez-Rodriguez |
ANALYSISTo date, the U.S. was the golden haven for athletic apparel, with a population of 321 million people expected to grow the industry’s value to 83 billion dollars by 2020.
However, China has rapidly gained positions in this market, becoming the preferred market for both national and international brands trying to win over an increasingly sporty 1.4 billion population.
Although the U.S. still presents many prospects for sportswear retailers - Morgan Stanley forecasts the category will reach 83 billion dollars by 2020 -, the Chinese market is outpacing it in terms of growth opportunities.
In fact, BizVibe data reveals that, with the largest population in the world and a boost from several government initiatives, China’s sportswear market is developing rapidly. It currently has a growth rate of 11 percent, considerably higher than the U.S., which is the world’s largest market for sportswear but is growing at only 2.5 percent.
China ramps up active lifestyle policy efforts after Beijing Olympics
Since the country began exploring national fitness policies back in 1978, the Chinese government has gone a long way to ensure the population gets more active. Furthermore, following the 2008 Olympics in Beijing, former president of China Hu Jintao announced a government-backed sports-for-all fitness policy.
“Our ultimate goal is to use sport to improve people’s fitness level and improve their living standards,” President Hu stated then. “Sport should service the people’s all-around development and facilitate the development of the economy. Elite sport and mass sport should advance together to achieve sustainable development.”
In fact, China’s government efforts to encourage a healthier and more active lifestyle are fuelling this rising interest in sports with multiple investments. In order to combat the rising number of health problems such as obesity in the country, the government has launched a five-year fitness plan that will make 225 million dollars investments in sports and fitness facilities.
Meanwhile, Chinese consumers have seen their disposable income increase: official data released by the National Bureau of Statistics at the beginning of the year showed China’s per capita disposable income increased 6.3 percent year-over-year.
These two factors have been the foundation for a rapid increase in workout facilities, which nothing but contributed even further to the sustained explosion of athletic apparel in the country. China’s 415 million Millennials are also contributing to this, as is its growing middle class. People with higher incomes tend to participate in more leisure activities, including sports, leading to rising demand for active wear, indicates data gathered by BizVibe.
On the back of such an increasing interest in being active, many national and international athletic fashion brands have thrived in China in the past years
Data collated by FashionUnited Business Intelligence reveal that Nike, Adidas, Anta and Li Ning – in this order – top the market of sportswear in the country. All brands have experienced a positive evolution in the past years, as shown in the chart below.
China's sportswear market share per brand (2011 -2016)
Image:Nike, Official China’s Web
- Prachi Singh |
Cherokee Global Brands said that consolidated revenues for the fourth quarter, including the contribution from Hi-Tec, were 15 million dollars. On a year-over-year comparable basis, Cherokee Global Brand revenues, excluding Hi-Tec, were 7.2 million dollars, a decrease of 8.8 percent from 7.8 million dollars in the prior year period.
The company said, year-over-year decline is largely due to the decrease in North America revenues related to the Cherokee brand as the company continues to transition to new wholesale licensees. During the quarter, some of the decrease was offset by global revenue increases, particularly in South America, Europe, Japan and South Africa.
Fourth quarter and full year financial highlights
Hi-Tec revenues totaled 7.8 million dollars in the fourth quarter and included 6.6 million dollars in indirect product sales related to distribution and government contracts, as well as 1.2 million dollars in licensing revenues stemming from new and existing licensing deals for the Hi-Tec portfolio of brands. Gross profit from Hi-Tec indirect product sales was 1.5 million dollars and is inclusive of 5.1 million dollars in cost of goods sold.
Consolidated revenues for the year, including the contribution from Hi-Tec, were 40.6 million dollars. On a year-over-year comparable basis, Cherokee Global Brand revenues, excluding Hi-Tec, were 32.8 million dollars, compared with 34.7 million dollars in the prior year. Cherokee-brand royalties earned by Target in fiscal 2017 were 10.5 million dollars, a decrease of 4.4 million dollars over the prior year.
GAAP operating loss for the fourth quarter was 9 million dollars, compared with GAAP operating income of 1.9 million dollars in the prior-year period. GAAP operating loss for fiscal 2017 totaled 3.4 million dollars, compared with GAAP operating income of 13.3 million dollars in the prior year.
Non-GAAP operating income for the quarter was 2.5 million dollars or 16.5 percent of revenues, compared with 2.3 million dollars or 29.9 percent of revenues, in the prior year period. Adjusted EBITDA for the fourth quarter was 2.9 million dollars compared to 2.7 million dollars in the prior year period. Adjusted EBITDA for fiscal 2017 was 13.4 million dollars compared to 15.9 million dollars in the in the prior year.
Picture:Cherokee Global Brands website
- Prachi Singh |
Ralph Lauren Corporation said that it reported earnings per diluted share of 2.48 dollars on a reported basis and 0.89 dollar on an adjusted basis for the fourth quarter of fiscal 2017 compared to earnings per diluted share of 0.49 dollar on a reported basis and 0.88 dollar on an adjusted basis, for the fourth quarter of fiscal 2016. For Fiscal 2017, earnings per diluted share were 1.20 dollars on a reported basis and 5.71 dollars on an adjusted basis compared to 4.62 dollars on a reported basis and 6.36 dollars on an adjusted basis, for the full year of fiscal 2016.
“The retail landscape today is more dynamic than ever, but within this environment, our brand continues to be one of the most recognized and beloved all over the world. I am very excited to partner with Patrice Louvet, who will join as our CEO in July, as we continue our evolution,” said Ralph Lauren, Executive Chairman and Chief Creative Officer in a media release.
Q4 revenues down 16 percent
In the fourth quarter, reported revenue decreased 16 percent to 1.6 billion dollars; excluding the impact of foreign currency and on a 13-week to 13-week basis, revenue was down 12 percent to last year. The company said, foreign currency pressured the fourth quarter revenue growth by approximately 100 basis points.
International revenue in the fourth quarter declined 9 percent while North America revenue was down 21 percent to last year. Excluding the impact of foreign currency and on a 13-week to 13-week basis, international revenue was down 2 percent to last year, with negative currency impact of 300 basis points of the difference.
Wholesale revenue decreased 17 percent in the quarter to 777 million dollars; on a 13-week to 13-week basis in constant currency, wholesale revenue was down 15 percent to last year. The company said, decline was primarily driven by North America as shipments were strategically reduced to increase quality of sales, better align with demand and reduce excess inventory.
Retail revenue decreased 16 percent to 745 million dollars; on a 13-week to 13-week basis in constant currency, retail revenue was down 9 percent to last year. Lower retail sales, Ralph Lauren said, were driven by a decline in comparable store sales that was negatively impacted by challenging traffic and average transaction size trends, partially driven by its initiatives to improve quality of sales. On a 13-week to 13-week constant currency basis, comparable store sales decreased 11percent negatively impacted by calendar shifts related to both Christmas and Easter holidays by about three percentage points; excluding this impact, comparable store sales would have decreased 8 percent.
Licensing revenue increased 7 percent on a reported basis to 43 million dollars.
FY17 revenues declined 10 percent
For fiscal 2017, revenue decreased 10 percent to 6.7 billion dollars. Wholesale revenue for the year decreased 15 percent to 2.8 billion dollars compared to the prior year period, primarily due to a decline in sales in North America.
For Fiscal 2017, retail revenue for the year decreased 6 percent on a reported basis to 3.7 billion dollars compared to the prior year period. On a 52-week to 52-week constant currency basis, consolidated comparable store sales decreased 7 percent.
Licensing revenue of 173 million dollars for the period was 1 percent below fiscal 2016 on a reported basis.
Ralhp Lauren posts Q4 net loss of 204 mn dollars
On a reported basis, net loss in the fourth quarter was 204 million dollars or 2.48 dollars per share. On an adjusted basis, net income was 74 million dollars or 0.89 dollar per diluted share, excluding restructuring and other charges. This compared to net income of 41 million dollars or 0.49 dollar per diluted share on a reported basis, and 74 million dollars or 0.88 dollar per diluted share on an adjusted basis, for the fourth quarter of fiscal 2016.
In fiscal 2017, on a reported basis, net loss was 99 million dollars or 1.20 dollars per share. On an adjusted basis, net income was 477 million dollars or 5.71 dollars per diluted share, excluding restructuring and other charges. This compared to net income of 396 million dollars or 4.62 dollars per diluted share on a reported basis, and 546 million dollars or 6.36 dollars per diluted share, for fiscal 2016.
FY18 revenues expected to decline 8-9 percent
For fiscal 2018, net revenue is expected to decrease 8-9 percent, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have approximately 150 basis points of negative impact on revenue growth in fiscal 2018. Operating margin is expected to be 9-10.5 percent, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to pressure operating margin for fiscal 2018 by 50-75 basis points.
In the first quarter of fiscal 2018, the company expects net revenue to be down low double-digits, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have approximately 225 basis points of negative impact on revenue growth in the first quarter. Operating margin for the quarter is expected to be about 9.5-10 percent, excluding foreign currency impacts. Foreign currency is estimated to pressure operating margin by approximately 75 basis points.
Picture:Ralph Lauren website
- Prachi Singh |
Net sales at The Children’s Place increased 4.1 percent to 436.7 million dollars in the first quarter of 2017. Comparable retail sales increased 6.1 percent. Net income was 36.2 million dollars or 1.97 dollars per diluted share compared 26 million dollars or 1.33 dollars per diluted share, the previous year, a 48 percent increase in net income per diluted share.
Commenting on the company’s performance, Jane Elfers, President and CEO, said in a press statement, “We continued to deliver outstanding operating results in the first quarter. Comparable retail sales, operating margin and earnings per diluted share were significantly above both last year and the high end of our guidance range. We continue to make significant progress on our key strategic growth initiatives - superior product, business transformation through technology, alternate channels of distribution and fleet optimization.”
Other important financial highlights of Q1
Adjusted net income was 35.9 million dollars, or 1.95 dollars per diluted share, compared to adjusted net income of 25.8 million dollars or 1.32 dollars per diluted share, in the first quarter last year, a 48 percent increase in adjusted net income per diluted share. This 0.63 dollars increase in adjusted net income per diluted share includes a 0.19dollar benefit resulting from the new accounting rules for the income tax impact on share-based compensation.
Gross profit was 170.6 million dollars compared to 165.4 million dollars in the first quarter of 2016. Adjusted gross profit was 171 million dollars compared to 165.3 million dollars last year, and deleveraged 20 basis points to 39.2 percent of sales.
Operating income was 42.3 million dollars compared to 39.6 million dollars in the first quarter of 2016. Adjusted operating income was 48.4 million dollars or 11.1 percent of net sales, compared to an adjusted operating income of 39.2 million dollars or 9.4 percent of net sales, in the first quarter last year, leveraging 170 basis points compared to last year.
The Children’s Place continue fleet optimisation program
In accordance with our fleet optimization initiative, the company closed seven stores and opened one store during the first quarter of 2017 and ended the quarter with 1,033 stores and square footage of 4.829 million, a decrease of 2.8 percent compared to the prior year. Since the fleet optimization initiative was announced in 2013, the company has closed 149 stores.
The company’s international franchise partners opened six points of distribution in the first quarter, and the company ended the quarter with 156 international points of distribution open and operated by its 6 franchise partners in 18 countries.
The Children's Place updates FY17 outlook
The company has updated its outlook for fiscal 2017 and now expects adjusted net income per diluted share to be in the range of 7.10 dollars to 7.20 dollars inclusive of an 0.89 dollar benefit resulting from new accounting rules for the income tax impact on share-based compensation. This compares to the company’s previous guidance for adjusted net income per diluted share of 6.50 dollars to 6.65 dollars, inclusive of a 0.45 dollar benefit resulting from new accounting rules for the income tax impact on share-based compensation, and to adjusted net income per diluted share of 5.43 dollars in fiscal 2016.
This guidance assumes an approximate 3 percent increase in comparable retail sales for the year. This guidance for adjusted net income per diluted share excludes year to date net income of approximately 0.3 million dollars primarily related to income associated with the release of reserves for uncertain tax positions, partially offset by charges related to a reserve for a legal settlement resulting from a pricing litigation as the company believes this income is not reflective of the performance of its core business.
The company expects adjusted net income per diluted share in the second quarter of 2017 will be between 0.70 dollar and 0.75 dollar, inclusive of a 0.70 dollar benefit resulting from new accounting rules for the income tax impact on share-based compensation. This compares to an adjusted net loss per share of 0.01 dollar in the second quarter of 2016. This guidance assumes a low single digit increase in comparable retail sales.
Picture:The Children's Place website