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Ralph Lauren per share earnings rise to 1.99 dollars

By Prachi Singh

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Management

Ralph Lauren Corporation has reported earnings per diluted share of 1.75 dollars on a reported basis and 1.99 dollars on an adjusted basis, excluding restructuring-related and other charges that were primarily related to activities associated with the company’s Way Forward plan. This compared to earnings per diluted share of 0.55 dollar on a reported basis and 1.90 dollars on an adjusted basis for the second quarter of Fiscal 2017.

“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 in a media release, adding, “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.”

Second quarter revenues decreased 9 percent

However, in the second quarter, the company said revenue decreased by 9 percent to 1.7 billion dollars on a reported basis, driven by initiatives to increase quality of sales, reduce promotional activity, and elevate distribution, as well as brand exits and lower consumer demand. Foreign currency benefited revenue growth by approximately 40 basis points in the second quarter.

North America revenue in the second quarter decreased 16 percent to 877 million dollars due to lower sales in both the retail and wholesale channels, driven by distribution and brand exits, a strategic reduction in shipments and promotional activity to increase quality of sales, as well as due to lower consumer demand. On a constant currency basis, comparable store sales in North America were down 9 percent, including a 6 percent decline in brick and mortar stores and an 18 percent decrease in ecommerce.

Europe revenue increased 4 percent to 463 million dollars on a reported basis and was flat in constant currency. On a constant currency basis, comparable store sales in Europe were down 6 percent, driven by a 5 percent decline in brick and mortar stores and an 11 percent decline in ecommerce.

Asia revenue was flat compared with the prior year period on a reported basis at 217 million dollars and increased 4 percent in constant currency, driven by strength in both retail and wholesale channels. Comparable store sales increased 3 percent in constant currency driven by improved traffic and conversion.

Gross profit was 996 million dollars on both a reported basis and an adjusted basis, while gross margin was 59.8 percent on a reported and 59.9 percent on an adjusted basis, and 300 basis points above the prior year on an adjusted basis. Foreign currency benefited gross margin by 10 basis points in the second quarter. Operating income was 193 million dollars and on an adjusted basis, operating income of 224 million dollars decreased 1 percent and operating margin was 13.4 percent, 100 basis points above the prior year period. Foreign currency benefited operating margin by 30 basis points in the second quarter.

On a reported basis, net income in the second quarter was 144 million dollars or 1.75 dollars per diluted share. On an adjusted basis, net income was 164 million dollars or 1.99 dollars per diluted share, excluding restructuring-related and other charges. This compared to a net income of 46 million dollars or 0.55 dollars per diluted share on a reported basis, and net income of 158 million dollars or 1.90 dollars per diluted share on an adjusted basis, for the second quarter of fiscal 2017.

Full year revenue expected to decline 8 to 9 percent

For fiscal 2018, the company continues to expect net revenue to decrease 8 percent to 9 percent, excluding the impact of foreign currency. Foreign currency is now expected to have approximately 80 basis points of benefit to revenue growth versus previous guidance of minimal impact, given recent movements in foreign exchange rates.

Based on the first half performance, the company now expects operating margin for fiscal 2018 to be 9.5 percent-10.5 percent, excluding the impact of foreign currency, and versus previous guidance of 9 percent - 10.5 percent. Foreign currency is now expected to have minimal impact on operating margin versus previous guidance of 40-50 basis points of pressure, due to recent movements in foreign exchange rates.

In the third quarter, the company expects net revenue to be down 6-8 percent, excluding the impact of foreign currency. Foreign currency is expected to have approximately 160-170 basis points of benefit to revenue growth in the third quarter. Operating margin is expected to be down 50-70 basis points, excluding the impact of foreign currency. Foreign currency is estimated to benefit operating margin by approximately 10-20 basis points in the third quarter.

Picture:Ralph Lauren website

Ralph Lauren