Ralph Lauren posts adjusted Q3 earnings of 2.03 dollars

Ralph Lauren Corporation reported loss per diluted share of 1 dollar on a reported basis and 2.03 dollars on an adjusted basis, excluding restructuring and related charges as well as the impact of tax reform, for the third quarter of fiscal 2018. This compared to earnings per diluted share of 0.98 dollar on a reported basis and 1.86 dollars on an adjusted basis, excluding restructuring-related and other charges, for the third quarter of fiscal 2017. The company said, revenue decreased by 4 percent to 1.6 billion dollars on a reported basis and 6 percent in constant currency, driven by initiatives to increase quality of sales, reduce promotional activity, and elevate our distribution, as well as brand exits and lower consumer demand.

“As we prepare to celebrate our 50th anniversary and look ahead to the future, we continue to focus on evolving the expression of our iconic brand and its rich heritage to connect with today’s consumers in all the ways they experience our brand,” said Ralph Lauren, Executive Chairman and Chief Creative Officer in a media release.

Highlights of Ralph Lauren’s Q3 performance

The third quarter revenue decline, the company said, was at the top end of the company’s guidance of a 6 percent-8 percent constant currency revenue decline. Foreign currency benefited revenue growth by approximately 190 basis points in the third quarter, above the guidance of 160-170 basis points of benefit, as foreign exchange rates moved favourably during the quarter.

North America revenue in the third quarter decreased 11percent to 886 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 lower consumer demand. On a constant currency basis, comparable store sales in North America were down 10 percent, including a 3 percent decline in brick and mortar stores and a 27 percent decrease in ecommerce, primarily due to a planned reduction in promotional activity and lower traffic.

Europe revenue in the third quarter increased 8 percent to 378 million dollars on a reported basis and was flat in constant currency. On a constant currency basis, comparable store sales in Europe were down 8 percent, driven by a 9 percent decline in brick and mortar stores and a 1 percent decline in ecommerce, as the company continued to intensify its focus on driving quality of sales with a pullback in promotions.

Asia revenue increased 7 percent on both reported and constant currency basis to 251 million dollars, driven by strength in both retail and wholesale channels. Comparable store sales increased 3 percent in constant currency driven by improved conversion, average unit retail and the number of transactions.

Gross profit was 996 million dollars and gross margin was 60.7 percent on both a reported and adjusted basis, 250 basis points above the prior year, excluding restructuring and related charges. Operating income was 189 million dollars on a reported basis, including restructuring-related and other charges of 27 million dollars. On an adjusted basis, operating income of 216 million dollars declined 1 percent to the prior year period and operating margin was 13.2 percent, 40 basis points above the prior year period, excluding restructuring-related and other charges from both periods. The adjusted operating margin was above the company’s guidance of down 50-70 basis points in constant currency.

On a reported basis, net loss in the third quarter was 82 million dollars or 1 dollar per diluted share. On an adjusted basis, net income was 167 million dollars, or 2.03 dollars per diluted share, excluding any impact from tax reform as well as restructuring and related charges compared to a net income of 82 million dollars or 0.98 dollar per diluted share on a reported basis, and net income of 155 million dollars or 1.86 dollars per diluted share on an adjusted basis, for the third quarter of fiscal 2017.

Ralph Lauren reveals full year and fourth quarter outlook

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 100 basis points of benefit to revenue growth versus previous guidance of approximately 80 basis points of positive impact, given recent movements in foreign exchange rates.

Based on the year-to-date performance, the company now expects operating margin for the year to be 10 percent-10.5 percent, excluding the impact of foreign currency, and versus previous guidance of 9.5 percent-10.5 percent. Foreign currency is now expected to have 30 basis points of benefit to operating margin versus previous guidance for minimal impact, due to recent movements in foreign exchange rates.

In the fourth quarter, the company expects net revenue to be down 8 percent-10 percent, excluding the impact of foreign currency. Foreign currency is expected to have approximately 330 basis points of benefit to revenue growth in the fourth quarter of fiscal 2018. Operating margin for the quarter is expected to be down 240-260 basis points, excluding the impact of foreign currency. Foreign currency is estimated to benefit operating margin by approximately 90 basis points in the fourth quarter.

Picture:Facebook/Ralph Lauren