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Ralph Lauren reports decline in Q3 sales and earnings

By Prachi Singh

Feb 5, 2021

Management

Ralph Lauren Corporation reported earnings per diluted share of 1.61 dollars on a reported basis and 1.67 dollars on an adjusted basis, for the third quarter of fiscal 2021 compared to earnings per diluted share of 4.41 dollars on a reported basis and 2.86 dollars on an adjusted basis, for the same quarter of fiscal 2020. Net revenue decreased by 18 percent to 1.4 billion dollars on a reported basis and was down 20 percent in constant currency. The company said, foreign currency favourably impacted revenue growth by approximately 170 basis points in the third quarter.

“Despite the disruptions and uncertainty we faced throughout our third quarter, our teams continued to elevate our brands and effectively engage with consumers around the world – delivering better than expected gross and operating margins through the holiday period, and continuing to meaningfully improve our digital profitability,” said Patrice Louvet, President and Chief Executive Officer of the company.

Revenue performance of Ralph Lauren’s core markets

The company added that North America revenue in the third quarter decreased 21 percent to 715 million dollars. In retail, comparable store sales in North America were down 21 percent, with a 30 percent decrease in brick and mortar stores partly offset by a 9 percent increase in digital commerce, while wholesale revenue decreased 22 percent.

Europe revenue in the quarter decreased 28 percent to 316 million dollars on a reported basis and decreased 32 percent in constant currency. In retail, comparable store sales in Europe were down 38 percent, with a 51 percent decrease in brick and mortar stores partly offset by a 68 percent increase in digital commerce. Europe wholesale revenue decreased 17 percent on a reported basis and decreased 22 percent in constant currency.

The company said, Asia revenue increased 14 percent to 330 million dollars on a reported basis and 9 percent in constant currency. Comparable store sales in Asia increased 3 percent, with a 1 percent increase in brick and mortar stores and a 54 percent increase in digital commerce.

Gross profit for the quarter was 930 million dollars and gross margin was 64.9 percent, while adjusted gross margin was 65.4 percent, 320 basis points above the prior year on a reported basis and up 290 basis points in constant currency. Operating income was 170 million dollars and operating margin was 11.9 percent on a reported basis, while adjusted operating income was 190 million dollars and operating margin was 13.3 percent, 70 basis points below the prior year.

Ralph Lauren to cut staff, close stores to drive growth

The company further said, previously announced actions related to the Fiscal 2021 Strategic Realignment Plan included a reduction of the company’s global workforce by the end of Fiscal 2021, transitioning the Chaps brand to a fully licensed business model and closing the Company’s Polo store on Regent Street in London. As part of this ongoing plan, the company plans to further right-size and consolidate its global corporate offices. In addition, the company has identified up to 10 stores subject to potential closure through fiscal 2022, pending ongoing negotiations. The company also plans to complete the consolidation of its existing North America distribution centers in order to drive greater efficiencies, improve sustainability, and deliver a better consumer experience.

Ralph Lauren expects the financial results for both the fourth quarter and full year fiscal 2021 to continue to be adversely impacted by the pandemic and prolonged demand recovery. For the fourth quarter, the company expects revenues to decline approximately mid-to-high single digits to last year, a sequential improvement from the first three quarters of the fiscal year. This outlook reflects confirmed government-mandated lockdowns and other COVID-related restrictions across several of key markets, notably in Europe and Japan. Based on our current outlook, the company plans to reinstate quarterly dividend in the first half of fiscal 2022.

Picture:Ralph Lauren website