Ralph Lauren’s Profits Rise After it Offers Fewer Products in Discount Stores

Ralph Lauren runway collection fall '16
Ralph Lauren runway collection fall '16.
REX Shutterstock.

Ralph Lauren’s plans to reduce promotions and rein in distribution are yielding progress.

The company today posted better-than-expected second-quarter profits of $144 million, or $1.75 per diluted share. On an adjusted basis, net income rose 4 percent year-over-year to $164 million, or $1.99 per diluted share, significantly topping analysts’ bets for diluted earnings per share of $1.88.

Still, as the company worked to increase quality of sales, reduce promotional activity and elevate distribution, its revenue declined 9 percent to $1.66 billion. Those results modestly beat forecasts for revenues of $1.65 billion. (Brand exits and lower consumer demand were also factors, the company noted.)

On a conference call with investors today, Ralph Lauren’s newly minted president, CEO and director, Patrice Jean Louis Louvet, recounted the brand’s progress on its Way Forward strategy — including key focus areas: improving quality of sales and distribution, evolving product and marketing to appeal to new consumers, productivity and expanding its digital and international presences. (Louvet joined Ralph Lauren in July.)

Among the quarter’s highlights, Louvet noted, were a reduction in discount rates and a 5 percent increase in average unit retail for direct-to-consumer, more limited-edition product launches, an increase in celebrity partnerships and a 4 percent improvement in revenues in the underrepresented Asian market. (On the retail side, Louvet said the company continues to close unproductive distribution in retail and wholesale, and significantly reduce off-price shipments.)

“We are moving in the right direction, with a clear focus on creating value for all of our stakeholders by continuing to drive productivity and reigniting quality growth,” Louvet said. “Ralph and I have the same vision for the brand, and the same goal, which is to get our great company back to winning. He and I are deeply committed to evolving how our iconic brand is experienced and expressed to win over consumers.”

As of 2:15 p.m. ET, Ralph Lauren shares were up nearly 4 percent to $92.97.