Ralph Lauren Posts Better-Than-Expected Q1

Ralph Lauren Corp.’s shares are down in midday trading, even though the firm posted better-than-expected first-quarter results on Wednesday. The company said its reported revenues declined by 5 percent, due mostly to foreign-currency headwinds, but double-digit international growth, new-store openings and e-commerce expansion buffered those losses.

The company is in the midst of a restructuring that it hopes will foster $100 million in annual expense savings.

Net Income: On a reported basis, net income for the first quarter, ended June 27, 2015, was $64 million.

EPS: Reported earnings per diluted share were 73 cents.

Net Revenue: Reported net revenues declined 5 percent, to $1.6 billion, in the first quarter.

Adjustments: Net income, excluding restructuring and non-cash charges associated with its global brand reorganization, totaled $95 million, or $1.09 per diluted share, compared with a net income of $162 million, or $1.80 per share, in the comparable quarter.

Hit, Miss or Beat: The firm’s revenues were in line with Wall Street’s estimates, while its adjusted EPS beat the Street’s forecast for the first quarter. Analysts polled by Yahoo Finance had predicted EPS of 99 cents and revenues of $1.6 billion.

Executive Insights: “We are making the right strategic decisions and investments to support the future growth of the company … I am confident that our new organizational structure will allow us to make our already powerful brands even stronger, and the investments we are making today will create significant value for shareholders over the long term.”
— Chairman and CEO Ralph Lauren, in a release.

“Our better-than-expected first-quarter profitability reflects the strong progress we have made on our key strategic initiatives. The decisive actions we are taking around our global brand reorganization, infrastructure investments, e-commerce re-platform, and product pricing will position the Company for future growth and generate substantial operating efficiencies.”
— President and COO Jacki Nemerov, in the release.

Looking Ahead: The company maintained its fiscal 2016 outlook.

Analyst Insights: “In our view, the good news from Ralph Lauren’s F1Q earnings report is the fact that the company didn’t lower annual revenue growth or EPS targets for the first time in several quarters, despite visibly sluggish traffic at U.S. apparel brick-and-mortar retailers, elevated U.S. promotional levels from our channel checks and ongoing pressure on U.S. tourist traffic.”
– Michael Binetti, UBS Investment Bank analyst

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