Ralph Lauren’s Earnings Top Expectations But Are Overshadowed By CEO Departure

Ralph Lauren’s shares have been in the red this morning despite the company’s better-than-expected third-quarter earnings, which were released today.

The culprit behind the sell-off is likely the news of president and CEO Stefan Larsson’s upcoming departure from the firm’s he’s helmed for less than two years.

Ralph Lauren announced simultaneously with its earnings results that Larsson would leave over creative differences with founder Ralph Lauren.

Nevertheless, the company’s third-quarter adjusted income was $155 million, or $1.86 per diluted share, a 20 percent decline from the comparable period but a significant beat against estimates for diluted earnings per share of $1.64. Reported net income declined 37 percent, to $82 million, or 98 cents per diluted share.

Revenues declined 12 percent year-over-year, to $1.7 billion, but were in line with market watchers’ expectations. On a reported basis, international net revenue declined 6 percent, while North America revenue was down 15 percent compared to the same period last year.

This quarter, we continued to drive the execution of the ‘Way Forward’ plan — refocusing and evolving our iconic product core, cutting our lead times, and aligning supply with demand — to put the foundation in place to drive demand back to the business,” Larsson said in a release, noting the plan, among other things, helped the firm lower its inventory levels by 23 percent to better match demand.

The company said it would continue to execute Larsson’s “Way Forward” plan — initiated last June — despite his impending departure.

While I’m disappointed that I will not be here to see the ‘Way Forward’ plan completely implemented, I’m confident that we have built a strong foundation and have the right team in place to continue to deliver on what we set out in June,” Larsson said during the company’s third-quarter conference call. “I truly believe that this brand and this team have the potential to do amazing things, and I expect them to take the ‘Way Forward’ plan and make it even stronger.”

Ralph Lauren maintained its fiscal 2017 outlook.

As of 11:45 a.m. today, the firm’s shares remained down nearly 11 percent, to $77.83.

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