Ralph Lauren Stock Plunges as Q3 Earnings Miss, Outlook Lowered

In Industry News, What's New by Jeff Prine

The Ralph Lauren Resort 2015 Collection, featuring the Petite Stirrup watch in Rose Gold with Black Dial

The Ralph Lauren Resort 2015 Collection, featuring the Petite Stirrup watch in Rose Gold with Black Dial

New York—Ralph Lauren Corp. faced its biggest one-day stock plunge ever after missing its third quarter earnings and lowering its forecast.

Net income dropped 9.3% to $215 million, or $2.41 a share, from about $237 million, or $2.57, a year earlier, Analysts’ average estimate called for $2.50 a share,

Net revenues increased 1% to $2.03 billion from $2.02 billion, while analysts estimated revenue of. $2.09 billion.

As a result of the lowered earnings, Ralph Lauren Corp. also lowered its further quarter net sales increase to a mid-single digit rate. For its full year, the company expects only 4% growth instead of its previous projection for as much as7% growth.

The luxury brand also faces tough headwinds as the U.S. dollar continues to appreciate against the euro and other currencies. According to Robert Drbul, analyst at Nomura Holdings Inc., Europe and Asia make up about a third of the company’s revenue.

‘Volatile Marketplace’

“Although our sales were below the expectations we had set, we navigated through the volatile global marketplace by controlling the controllable and delivered an operating margin at the high end of our outlook,” said Jacki Nemerov, president/coo. “Foreign exchange and global consumer spending remain unpredictable, and we are planning our business accordingly. While we are cautious with our outlook, we are bold with our actions to offset some of these ongoing external pressures. Over the next several months, we will implement a new, carefully considered, global brand management structure that we are confident will enable us to operate in a more customer-centric way and provide substantial operating efficiencies.”

Ralph Lauren’s wholesale division posted sales of $837 million in line with its forecast. “Growth in European wholesale shipments was offset by lower shipments in the Americas and unfavorable foreign currency translation. Excluding negative foreign currency effects, wholesale segment sales increased 2%.

In its own retail sales, the company posted a 2% to $1.1 billion, “led by double-digit growth in global e-commerce and the contribution from new store openings. Excluding the negative impact from foreign currency translation, retail sales rose 5% over the prior year period. Consolidated comparable store sales declined 2% on a reported basis during the third quarter and were in line with the prior year i constant currency.

Its licensing sales were up 6% to $47 million, reflecting higher royalties from increased sales of Ralph Lauren, Polo and Lauren products worldwide.”

Gross profit declined 1% to $1.2 billion. Gross profit margin of 57% was 120 basis points lower than the comparable prior year period, due to “mix impacts, a more promotional U.S. marketplace and unfavorable foreign currency effects.”

The board declared an 11% increase in its regular quarterly cash dividend on the company’s commons Stock. The next quarterly dividend is payable on April 10 to shareholders of record.