Ralph Lauren misses quarterly estimates yet keeps looking ahead

Ralph Lauren Corporation (RL) has run out of its lucky star during the third quarter of fiscal 2015, as, after posting better-than-expected results in the trailing four quarters, the upscale fashion retailer disappointed with lower-than-expected top and bottom lines for its third quarter of fiscal 2015.

Net income dropped 9.3 percent to 215 million dollars, or 2.41 dollars a share, from about 237 million dollars, or 2.57 dollars, a year earlier, the New York-based company said Wednesday in a statement. The average of analysts’ estimates compiled by Bloomberg was 2.50 dollars.

Quarterly earnings of 2.41 dollars per share missed the Zacks Consensus Estimate of 2.52 dollars and decreased 6.2 percent from the year-ago quarter figure of 2.57 dollars.

Likewise, revenue climbed 0.9 percent to 2.03 billion dollars in the quarter, compared to the 2.09 billion dollars analysts estimated on average.

“Net revenue of this luxury apparel retailer inched up 0.9 percent year over year to 2,033 million dollars. This improvement was backed by enhanced performance across the company's retail segment and higher licensing revenues. However, the company's net revenues fell short of the Zacks Consensus Estimate of 2,107 million dollars,” pointed out Zacks analysis team.

Overall, retail revenue grew 2 percent year-over-year to 1,149 million dollars, licensing revenues increased 6 percent to 47 million dollars, while wholesale revenues remained almost unchanged at 837 million dollars.

Worse fall since Ralph Lauren started trading

“In spite of a not so impressive quarter, Ralph Lauren remains confident of its future performance. Management believes that its results so far this year highlight its focus on long-term objectives. The company intends to stay fixed on its goal by undertaking significant investments, introducing new stores and making the correct organizational alterations,” said analysts at Zacks Equity Research in a note to investors.

However, investors were not that optimistic and after reporting the lower-than-expected figures, the stock lost 10.3 percent in the pre-market trading session Wednesday.

In fact, and as reported by Bloomberg, Ralph Lauren stock fell the most since it began trading more than 17 years ago after third-quarter earnings trailed analysts’ estimates and the company cut its sales forecast.

Potential 185 million headwind due to dollar appreciation

On top of the blow on the trading floor, Ralph Lauren faces a potential 185 million dollars headwind to its operating income next fiscal year due to the rapid dollar’s appreciation against the euro and other currencies, executives said today on a conference call. That’s the largest currency impact the company has ever experienced in a single fiscal year, given that Europe and Asia make up about a third of the company’s revenue.

“Everything went a little worse than expected,” Paul Swinand, a Chicago-based analyst at Morningstar Investment Services, said in an interview with Bloomberg. “Everyone knew currency would be a headwind, but it was worse. Everyone knew traffic was down and promotions were high, but it was worse. The exchange rate is going to continue to be a problem.”

However, and aimed to lift both figures and spirits, the company's management hiked its quarterly dividend to 50 cents a share, payable on April 10, 2015 to stockholders of record as of March, 27.