Ralph Lauren Corporation's net revenue has grown 5.1 percent or 6.3 percent in constant currency to 1.7 billion dollars in the third quarter.
The company reported earnings per diluted share of 1.48 dollars on a reported basis and 2.32 dollars on an adjusted basis, for the third quarter of fiscal year 2019. This compares to a loss per diluted share of 1 dollar on a reported basis and earnings of 2.03 dollars on an adjusted basis one year ago.
“Solid execution on our key initiatives, especially during the important holiday period, delivered better-than-expected results for the third quarter as we drove higher average unit retail and continued to improve quality of sales overall,” said Patrice Louvet, President and Chief Executive Officer of Ralph Lauren in a statement.
Ralph Lauren reports positive results across geographies
The company said that revenue growth was driven by positive results across regions but foreign currency negatively impacted revenue growth by approximately 120 basis points in the third quarter. Revenues in North America increased 3 percent to 909 million dollars, while wholesale revenue decreased 3 percent to last year reflecting planned reductions in off-price sales. In retail, comparable store sales in North America were up 4 percent, including flat comps in brick and mortar stores and a 21 percent increase in digital commerce.
Sales in Europe increased 10 percent to 415 million dollars on a reported basis and increased 13 percent to last year in constant currency. In retail, comparable store sales were up 4 percent on a constant currency basis, driven by a 3 percent increase in brick and mortar store comps and a 13 percent increase in digital commerce. Europe wholesale revenue increased 16 percent on a reported basis and 20 percent in constant currency.
Revenues in Asia increased 10 percent to 275 million dollars on a reported basis and 11 percent in constant currency, with strong performance across every market, including 19 percent constant currency growth in Greater China. Comparable store sales in Asia increased 4 percent in constant currency, reflecting growth in both brick and mortar and digital commerce operations.
Highlights of Ralph Lauren’s Q3 performance
Gross profit for the third quarter was 1.1 billion dollars and gross margin was 61.4 percent. On an adjusted basis, gross margin was 61.6 percent, 90 basis points above the prior year. Operating income was 194 million dollars on a reported basis and operating margin was 11.2 percent. Adjusted operating income was 239 million dollars and adjusted operating margin was 13.9 percent, 70 basis points above the prior year. Foreign currency benefited operating margin by 20 basis points in the third quarter.
On a reported basis, net income was 120 million dollars or 1.48 dollars per diluted share. On an adjusted basis, net income was 188 million dollars or 2.32 dollars per diluted share compared to a net loss of 82 million dollars or 1 dollars per diluted share on a reported basis, and 167 million dollars or 2.03 dollars per diluted share on an adjusted basis, for the third quarter of fiscal 2018.
Ralph Lauren reveals Q4 and full year outlook
For fiscal 2019, the company now expects net revenue to be up slightly on a constant currency basis. Foreign currency is expected to have approximately 80 to 90 basis points of negative impact on revenue growth in fiscal 2019. The company now expects operating margin to increase 60 basis points in constant currency, up from 40 to 60 basis points previously, driven by gross margin expansion. Foreign currency is expected to have minimal impact on operating margin in fiscal 2019.
In the fourth quarter, the company expects net revenue to be down slightly in constant currency due to a planned reduction in off-price sales. Foreign currency is expected to pressure revenue growth by about 300 basis points in the fourth quarter. Operating margin is expected to be up about 70 basis points in constant currency and foreign currency is expected to have about 60 basis points of negative impact on operating margin.