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Ralph Lauren reports flat Q4, marginal rise in FY16 revenues

By Prachi Singh

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Business |REPORT

Ralph Lauren net revenues for the fourth quarter were flat with the prior year period on a constant currency basis and declined 1 percent on a reported basis to 1.9 billion dollars. Net revenues for the full year increased 1 percent on a constant currency basis, and declined 3 percent on a reported basis to 7.4 billion dollars.

“Fiscal 2016 was a year of significant change for our company as we established a new organisational structure and appointed a new CEO,” said Ralph Lauren, Executive Chairman and Chief Creative Officer, adding, “I am greatly encouraged by the changes that have already taken shape over the past several months under Stefan’s leadership and he has my full support as he and his team build and implement our new strategic growth plan.”

Fourth quarter and full year financial review

In constant currency, international net revenue rose 3 percent, offset by a 1 percent decline in the Americas. In the fourth quarter, wholesale segment sales decreased 5 percent on a constant currency basis and 6 percent on a reported basis to 942 million dollars, primarily due to a decline in sales in North America. For Fiscal 2016, wholesale sales decreased 3 percent on a constant currency basis and 6 percent on a reported basis to 3.3 billion dollars, due to a decline in sales in North America.

Retail segment sales increased 7 percent on a constant currency basis and 6 percent on a reported basis to 889 million dollars in the fourth quarter, driven by the benefit of a 53rd week of sales, new store expansion and e-commerce growth. On a 13-week to 13-week basis, consolidated comparable store sales decreased 5 percent in constant currency and 6 percent as reported during the fourth quarter.

Retail sales for fiscal 2016 increased 4 percent on a constant currency basis but reported retail sales decreased 1 percent to 3.9 billion dollars. On a 52-week to 52-week basis, consolidated comparable store sales decreased 3 percent in constant currency and 7 percent as reported in fiscal 2016.

Licensing segment revenue of 40 million dollars in the fourth quarter increased 8 percent on both a constant currency and reported basis, reflecting higher royalties from increased sales of Ralph Lauren, Polo Ralph Lauren and Lauren products worldwide. Licensing revenues of 175 million dollars in fiscal 2016 were 5 percent above fiscal 2015’s level in constant currency and increased 4 percent as reported.

“We have made great progress over the past few months in developing our long-term growth strategy. Immediately following the comprehensive assessment work we undertook after I arrived at the company, we started developing our new strategic plan and building the foundation to start executing. We are looking forward to sharing the plan at our Investor Day on June 7th. We are confident that our new strategic plan will strengthen the brand, drive sustainable profitable sales growth and deliver shareholder value,” added Stefan Larsson, President and CEO of the company.

Gross profit and net income decline in Q4 and FY16

Gross profit for the fourth quarter was one billion dollars and gross profit margin was 54.5 percent, which was 90 basis points lower than the prior year period. Gross profit for fiscal 2016 decreased 4 percent to 4.2 billion dollars ad gross profit margin was 56.8 percent, 70 basis points lower than the prior year, due to negative foreign currency impacts, which was partially offset by favourable sales mix shift to the retail segment.

Net income for the fourth quarter was 74 million dollars or 0.88 dollar per diluted share compared to reported net income of 124 million dollars, or 1.41 dollar per diluted share, for the fourth quarter of fiscal 2015. On a reported basis, net income was 41 million dollars or 0.49 dollar per diluted share in the fourth quarter.

Net income for the full year was 546 million dollars or 6.36 dollars per diluted share, compared to 702 million dollars or 7.88 dollars per diluted share, for fiscal 2015. On a reported basis, net income was 396 million dollars or 4.62 dollars per diluted share.

The company ended Fiscal 2016 with 493 directly operated stores, comprised of 144 Ralph Lauren stores, 77 Club Monaco stores and 272 Polo factory stores. The Company also operated 583 concession shop locations worldwide at the end of the year. Compared to the end of fiscal 2015, the Company had 27 net new directly operated stores and 47 net new concession shops at the end of fiscal 2016. In addition to Company-operated locations, international licensing partners operated 93 Ralph Lauren stores and 42 dedicated shops, as well as 133 Club Monaco stores and shops at the end of fiscal 2016.

picture:ralphlauren.com

Ralph Lauren