Ralph Lauren reports marginal rise in Q3 revenues

Ralph Lauren Corporation has reported that net revenues for the third quarter of fiscal 2015 rose 1 percent to 2 billion dollars. Excluding the net negative impact from foreign currency effects, net revenues increased approximately 3 percent, reflecting growth in all geographic regions. Net income stood at 215 million dollars, or 2.41 dollars per diluted share, compared to net income of 237 million dollars, or 2.57 dollars per diluted share.

The company also announced that its Board of Directors declared an 11 percent increase in the regular quarterly cash dividend on the company's common stock. The new quarterly cash dividend is 0.50 dollars per share. Over the next year, the new annual dividend amount will be 2 dollars per share. The next quarterly dividend is payable on April 10, 2015 to shareholders of record at the close of business on March 27, 2015.

“Our year-to-date results reflect continued focus on our long-term strategic growth initiatives,” said Ralph Lauren, Chairman and Chief Executive Officer, adding, “We opened several new stores around the world; we invested in advertising and marketing to support substantial product innovation, including the launch of Polo for women; and we made important upgrades to our infrastructure.”

Wholesale segment sales of 837 million dollars in line with the prior year period. 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 percent. Retail sales increased 2 percent to 1.1 billion dollars, 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 percent over the prior year period. Consolidated comparable store sales declined 2 percent on a reported basis in constant currency.

Licensing revenues of 47 million dollars in the third quarter were 6 percent above the prior year period, reflecting higher royalties from increased sales of Ralph Lauren, Polo and Lauren products worldwide. Gross profit for the third quarter declined 1 percent to 1.2 billion dollars. Gross profit margin of 57 percent was 120 basis points lower than the comparable prior year period, due to mix impacts, a more promotional US marketplace and unfavorable foreign currency effects.

The company ended the third quarter with 470 directly operated stores, comprised of 148 Ralph Lauren stores, 65 Club Monaco stores and 257 Polo factory stores. The company also operated 504 concession shop locations worldwide at the end of the third quarter. In addition to company-operated locations, international licensing partners operated 71 Ralph Lauren stores and 23 dedicated shops, as well as 114 Club Monaco stores and shops at the end of the third quarter.

In the fourth quarter of fiscal 2015, the company expects consolidated net revenues to increase at a mid-single digit rate in constant currency. Based on current rates, the net negative impact from foreign currency translation is estimated at approximately 550 basis points. Operating margin for the fourth quarter is expected to be 250-300 basis points below the comparable prior year period, reflecting relatively equal pressure from the gross margin and operating expenses.

Based on the third quarter results and incrementally unfavorable foreign currency movements, the company is adjusting its outlook for fiscal 2015. The company now expects consolidated net revenues to increase by approximately 4 percent in constant currency. The revised revenue outlook compares to the company’s previous expectation of 5 percent-7 percent growth. Based on current rates, the company expects foreign exchange to have a negative impact on the company’s sales and profits in fiscal 2016.