Ralph Lauren Q1 Profit Down, But Results Match View; Backs Revenue Outlook

(RTTNews) - Apparel maker Ralph Lauren Corp. (RL) on Wednesday reported a 6 percent decline in profit for the first quarter from last year, as an increase in revenues was more than offset by higher expenses and lower margins. However, both revenue and earnings per share for the quarter matched analysts' expectations.

Looking ahead, the company maintained its revenue growth outlook for fiscal 2014. The company's shares are down 7 percent in pre-market trades.

The New York-based fashion company, whose brands include Ralph Lauren, Polo, and Club Monaco, reported net income for the first quarter of $181 million or $1.94 per share, down from $193 million or $2.03 per share in the prior-year quarter.

On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $1.94 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter grew 4 percent to $1.65 billion from $1.59 billion in the same period last year and matched analysts' consensus estimate of $1.65 billion.

Excluding the negative impact from foreign currency translation and discontinued businesses, net revenues grew about 6 percent. Same-store sales for the quarter declined 1 percent, but increased 1 percent in constant currency.

Wholesale net sales rose 6 percent from the previous-year quarter to $735 million, while retail net sales increased 3 percent to $879 million. Meanwhile, licensing revenue declined 8 percent to $39 million.

Gross margin for the quarter was 60.7 percent, 160 basis points below the prior-year period due to the integration of the Chaps men's sportswear operations and unfavorable foreign currency dynamics.

Operating margin also declined 160 basis points to 16.7 percent, primarily as a result of the lower gross profit margin.

Looking ahead to the second quarter, Ralph Lauren forecasts consolidated revenues to increase by a low-single-digit percentage, including a 200 basis point net negative impact from foreign currency translation and discontinued businesses. Analysts currently expect revenues for the quarter to grow 6.5 percent to $1.98 billion.

The company projects retail sales for the quarter to grow at a mid-single digit rate, while wholesale revenues are projected to be flat to the prior year as a result of the timing of certain seasonal shipments and a planned conversion from legacy systems to SAP.

For fiscal 2014, Ralph Lauren maintained its outlook for consolidated revenues to increase 4 to 7 percent. Street is currently looking for full-year revenues of $7.37 billion.

The outlook includes a 150 basis point negative impact from foreign currency translation and an additional 100 basis point headwind from discontinued businesses.

RL closed Tuesday's regular trading session at $189.51. In Wednesday's pre-market, the stock is down $14.19 or 7.49 percent to $175.31.