Ralph Lauren Q1 Results Top Estimates, Backs 2016 Outlook

(RTTNews) - Apparel maker Ralph Lauren Corp. (RL) reported Wednesday a profit for the first quarter of fiscal 2016 that plunged from last year, reflecting a revenue drop and lower operating margins amid charges.

Both adjusted earnings per share and quarterly revenues topped analysts' expectations. The company also reaffirmed its revenue growth forecast for the full-year 2016.

"Our better-than-expected first quarter profitability reflects the strong progress we have made on our key strategic initiatives," President and Chief Operating Officer Jacki Nemerov said in a statement.

The New York-based fashion company, whose brands include Polo, American Living, Chaps and Club Monaco, reported net income of $64 million or $0.73 per share for the first quarter, sharply lower than $162 million or $1.80 per share in the prior-year quarter.

Excluding restructuring and non-cash charges associated with its global brand reorganization, net income for the latest quarter was $95 million or $1.09 per share.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.99 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter declined 5.3 percent or 0.4 percent in constant currency, to $1.62 billion from $1.71 billion in the same quarter last year, but topped fourteen Wall Street analysts' consensus estimate of $1.61 billion by a whisker.

Net sales declined 5.5 percent or 0.5 percent in constant currency, to $1.58 billion from last year. Consolidated comparable-store sales decreased 8 percent or 2 percent on a constant currency basis.

Wholesale net sales declined 9.3 percent or 5.7 percent in constant currency, to $642 million, and retail net sales decreased 2.7 percent or up 3.2 percent in constant currency, to $935 million from the year-ago quarter.

Meanwhile. licensing revenues grew 2.7 percent or 6.0 percent in constant currency, to $41 million from last year's $40 million.

Operating margin for the quarter contracted 830 basis points to 6.0 percent, primarily due to a higher operating expenses and a 120 basis points decline in gross profit margin from last year.

The company also announced significant progress on the transition to the new global brand management organizational structure. In the 90 days since the announcement, the company established six global brand groups and filled the global brand president roles, as well as the key regional and channel positions.

The Company said it is on track to achieve $100 million in annual expense savings associated with the restructure. It expects to incur restructuring and related non-cash charges of about $70 million to $100 million as a result of this reorganization, of which $45 million of which was taken in the first quarter.

Looking ahead, the company expects consolidated net revenues for the second quarter to increase 3 to 5 percent in constant currency. The company also said it continues to project revenue growth in the mid-single digits in constant currency for fiscal 2016.

Street is currently looking for second-quarter revenues to edge down 0.8 percent to $1.98 billion and full-year 2016 revenues to edge down 0.1 percent to $7.61 billion.

"The decisive actions we are taking around our global brand reorganization, infrastructure investments, e-commerce re-platform, and product pricing will position the Company for future growth and generate substantial operating efficiencies," Nemerov added.

In Wednesday's regular trading session, RL is currently trading at $126.25, up $2.94 or 2.38% on a volume of 0.10 million shares.