Ralph Lauren Q2 Profit Declines, Cuts FY Revenue Growth Outlook

(RTTNews) - Apparel maker Ralph Lauren Corp. (RL) Wednesday reported a marginal decline in the second-quarter profit, reflecting higher operating expenses. Earnings per share, however, rose from last year. Net revenues increased 4 percent, driven by Retail segment growth, but missed analysts' expectations.

The company forecast revenue growth of 3 to 5 percent for the third quarter, but sees margin pressure in the period. Ralph Lauren lowered its revenue growth outlook for fiscal 2015, to reflect foreign currency impacts, and continues to see lower margins.

For the second quarter, the company's net income declined to $201 million from $205 million in the previous year. Earnings per share rose to $2.25 from $2.23 reported a year earlier.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $2.06 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter increased 4 percent to $1.99 billion from $1.92 billion, led by retail segment expansion, including double-digit international growth. Analysts estimated revenues of $2.02 billion.

Retail sales rose 7 percent to $1 billion. Wholesale segment sales were $943 million, up 2 percent from last year, reflecting growth in all geographic regions.

Licensing revenues increased 2 percent to $45 million, with higher royalties from increased sales of Ralph Lauren products.

Consolidated comparable store sales edged up 1 percent on both a reported and constant currency basis.

Net operating expenses advanced to $846 million from $789 million in the preceding year. The increase in operating expenses was due to incremental investments in global retail development, advertising, marketing and infrastructure, the firm said.

Looking ahead, for the third quarter, the company expects consolidated net revenues to increase by 3 to 5 percent, including a 200 basis point net negative impact from foreign currency translation.

Operating margin for the quarter is expected to be about 100-150 basis points below last year, due to higher cost of goods and incremental investments in the company's strategic growth objectives.

Ralph Lauren maintained its fiscal 2015 constant dollar outlook. However, as a result of recent, unfavorable foreign currency movements, the firm now sees consolidated net revenues for fiscal 2015 to increase by 5 to 7 percent, compared to its previous outlook of 6 to 8 percent growth.

Operating margin for the fiscal is still estimated to be around 75 to 125 basis points below fiscal 2014's level.

RL is currently trading at $165.19, up 2.65 percent.