Ralph Lauren Q2 Results Top Estimates; Boosts Dividend, 2014 Outlook

(RTTNews) - Apparel maker Ralph Lauren Corp. (RL) reported Wednesday a profit for the second quarter that declined four percent from last year, despite revenue growth, reflecting lower margins amid higher expenses. However, both earnings per share and quarterly revenues topped analysts' expectations.

The company also provided revenue growth guidance for the third quarter, in line with Street view, while raising revenue growth forecast for the full-year 2014.

Additionally, the company announced that its Board of Directors declared a 12.5 percent increase in the regular quarterly cash dividend on its Common Stock to $0.45 per share, payable on January 10, 2014 to shareholders of record at the close of business on December 27, 2013.

"The Board's decision to raise the quarterly dividend demonstrates its conviction in the Company's growth initiatives and a commitment to returning cash to shareholders," Chairman and CEO Ralph Lauren said.

The New York-based fashion company, whose brands include Polo, American Living, Chaps and Club Monaco, reported net income of $205 million or $2.23 per share for the second quarter, lower than $214 million or $2.29 per share in the prior-year quarter.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $2.20 per share for the second quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter grew 2.9 percent or 3.6 percent in constant currency, to $1.92 billion from $1.86 billion in the same quarter last year, and topped thirteen Wall Street analysts' consensus estimate of $1.91 billion.

Net sales totaled $1.87 billion, up 3.1 percent or 3.8 percent in constant currency, to $1.82 billion last year. Same store sales decreased 1 percent or increased 1 percent in constant currency.

Wholesale net sales grew 1.4 percent or 1.1 percent in constant currency, to $928 million, and retail net sales increased 4.8 percent or 6.5 percent in constant currency, to $944 million from a year-ago quarter.

Meanwhile, licensing revenues declined 5.8 percent to $43 million, primarily due to lower Chaps licensing revenues.

"We made excellent progress on several key initiatives during the second quarter. We successfully transitioned key operations to new technology platforms and made great strides with our global store expansion and e-commerce efforts," President and Chief Operating Officer Jacki Nemerov stated.

Operating margin for the quarter contracted 330 basis points to 15.4 percent, primarily due to a 220 basis points drop in gross profit margin to 56.6 percent, and a 110 basis points increase in operating expense as a percentage of revenues.

Looking ahead to the third quarter, the company expects consolidated revenues to increase 8 to 10 percent, while analysts currently expecting revenues to grow 8.8 percent to $2.01 billion.

For fiscal 2014, the company now anticipates consolidated revenues to increase by 5 to 7 percent, up from the prior expectation of a 4 to 7 percent growth. Street is currently looking for full-year 2014 revenues to grow 6.1 percent to $7.37 billion.

"As a result of encouraging current trends, we are raising our revenue outlook and intensifying our investment in our global retail operations for the balance of the year. We are confident that the investments we're making will support accelerated sales and profit growth in the second half of Fiscal 2014," Nemerov added.

RL closed Tuesday's regular trading session at $171.19, up $1.48 on a volume of 1.94 million shares. In the past 52-week period, the stock has been trading in a range of $144.14 to $192.03.