Ralph Lauren Corporation
) posted fiscal first-quarter 2014 adjusted earnings of $1.94 per
share, which beat the Zacks Consensus Estimate by a penny.
However, the earnings were down 4.4% year over year.
Ralph Lauren's total revenues inched up nearly 4% year over year
to $1,653.0 million. However, revenues marginally missed the
Zacks Consensus Estimate of $1,656.0 million.
Ralph Lauren's gross profit in the quarter nudged up 1.2% year
over year to $1,004 million, while the gross margin fell 160
basis points (bps) to 60.7%, driven by the integration of the
Chaps men's sportswear operations and negative foreign currency
Total operating expenses increased 4% year over year to $728.0
million owing to business expansion initiatives other
infrastructure costs partly offset by disciplined cost
Ralph Lauren's operating profit decreased 5% year over year to
$276 million. Moreover, its operating margin fell 160 bps to
16.7%, reflecting gross profit margin contraction.
Overall, in the quarter, the Retail segment's net revenue
increased 3% to $879 million, primarily due to increased
e-Commerce business and contribution from new stores, partly
offset by net negative impact of foreign currency translation.
The segment's operating income decreased 11% year over year to
$160 million. Consequently, operating margin contracted 270 bps
to 18.2%, due to the negative foreign currency effects, costs
related to the company's worldwide store and e-commerce
The Wholesale segment's revenues rose 6% to $735 million mainly
due to contribution from the revamped Chaps men's sportswear
operations and sustained growth for core North American
merchandise categories, partly offset by scheduled reductions in
However, the segment's operating income of $154 million remained
the same as the year-ago figure while operating margin fell 120
bps to 21.0%, primarily due to profitability in core North
American operations being entirely mitigated by reduced overseas
profits and transition costs related to Chaps.
The Licensing segment's revenues fell 8% year over year to $39
million in the quarter. Operating income came in at $29 million,
which was flat compared with the prior-year period.
Ralph Lauren exited the said quarter with cash and investments of
$1.4 billion compared with $1.1 billion in first-quarter fiscal
2013. During the quarter, the company deployed $66.0 million
toward capital expenditure against $62 million in the comparable
year-ago period. Moreover, inventory levels increased 9% at the
quarter-end to $1.1 billion compared with $964.0 million in the
In the quarter, the company purchased 0.9 million shares at the
rate of $175.64 per share.
Ralph Lauren expects net revenue in fiscal second-quarter 2014 to
increase in low single-digit percentage points incorporating a
200 bps net negative impact from foreign currency translation and
discontinued businesses. Retail sales are expected to increase in
the mid single-digit range whereas wholesale revenues are
anticipated to remain the same as the prior-year period.
Operating margin is anticipated to be around 300-350 bps, below
the prior year quarter's level and the tax rate is estimated to
be around 31.5%.
For fiscal 2014, the company reiterated its guidance that net
revenue will increase in the range of 4%-7%. It includes 150 bps
net negative impact from foreign currency translation and further
100 bps impact from discontinued businesses. Operating margin is
anticipated to grow in the range 25-75 bps, unchanged from the
earlier projected guidance. For 2014, effective tax rate is
projected at 31%.
Other Stocks to Consider
Ralph Lauren currently carries a Zacks Rank #4 (Sell). Other
stocks in the same industry that are worth considering include
Gildan Activewear Inc.
). While Hanesbrands carries a Zacks Rank #1 (Strong Buy), Gildan
and PVH Corp both have a Zacks Rank #2 (Buy).
GILDAN ACTVWEAR (GIL): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
PVH CORP (PVH): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis
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