- Prachi Singh |
Ralph Lauren Corporation has reported net income of 184 million dollars, or 2.13 dollars per diluted share, for the second quarter of fiscal 2016. This compared to reported net income of 201 million dollars, or 2.25 dollars per diluted share, for the second quarter of fiscal 2015. Earnings per diluted share increased 13 percent from the prior year period. On a reported basis, net income was 160 million dollars or 1.86 dollars per diluted share.
“I am pleased that the company is beginning to benefit from our recent strategic initiatives and investments,” said Ralph Lauren, Executive Chairman and Chief Creative Officer, adding, “We achieved several critical goals, including the worldwide launch of Polo Sport, implementation of the new global brand structure, and strong growth in our international businesses during the quarter. I am confident that our key strategic initiatives will drive continued growth and create significant shareholder value over the long term.”
Second quarter income statement review
Net revenues were 4 percent above the prior year period on a constant currency basis, driven by double-digit growth internationally, contribution from new stores and strong global e-commerce growth. Reported net revenues declined 1 percent to 2 billion dollars compared to the prior year period. The decline in reported net revenues included approximately 500 basis points of negative impact from foreign currency effects.
Wholesale segment sales increased 3 percent on a constant currency basis, driven by strength in Europe across all brands. Reported wholesale segment sales declined 2 percent to 927 million dollars. Retail sales increased 5 percent on a constant currency basis, driven by contribution from new stores and strong global e-commerce growth. Reported retail sales declined 1 percent compared to the second quarter of fiscal 2015 to 996 million dollars, negatively impacted by foreign currency movements. Consolidated comparable store sales decreased 1 percent on a constant currency basis and declined 6 percent on a reported basis.
Licensing revenues of 47 million dollars were 7 percent above the prior year period in constant currency and grew 5 percent on a reported basis, reflecting higher royalties from increased sales of Ralph Lauren, Polo, Chaps and Lauren products worldwide. Gross profit was 1.1 billion dollars and gross profit margin was 56.5 percent.
Update on the global brand reorganization
In the first six months since the announcement of the new global brand management organisational structure, all six brand Presidents and their leadership teams have been established, and the new global line planning process, which is a significant component of the new structure, has successfully been launched. The company now expects to achieve approximately 110 million dollars in annual expense savings associated with the restructure.
The company ended the second quarter with 480 directly operated stores, comprised of 144 Ralph Lauren stores, 68 Club Monaco stores and 268 Polo factory stores. It also operated 576 concession shop locations worldwide at the end of the second quarter. In addition to company-operated locations, international licensing partners operated 81 Ralph Lauren stores and 26 dedicated shops, as well as 130 Club Monaco stores and shops at the end of the second quarter.
Maintains fiscal 2016 outlook
The company is maintaining its fiscal 2016 outlook. It expects consolidated net revenues to be approximately flat on a reported basis and increase by 3-5 percent in constant currency. Based on current exchange rates, foreign currency is expected to make an approximate 400 basis point negative impact on fiscal 2016 revenue growth. Operating margin is still expected to be 180-230 basis points below the prior year’s level due to negative foreign currency effects.
In the third quarter of fiscal 2016, the company expects consolidated net revenues to be up 0-2 percent on a reported basis, and based on current exchange rates, foreign currency will have an approximate 250 basis point negative impact on revenue growth. Operating margin is expected to be approximately 200-250 basis points below the comparable prior year period, primarily due to negative foreign currency effects and infrastructure investments.