Ralph Lauren Q1 2017 Earnings: Company Beats Low Expectations
Ralph Lauren (NYSE:RL) reported its first quarter results, ended June 2016, on August 10, 2016. The company exceeded the EPS and revenue expectations, which were quite low to begin with, which sent the stock price up over 8%.
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See Our Complete Analysis For Ralph Lauren Here
While the company’s domestic business remains challenged, where revenues fell 11%, its international business is growing at a strong 10% rate. The company’s North American business is suffering from excess inventory and not having evolved its offerings to match consumer preferences, besides a tough retail environment. However, according to its CEO Stefan Larsson, the company has made good progress on its Way Forward plan, which involves refocusing on the product, marketing, and shopping experience, while at the same time evolving its operating model to a more demand-driven supply chain, better sourcing, and a multi-channel global expansion strategy. In this regard, the company has made massive changes to its leadership team, including appointments of Jane Nielsen, who worked on the turnaround at Coach and will be joining as the CFO after Labor Day, Halide Alagoz as the new Head of Global Sourcing, and Bill Campbell, who will be joining as the Head of Global Supply Chain, from Amazon. The head count in the organization has also been cut down by 8%, with layers in the management reduced from nine to six, which will result in SG&A savings of $115 million on an annualized basis. Eight of the anticipated 50 store closures were completed in the quarter, and there was a double digit reduction in the number of SKUs (stock keeping units) across the brands. The company had also stated its desire to shorten the lead time of their whole production process from fifteen to nine months, which will take a couple of years to implement. According to Larsson, 50% of the reduction will be completed by the end of the year, and 90% by the end of next year.
Ralph Lauren managed to improve its gross profit margin by 130 basis points, on the back of a favorable sales mix shift, lower product costs, and an improvement in Asia, where revenues increased 3%. The company has also closed 43 stores in the region, which were felt to be weakening the brand, while also cutting down on its average sale period by 30%, and decreasing the depth of its markdowns. These factors helped to improve the AUR (average unit retail) and gross profit. Europe witnessed a 14% growth in net revenues, primarily driven by a benefit from the timing of wholesale shipments, relative to the previous year. The company also reduced buys for the year to protect full price selling, increase stock turnover, and reduce excess inventory. However, going forward, the impact of the Brexit on consumer spending and geopolitical volatility in the region may hamper the earnings.
Have more questions on Ralph Lauren? See the links below:
- How Will Ralph Lauren Perform In The First Quarter Of Its FY 2017?
- What Are The Main Facets Of Ralph Lauren’s Turnaround Plan?
- How Will Ralph Lauren Perform In 2016?
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- What Percentage Of Ralph Lauren’s Stock Price Can Be Attributed To Growth?
- Ralph Lauren Q4 And FY 2016 Earnings And Revenue Beat Expectations
- Why Have Ralph Lauren’s Licensing Revenues Been Declining In Recent Years?
- How Have The Number Of Ralph Lauren Stores Operated By The Company Changed Over The Past Five Years?
- Why Is The Online Market Place The Next Big Thing For Ralph Lauren?
- How Has Ralph Lauren Performed In Comparison To Its Peers?
- How Has Ralph Lauren’s Sales Breakdown According To Geographic Locations Changed Over The Past Five Years?
- How Will Ralph Lauren’s Retail Division Perform In The Next Five Years?
- How Did Just The Month Of February Make Ralph Lauren One Of The Worst Performing Companies, Amongst Its Peers?
- Why Did We Revise Our Price Estimate Of Ralph Lauren To $102?
- How Will Ralph Lauren’s Revenue And EBITDA Composition Change In The Next 3 Years?
- What Is Ralph Lauren’s Fundamental Value Based On Expected 2016 Results?
- Ralph Lauren: Year 2015 In Review
Notes:
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
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