On August 8, Ralph Lauren (NYSE:$RL) witnessed its stock jump by 10% as of 12:45 p.m. EDT. This occurred after the clothing specialist posted better-than-expected fiscal Q1 earnings.
What Happened?
In the report, Ralph Lauren posted revenue of $1.35 billion, which is down from $1.55 billion in 2016 but marginally ahead of analyst expectations. Additionally, adjusted earnings per share was $1.11, which surpassed the $0.96 per share in adjusted profit that Wall Street was looking for.
In an attempt to help aid profitability, Ralph Lauren reduced discounts, which helped gross margin by 210 basis points. Additionally, as Ralph Lauren worked to improve inventory turnover and efficiency, inventories dropped by 31%.
Now What?
In North America, comparable store sales dropped 8% on a constant currency basis, which is driven by a 22% decline in e-commerce and a 4% decline in traditional store revenue. In Europe, comps dropped 8%, while comps in Asia grew by 2%.
“While we are addressing challenges in our business, we have significant opportunity ahead and we’re moving forward with urgency,” CEO Patrice Louvet said. “Ralph and I are focused on actively evolving the brand expression and consumer experience so we can ultimately renew growth and get back to leading. We are continuing to build a strong foundation for future growth, as evidenced by our progress this quarter on the key elements of the Way Forward plan.”
In regards to fiscal Q2 sales, these are forecast to drop 9% to 10%. Additionally, Ralph Lauren echoed its 2017 guidance, which expects net revenue to drop 8% to 9%, with an operating margin between the range of 9% to 10.5%.
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