polo blue cologne Ralph Lauren tanks despite Q1 in line with expectations as current quarter outlook falls short
Shares in Ralph Lauren (NYSE:RL) took a massive dive Wednesday as the designer clothing brand reported narrowing margins and slightly flagging same store sales in the first quarter to post a modest short term outlook despite reaffirming expectations of growth in net revenues for the fiscal year 2014 of between 4 and 7 per cent.
The stock was the day second biggest S 500 loser, despite quarterly results in line with predictions.
For the three months that ended June 29, the first quarter of the company fiscal 2014, the New York headquartered retailer posted net income of $181 million, for earnings per diluted share of $1.94 compared with a profit of $193 million a year ago, or $2.03 per share.
Revenue for the quarter came in at $1.7 billion, an uptick on the year ago figure of $1.6 billion for an increase of 4 per cent. Once the net impact from foreign currency translation and discontinued businesses is excluded, net revenues for the quarter rose 6 per cent in the quarter, the company said.
The results were in line with analyst expectations, which were for earnings of $1.94 per share on revenue of $1.65 billion.
Same store sales for the retailer were down 1 per cent on an reported basis, although the metric recorded a 1 per cent uptick when using constant currency.
The company reaffirmed its outlook of growth in consolidated net revenues for the fiscal year 2014 of between 4 and 7 per cent, and said it is also looking for consolidated net revenues to increase by a low single digit percentage in the current quarter, compared to expectations for 7 per cent.
Margins narrowed throughout the latest quarter gross profit margin of 60.7 per cent was 1.6 per cent below that reported in the prior year,
which the company attributed to both unfavourable foreign currency movements, and the integration of the Chaps men sportswear operations.
Operating margin also narrowed 1.6 per cent to 16.7 per cent of sales. Retail operating margin dropped 2.7 per cent to 18.2 per cent.
As of the end of the quarter, the company owned 396 directly operated stores, of which 123 were Ralph Lauren stores, 59 were Club Monaco stores and 214 were Polo factory stores. In addition, the company also operated 505 concession shop locations worldwide.
“Despite an uneven global operating environment, we planned the business prudently and achieved sales and profit levels that exceeded our expectations, even as we make important investments in our long term growth objectives and in the infrastructure to support them,” said president and chief operating officer, Roger Farah.
“We expect that our more recent investments in new stores, e commerce operations and international expansion will contribute to accelerated sales and profit momentum in the second half of the year.”
Shares in the retailer were trading down in New York the morning of the release of figures, with the stock losing $11.96 per share to hit $177.55 as of 11:42 am EST, a loss of more than 6 per cent.