• Swings to Q1 net loss of US$22m from earnings of $64m
  • Net revenues were down 4% to $1.6bn
  • Gross profit margin reached 61.1%, 130 basis points above last year
Ralph Lauren is in the midst of restructuring

Ralph Lauren is in the midst of restructuring

Ralph Lauren Corporation has swung to a loss in its first-quarter on lower sales and expenses related to its turnaround, but results beat management expectations and the company reaffirmed its full-year outlook. 

In the three months ended 2 July, net losses amounted to US$22m from earnings of $64m in the prior year period. In June, the company revealed restructuring plans that included an overhaul of its supply chain.

Faster supply chain is key to Ralph Lauren turnaround

Gross profit margin reached 61.1%, 130 basis points above last year, primarily driven by favourable sales mix shifts, lower product costs and an improvement in Asia driven by initiatives to improve quality of sale metrics.

Net revenues were down 4% to $1.6bn on both a constant currency and reported basis. The decline was in line with guidance provided in June of a mid-single digit revenue decline. However, Reuters analysts had forecast a decline of 10% to $1.77bn.

Retail sales in the quarter were down 3% to $907m, as a result of a 6% comparable store sales decline, primarily due to lower traffic trends. Wholesale revenues fell 5%, driven by a decline in North America as the US department store channel continued to experience "challenging" traffic trends, partially offset by an increase in Europe.

"We have made good initial progress in the execution of our Way Forward Plan," said CEO Stefan Larsson. "We will continue to balance driving near-term performance with the pursuit of our long-term vision. We have already completed the planned right-sizing of the organisation and are well underway in building the leadership team that will have the strength to successfully execute the plan."

For fiscal 2017, the company continues to expect consolidated net revenues to decrease at a low-double digit rate, and operating margin to be around 10%.

UBS Investment Bank analyst Michael Binetti, noted: "While we're confident Ralph Lauren will make significant progress in streamlining its supply chain, inbound questions have focused on its long-term revenue outlook. Ralph Lauren's guidance implies second-half revenues will decline 13-20% - with many of the F2H17 revenue headwinds (esp 50+ store closures) still a year-on-year drag in F1H18."