• Q2 profit slides 20.4% to $160m
  • Revenues down 1.3% to $2bn
  • Analyst upbeat about performance 
Ralph Lauren saw its second-quarter profit slide

Ralph Lauren saw its second-quarter profit slide

Analysts are upbeat about Ralph Lauren's second-quarter performance, despite the apparel giant seeing its net profit slide and revenues fall. 

Net income tumbled 20.4% to US$160m for the three months to 26 September, compared to $201m in the same period of the prior year. 

Sales edged down 1.3% to $2bn, with wholesale sales falling 1.7% and retail sales edged down 1%. Licensing revenue dropped 4.4% year-on-year. Gross margin fell 30 basis points to 56.5%, due to unfavourable foreign currency effects.

However, chairman and CEO Ralph Lauren said: “I am pleased that the company is beginning to benefit from our recent strategic initiatives and investments.”

“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.” 

Although the global reorganisation comes with short term costs attached – $38m of which were recognised during the quarter – it is expected to yield an annual $100m in terms of efficiency savings by the end of 2017. 

Conlumino analyst Håkon Helgesen added: “While Ralph Lauren remains in negative territory across the board, the latest set of numbers nonetheless show a solid sequential improvement on the prior quarter.”

Of the global restructure, he said: “Despite the squeeze this exerts on profits, we believe that Ralph Lauren is to be applauded for taking the long term view.”

The company has maintained its fiscal 2016 guidance of flat revenues on a reported basis and increase by 3-5% in constant currency. Operating margin is still expected to be 180-230 basis points below the prior year’s level due to negative foreign currency effects.