• Q1 net income reached US$109m from $91m last year. 
  • Sales regained their upward trajectory, with net revenues rising 3% to $1.4bn on a reported basis.
  • Gross margin up 120 basis points to 64.4%. 
Earnings in the three months ended 30 June reached US$109m from $91m a year earlier

Earnings in the three months ended 30 June reached US$109m from $91m a year earlier

Ralph Lauren CEO Patrice Louvet remains confident the US apparel giant is on the right track, having hailed an "encouraging start" to the new fiscal year thanks to a rise in both earnings and revenue during the first quarter.

On a reported basis, earnings in the three months ended 30 June reached US$109m from $91m a year earlier. On an adjusted basis, excluding restructuring and tax charges, earnings were $128m.

Gross margin, meanwhile, was 64.4%, 120 basis points above the prior year. The increase was driven by initiatives to improve the quality of sales through reduced promotional activity and improved pricing as well as a favourable product mix. Foreign currency benefited gross margin by 10 basis points in the first quarter.

Sales regained their upward trajectory in the quarter, with net revenues rising 3% to $1.4bn on a reported basis, and by 1% in constant currency, driven by Asia and Europe. Foreign currency benefited revenue growth by approximately 210 basis points in the period.

Meanwhile, sales were up in the company's Europe and Asia regions, by 8% and 19% respectively, to $351m and $248m. North America revenues, however, were down 2% to $698m as wholesale revenue declined due to deliberate actions to improve the quality of sales and exits from lower quality distribution.

Comparable store sales in North America were down 3% in constant currency, driven by a 3% decline in brick and mortar stores and a 2% decline at ralphlauren.com. Excluding the impact of Easter timing, comparable store sales in North America were approximately flat to last year. The comparable store sales decline at ralphlauren.com represents a significant sequential improvement, in line with the company's expectations.

CEO Patrice Louvet said Ralph Lauren is off to an "encouraging start" to the new fiscal year on both the top and the bottom line, as its teams are focused on executing the 'Next Great Chapter' plan announced at the company's investor day last month. 

The strategy aims to return Ralph Lauren to sustainable long-term growth and value by overhauling core products, accelerating under-developed categories, and focusing on digital growth across all activities.

"Guided by our three core principles of putting the consumer at the centre of all we do, elevating and energising our brand and balancing productivity and growth, we are on track to return the company to long-term, sustainable growth and value creation," Louvet added.

For fiscal 2019, the company is now expecting net revenues to be down slightly in constant currency, and operating margin to be up 40 to 60 basis points in constant currency driven by gross margin expansion.

Meanwhile, Ralph Lauren has become the latest fashion retailer to commit to ensuring its products are mohair-free following an investigation into the industry in South Africa by animal rights group PETA.