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Ralph Lauren: Revenues Grow But Earnings Drop Due To Expansion

Ralph Lauren: Revenues Grow But Earnings Drop Due To Expansion
By: Bill Ashton
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Ralph Lauren Corp (RL) beat earnings estimates, while revenues were in line with analysts’ expectations. Ralph Lauren reported earnings for first quarter of its fiscal year 2015(1QFY15) of $1.8 per share, 4.15% ahead of analysts’ estimate. Revenues for the quarter were $1.7 billion against the expected $1.72 billion.

Ralph Lauren is expecting its second quarter revenues to be in the range of $1.99 to $2.03 billion while analysts’ estimates are of $2.06 billion. It also expects its operating margin for the quarter to decline between 200 to 250 basis points. The company says, this is due to its “strategic growth objectives.” These objectives include investing in its business expansion and continue the marketing and advertising efforts globally to establish its brand.

For the full year of 2015, Ralph Lauren has reiterated its guidance.

Gross margin for the quarter was 61%, a 30 basis point rise from the same period last year through better distribution and geographic regions. The company saw its operating expenses rise by 10% for the quarter as it invested in its ongoing growth initiative. Operating income, as a result, fell 12% from the same period last year.

The company’s first quarter results were driven by 9% growth in its retail sales segment. The segment was supported by new-store additions, international growth and the expanding e-commerce business. Same-store sales for the segment were up 3% year-over-year (YoY) for the quarter. The company also benefited from the 4% YoY growth in its licensing revenues, which signified growth in sales of its products globally.

The expansion efforts by the company include the opening of a new Polo flagship in New York City and a plan to open a 20,000 square foot store in Greater China. Also the company is expanding its Polo brand to offer products for women.

Ralph Lauren management believes its results for the first quarter are strong and a reflection of its success from the strategic long-term growth objectives. The company has been able to produce double-digit growth in its e-commerce business and its international markets as well.

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