Ralph Lauren Corp. (RL, Financial), a designer and marketer of premium brands like Polo, said on Tuesday that fiscal fourth-quarter revenues declined 1.5% on a reported basis as sales declines in North America offset strong growth in Europe and Asia.
For the quarter ending March 31, the New York-based apparel manufacturer reported net income of $32 million, or 39 cents per diluted share, compared to net income of $41 million, or 50 cents per diluted share, in the prior-year quarter. Adjusted earnings were $1.07 per share, up from the prior-year quarter's earnings of 90 cents.
Company reports declining sales in North America, but improving sales in international markets
Chief Financial Officer Jane Nielson said on the earnings call that revenues of $1.5 billion on a reported basis represent a 1.5% decline from revenues in the prior-year quarter. Although sales in Europe increased 4% and sales in Asia rose 6%, driven by a 30% constant-currency growth in China, revenues in North America declined 7%.
Comparable sales in North America declined 4%, with brick-and-mortar revenues down 7%, driven by a 5% decrease in foreign tourist traffic. Wholesale revenues declined 10% primarily due to the company’s decision to reduce off-price shares and softness in select spring fashion concepts.
Stock falls on weak domestic revenue performance
Shares of Ralph Lauren traded at an intraday low of $108.70, down approximately 8.12% from Monday’s close on the weak revenue performance in North America. According to Reuters, the company reported its sixth quarter of comparable sales decline in North America over the past two years.
GuruFocus ranks Ralph Lauren’s profitability 7 out of 10, yet lists two severe warning signs: declining revenues over the past three years and contracting operating margins over the past five years. Ralph Lauren’s three-year revenue decline rate of 6.7% underperforms 71.41% of global competitors. Despite this, the company has a strong Piotroski F-score of 7 and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 82.38% of global apparel manufacturing companies.
Gurus with large holdings in Ralph Lauren include Jim Simons (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates.
Disclosure: No positions.
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