Ralph Lauren Profit Declines as Sales at its Stores Slump

Ralph Lauren Purple Label S/S 2013 Campaign | Source: Ralph Lauren

NEW YORK, United States — Ralph Lauren Corp on Wednesday reported a lower quarterly profit on disappointing results at its own stores, and the fashion company reiterated its forecast for modest growth this fiscal year.

Shares of Ralph Lauren were down 6.6 percent to $177 in premarket trading.

Sales at its stores open at least a year slipped 1 percent, although they would have risen at that rate without the impact of currency fluctuations, and investments the company has made in opening new stores and renovating others dented profits.

“Retail is a tough business – when you go retail, you make your business more complicated,” Morningstar analyst Paul Swinand told Reuters.

The company said net revenue, including licensing revenue, rose 3.8 percent to $1.65 billion in the first quarter ended June 29. That was in line with Wall Street estimates, according to Thomson Reuters I/B/E/S.

Wholesale sales rose 6 percent, outpacing the 3 percent growth in the retail business, as sales to department stores like Macy’s Inc jumped.

Ralph Lauren now operates 396 stores itself, up from 379 last year, and is in the processing of repositioning itself in China, closing locations that were run by local partners and replacing them with its own in better locations. It also renovating many Club Monaco stores.

That repositioning in China, as well as the decision last year by J.C. Penney Co Inc to drop Ralph Lauren’s “American Living” brand, has hurt sales in the last year.

Ralph Lauren affirmed its revenue forecast and still expects a rise of 4 percent to 7 percent this fiscal year, a modest pace compared with the double-digit gains of recent years.

The company, whose brands also include Chaps, expects revenue this quarter to be up by a low single-digit percentage rate, hurt in part by the strong U.S. dollar.

Net income slipped to $181 million, or $1.94 per share, in the first quarter from $193 million, or $2.03 per share, a year earlier. Its profit, in line with Wall Street expectations, fell as it spent money on new stores and developing its e-commerce.