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Ralph Lauren's Retreat From Discounting Helps Bolster Profit

The brand's pursuit of higher-quality sales channels and fewer discounts helped second-quarter revenue reach $1.66 billion, just above the $1.64 billion predicted by analysts.
Ralph Lauren store interior | Source: Shutterstock
By
  • Bloomberg

NEW YORK, United States — Ralph Lauren Corporation, the 50-year-old fashion brand known for its preppy style, is making good on its effort to rely less on markdowns — even if it means selling fewer clothes.

The company posted earnings of $1.99 a share last quarter, topping analysts’ average projection by a dime. Ralph Lauren credited its pursuit of higher-quality sales channels and fewer discounts. Still, the push is taking a toll on revenue, which fell 9 percent in the period.

The results reflect the trade-offs of Ralph Lauren’s comeback plan: the fashion house is willing to sacrifice some growth to restore the brand’s exclusivity. The New York-based company, now headed by Patrice Louvet, plans to retreat from 20 percent to 25 percent of its US department-store distribution points by the second half of this fiscal year. It’s also reducing its inventory.

At the same time, Ralph Lauren has introduced limited-edition polo shirts and brought back some vintage pieces to generate buzz, while continuing to shorten the time it takes to bring fashion to the market.

“While there is a lot of work to be done, I am encouraged by the early progress we are making,” Louvet said in a statement.

Ralph Lauren shares rose 1.7 percent to $91 in premarket trading after the results were posted. The stock had declined about 1 percent this year through Wednesday’s close.

Second-quarter revenue amounted to $1.66 billion, just above the $1.64 billion predicted by analysts. But same-store sales declined 6 percent, slightly worse than the 5.4 percent average estimate compiled by Consensus Metrix.

The company expects the sales declines to continue as it retrenches from less profitable channels. Revenue will drop 6 percent to 8 percent in the third quarter.

By Stephanie Wong; editors: Nick Turner and Lisa Wolfson.

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