RL - Ralph Lauren beats estimates after sales accelerate in Europe and Asia

2023-08-10 08:19:35 ET

Ralph Lauren Corporation ( NYSE: RL ) traded lower early on Thursday after topping revenue and EPS expectations with its FQ1 report, but falling short of the consensus mark for comparable sales after stripping out FX swings.

The apparel giant said North America revenue in the quarter decreased 10% to $632M. Results included approximately 5 points of negative impact from a previously reported shift in timing of spring product receipts into the FQ4 of last year, as the company returned to a more normalized cadence of seasonal wholesale shipments post-pandemic. In retail, comparable store sales in North America were down 6%, including an 8% decrease in digital commerce and a 5% decrease in brick and mortar stores. Europe revenue increased 8% to $450M on a reported basis and 7% in constant currency. Asia revenue increased 13% to $378M on a reported basis and 18% in constant currency. Comparable store sales in Asia increased 13%, with a 14% increase in our brick and mortar stores and an 11% increase in digital commerce.

Adjusted gross margin improved 80 basis points from a year ago to land at 68.8% of sales. Gross margins were driven higher by AUR growth across all regions, lower freight and favorable channel and geographic mix shifts, more than offsetting continued pressure from raw material costs and foreign currency.

On an adjusted basis, net income was $158M or $2.34 per share vs. $1.88 per share a year ago and the consensus estimate from analysts of $2.13.

On the balance sheet, Ralph Lauren ( RL ) ended the quarter with $1.7B in cash and short-term investments and $1.1B in total debt. RL's inventory at the end of the quarter was up 1% year-over-year to $1.2B, including increases in Asia and Europe to support growth initiatives largely offset by a decline in North America.

Shares of Ralph Lauren ( RL ) fell 2.72% in premarket action on Thursday after dropping 1.28% on Wednesday. The stock is still up more than 18% on a year-to-date basis.

Sector watch: Earlier on Thursday, Tapestry ( TPR ) announced that it struck a deal to acquire Capri Holdings Limited ( CPRI ) for $57.00 per share in cash. The deal will have a total enterprise value of approximately $8.5B. The acquisition is noted to bring together six highly complementary brands with global reach, powered by Tapestry's ( TPR ) data-rich customer engagement platform and direct-to-consumer operating model. The combined sales of the two companies is in excess of $12B and the two have a combined presence in over 75 countries.

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