Ralph Lauren (NYSE:RL) Earnings Fail to Impress

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By dmcIntire on October 30, 2014 Company, Consumer Staples

Ralph Lauren Corporation (NYSE:RL), owned by Ralph Lauren ofcourse is a multi-billion dollar enterprise headquartered in New York City. Ralph Lauren (NYSE:RL), due to his tremendous efforts in the world of fashion and philanthropic activities, was declared Chevalier de la Legion HYPERLINK “http://en.wikipedia.org/wiki/Legion_of_Honour”d’honneur by the then French President, Nicholas Sarkozy.

As of September 2012, Forbes estimates his wealth at $7 billion, which makes Ralph Lauren (NYSE:RL) the 191^st richest person in the world. Being a college dropout and moving from one career to another, Ralph Lauren (NYSE:RL) has finally made his mark and is seen as one of the major trendsetter in the fashion industry.

Before the opening of the markets on Wednesday, the company reported their second quarter fiscal 2015 earnings and the earning per share (EPS) of the company currently stands at around $2.25 with revenues of $1.92 billion as compared to last year, which was $2.23 with revenues of $1.92 billion. Thomas Reuters also released their EPS results for the second-quarter that stands at $2.06 and $2.02 billion in revenues.

In the second-quarter, retail sales grew 7% whereas, as compared to last year, wholesale sale and licensing revenue both increased by 2%. Moreover, the gross margin stood at 56.8% showing a rise of 0.2% from last year. The company’s president assured that RL has what it takes to tackle the issues that are coming in the form of a challenging global macroeconomic environment. Currently, the company is showing good progress in areas of strategic focus that includes double -digit revenue growth that is beneficial internationally and for their e-commerce business as well.

RL expects a rise in net revenues by 3% to 5% in the third fiscal quarter. Their expectations also includes a negative impact of 20 basis points related to currency translation effects. This year, higher cost of goods and huge investments in growth might lead to a decrease in their operating margin however, 1.0% to 1.5% lower than what they had achieved last year. According to the consensus estimate, EPS should have been $2.81 on revenues of $2.18 billion and unfortunately, RL is quite below this range.

Due to foreign currency showing a negative growth rate, the company has lowered it’s fiscal 2015 revenue estimate to be within a range of 5% to 7% as compared to their ambitious claim, which was 6% to 8%. Moreover, a fall is expected in operating margin as compared to last year as well: 75 to 125 basis points.

Furthermore, stock price of the company is also down, nearly 9% year-to-date. Micheal Kors Holdings Ltd. (NYSE: KORS), a huge competitor of RL also showed a slight decrease of about 3.7% in the same time period. RL shouldn’t lose all hope, as there have been worst-case scenarios as well. This includes PVH Corp. (NYSE: PVH) which has seen stock prices to go down by more than 15% year-to-date.

On Wednesday morning, RL’s shares went down about 2.5%, 156.95 in a 52-week range of $141.93 to $181.07. Before this report, the consensus target price for the shares was around $180.00.