Ralph Lauren Beats on Q3 Earnings


Driven by solid top-line performance along with leveraged selling, general and administrative (SG&A), Ralph Lauren Corp.’s (RL) earnings for the third quarter of fiscal 2014 surged 11.3% year over year to $2.57 per share. Moreover, quarterly earnings were ahead of the Zacks Consensus Estimate of $2.51.

Quarterly Highlights

In the quarter, Ralph Lauren's net revenue increased 9.2% year over year to $2,015 million, slightly above the Zacks Consensus Estimate of $2,011 million. The year-over-year growth was primarily driven by improved performance across the company’s wholesale and retail segments. Moreover, the company witnessed sales growth in every region with Americas, Europe and Asia registered high single-digit rise.

Overall, in the said quarter, retail revenues increased 6.4% to $1,130 million, wholesale revenues rose 14.6% to $840 million and licensing revenues declined 11.8% to $45 million.

Revenue growth at the retail division resulted from improvement in e-Commerce business and increased contribution from new stores, partially offset by unfavorable foreign exchange rates. The rise in wholesale revenues was mainly owing to increased revenues from the United States, better performance in Europe and favorable impact from transition of Chaps menswear operations. The year- over-year decline in licensing revenue was mainly due to license take-backs in Australia/New Zealand and soft performance of Chaps menswear operation.

Ralph Lauren's gross profit in the quarter increased 7.1% year over year to $1,172 million. However, gross margin contracted 110 basis points (bps) to 58.2% due to unfavorable foreign currency exchange rates and impact from the integration of the Chaps men’s sportswear operation.

Total operating expenses rose 6.2% year over year to $838 million, mainly due to overall business expansion as well as increased investments in growth initiatives and infrastructure. However, as a percentage of sales, it contracted 120 bps to 41.6% as increased expenses drive incremental revenue.

Ralph Lauren's operating profit improved 9.5% to $334 million from $305 million in the year-ago quarter, while operating margin expanded 10 bps to 16.6% compared with the prior-year quarter. The slight rise in operating margin mainly benefiting from the lower operating expenses as a percentage of sales more than offsets the gross margin contraction.

Exiting the quarter, Ralph Lauren operated 435 directly operated stores and 518 concession shops across the globe. Additionally, Ralph Lauren’s global licensing partners operated 57 Ralph Lauren stores, 13 dedicated concession shops as well as 105 Club Monaco stores and dedicated shops.

Balance Sheet

Ralph Lauren exited the quarter with cash and investments of $1.4 billion compared with $1.3 billion in the previous-year quarter. During the quarter, the company deployed $81 million toward capital expenditure. Moreover, inventory levels stood at $1,117 million, up 13.9% from $981 million in the comparable period last year.


Bolstered by improved quarterly results, Ralph Lauren now expects its sales for the fiscal to increase by 7% compared with its earlier guidance range of 5% – 7%. However, looking at the current margin trends, Ralph Lauren now anticipates operating margin to contract in the range of 110 – 120 bps, up from its previously guidance of contraction of 75 bps.

For the fourth quarter of fiscal 2014, the company expects net revenue to increase by 10% –12%. Operating margin is anticipated to increase in the range of 50 – 90 bps from the year-ago level of 11.1%.

Other Stocks to Consider

Currently, Ralph Lauren holds a Zacks Rank #4 (Sell). However, some better-performing stocks which may be considered in the apparel-retail industry include Columbia Sportswear Co. (COLM), Gildan Activewear Inc. (GIL) and Michael Kors Holdings Ltd. (KORS). All of these carry Zacks Rank #2 (Buy).

Read the Full Research Report on RL
Read the Full Research Report on KORS
Read the Full Research Report on COLM
Read the Full Research Report on GIL

Zacks Investment Research


View Comments (0)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • Enjoy this refreshing Triple Play offer!

    Get FIOS TV Mundo starting at $79.99/mo. w/ no annual contract + 2-yr. price guarantee. Or sign for 2 yrs. & get a $300 prepaid Visa. Click here.

    AdChoicesVerizon FiOS ®Sponsored
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • As Fed takes baby steps, Cramer's trick for profit

    In turn, Cramer says making money in the market, involves looking at the environment through the lens of the Fed. "The trick is to remember that they speak for the common person," Cramer said. "The Fed wants the common person to make money." With that backdrop always in mind, Cramer says it becomes…

  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • Accomplish your career goals

    At Capella University, you can learn the skills you need to succeed. Why wait another day? Get started today.

    AdChoicesCapella UniversitySponsored
  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • Don't buy Alibaba stock: 'Dean of Valuation'

    Investors should steer clear of Alibaba , valuation expert Aswath Damodaran said Wednesday. On CNBC's " Fast Money ," Damodaran, a professor of finance at New York University's Stern School of Business, noted that he was looking at Alibaba stock from the perspective of a long-term investor, not a…

  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • Norwich Information Security MS

    Online, accredited, top ranked. NSA Center of Academic Excellence. Recognized by the Department of Homeland Security. Download your free brochure!

    AdChoicesNorwich UniversitySponsored
  • 6 Things Debt Collectors Wish You Knew

    The work debt collectors do is not popular, and has become increasingly derided by those who don’t like what we do or simply don’t know the facts about debt collection. Too often, debt collection is painted with a broad brush to create a portrait that isn’t accurate, and doesn’t properly educate…