Earnings in Focus: Polo Ralph Lauren, Warner Music Group

Yahoo Finance’s Emily McCormick joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss earning reports from Ralph Lauren and Warner Music Group.

Video Transcript

ALEXIS CHRISTOFOROUS: Meantime, back on Wall Street, the earnings bonanza rolls on. I want to get to it now with Emily McCormick. And, Emily, let's begin with Warner Music Group. I guess a mixed earnings report there.

EMILY MCCORMICK: Mixed earnings report, as you said, for Warner Music Group. This is actually their first quarterly report since the company went public back in early June. And taking a look at those results, we had a beat on the top line with revenue of $1.01 billion, better than the $980 million that had been expected.

Now the company did swing to a net loss of $519 million versus $14 million in net income in the same period last year. That did lead to a big miss on adjusted earnings per share, which actually was a loss per share in Warner Music Group's case for this quarter. Now take a look at that top line. We had overall revenue down 5% over last year.

Recorded music revenue, specifically, was down 6%. And that came even as we saw a jump in digital revenue within that category. That was up 11% to 71% of total revenue versus 61% in the same period last year. So we are seeing Warner Music Group benefiting from this shift to streaming.

Now the company did call out negative impacts as a result of tour postponements, lower merchandise sales because, again, of this pandemic. They also saw a decline in licensing revenue due to lower advertising spend. Now they did break out major artist sellers on their labels, so an interesting little bit of color here.

We had artists, including Dua Lipa, Lil Uzi Vert, Tones and I, and Ed Sheeran selling well during the fiscal quarter for Warner Music Group. Now those shares are just above the flatline now. They are up about 20% since its IPO in early June. Alexis.

ALEXIS CHRISTOFOROUS: All right. Lots of retail news this week, certainly, Lord & Taylor and Men's Wearhouse saying they are going to be filing for bankruptcy yesterday. And, today, we're getting results from Polo Ralph Lauren, and they are not good.

EMILY MCCORMICK: No surprise here, we are seeing retail-- the retail industry as a whole really struggling. That's what we saw with Ralph Lauren's results this morning. So we had it in a wider than expected adjusted loss per share at $1.82.

That was versus $1.08-- $1.73 in losses that had been expected. We also saw net revenue of $487.5 million, down 66% over last year. Really dragged down by that wholesale revenue, that was down 85% over last year, so clearly a drought of demand among store owners for new inventory during the pandemic.

Now taking a look at those closely-watched comparable same store sales, those were down 57% in the quarter. That compares to growth of 2% in the same fiscal quarter last year. And during this quarter, we did have the majority of Ralph Lauren stores closed for eight to 10 weeks.

Well, that significantly impacting traffic and revenue. Now, nearly all physical stores are reopened across North America, Europe, and Asia. However, they are opened with limited hours and customer capacity.

So that's something that will continue to weigh on the company in the current quarter. And we do see those shares off about 6% in premarket trading. They're down 40% for the year to date. Alexis.