Growth in Europe and Asia boosts Ralph Lauren's Q3 revenues
Prachi Singh| Wednesday, February 05 2020
Ralph Lauren Corporation reported net income in the third quarter of fiscal 2020 of 334 million dollars or 4.41 dollars per diluted share on a reported basis, while on an adjusted basis, net income was 217 million dollars or 2.86 dollars per diluted share. This, the company said, compared to net income of 120 million dollars or 1.48 dollars per diluted share on a reported basis, and 188 million dollars or 2.32 dollars per diluted share on an adjusted basis, for the third quarter of fiscal 2019. Revenue for the quarter increased by 1 percent to 1.8 billion dollars on a reported basis and 2 percent in constant currency, with growth across all regions led by Europe and Asia.
“We continue to make strong progress on our Next Great Chapter plan amid a volatile backdrop, with third quarter results ahead of our overall expectations, including better than expected revenues, operating margin, and double-digit EPS growth,” said Patrice Louvet, the company’s President and Chief Executive Officer in a statement.
Revenue performance across Ralph Lauren’s core markets
The company added that North America revenue in the third quarter increased slightly to 911 million dollars, while in retail, comparable store sales in North America were up 4 percent, driven by a 4 percent increase in brick and mortar stores and a 6 percent increase at ralphlauren.com. North America wholesale revenue decreased 8 percent.
Revenues in Europe increased 3 percent to 438 million dollars on a reported basis and 5 percent in constant currency. In retail, comparable store sales in Europe were up 3 percent, driven by a 2 percent increase in brick and mortar stores and a 15 percent increase in digital commerce. Europe wholesale revenue increased 2 percent on a reported basis and 5 percent in constant currency.
Turnover in Asia increased 5 percent to 290 million dollars on both a reported and constant currency basis, driven by solid growth in retail. Comparable store sales in Asia decreased 1 percent, with growth in both brick and mortar and digital commerce operations more than offset by a decline in Hong Kong. Excluding Hong Kong, comparable store sales increased 2 percent.
Gross profit for the quarter was 1.1 billion dollars and gross margin was 62.2 percent, while adjusted gross margin was 60 basis points above the prior year on both a reported and constant currency basis. Operating income was 224 million dollars on a reported basis and operating margin was 12.8 percent, while adjusted operating income was 246 million, while adjusted operating margin was 14 percent, 10 basis points above the prior year.
Ralph Lauren reveals outlook for Q4 and FY20
For fiscal 2020, the company expects net revenue growth in the range of 2 percent to 3 percent on a constant currency basis. Foreign currency is expected to negatively impact revenue growth by approximately 110 to 130 basis points. This outlook, the company further said, continues to include the impact of tariffs and business disruptions in Hong Kong but does not include potential impact from the coronavirus outbreak in Asia. The Company now expects operating margin expansion for fiscal 2020 to be at the high end of our previous guidance of 40 to 60 basis points in constant currency. Foreign currency is expected to negatively impact operating margin by about 10 basis points.
In the fourth quarter, the company expects net revenue to be up slightly on both a constant currency and reported basis. Foreign currency is expected to negatively impact revenue growth by approximately 50 basis points in the fourth quarter. Operating margin for the quarter is expected to be up slightly on both a constant currency and reported basis. Foreign currency is expected to have a minimal impact on operating margin in the fourth quarter.