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Net income at Ralph Lauren falls in Q1FY15
Aug '14
Despite strong retail segment sales growth and double-digit expansion in international markets, net income at fashion and luxury brand Ralph Lauren Corporation fell to $162 million or $1.80 per diluted share in Q1FY15 against $181 million, or $1.94 per diluted share in Q1FY14.

According to Ralph Lauren, the contraction in net income per diluted share was a result of the decline in operating income that was partially offset by a lower effective tax rate and share count.

Net revenues rose by 3% to $1.7 billion in Q1FY15, led by strong retail segment sales growth and double-digit expansion in international markets, out of which wholesale sales posted $708 million, 4% below the prior year period and retail sales rose 9% to $960 million in the same period.

Ralph Lauren said that the decline in wholesale sales was due to higher revenues associated with the initial transition of Chaps men’s sportswear to a wholly-owned operation in the prior year period and a shift in the timing of shipments between quarters.

It added that hike in retail sales reflects the incremental contribution from new stores and double-digit growth in international markets and e-commerce. Consolidated comparable store sales increased 3% on a reported basis and were up 1% in constant currency during the first quarter.

Licensing revenues of $40 million in Q1FY15 was 4% from a year earlier, reflecting higher royalties from higher sales of Ralph Lauren products worldwide.

Gross profit for Q1FY15 rose 4% to $1.0 billion, while posting gross profit margin of 61.0%, which is 30 basis points above the prior year period, mainly due to favourable channel and geographic mix that was partially offset by negative foreign currency effects.

Operating expenses stood at $799 million in Q1FY15, up 10% from Q1FY14, mainly due to business expansion, continued investment in strategic growth initiatives and infrastructure and also due to costs associated with newly transitioned operations.

Operating income for Q1FY15 was $244 million, down 12% from Q1FY14, while operating margin was 14.3%, 240 basis points below Q1FY14, which Ralph Lauren said was attributable to incremental investments in its long-term growth strategies, higher restructuring charges and a gain on the Chaps men’s sportswear license acquisition that benefited the prior year period.

Ralph Lauren ended the first quarter with $1.4 billion in cash and investments, or $1.1 billion in cash and investments net of debt, which is stable from the same quarter in FY14.

The first quarter ended with inventory of $1.2 billion compared to $1.1 billion in the prior year period. The increase in inventory primarily reflects investments to support anticipated sales growth for existing operations and new store openings, in addition to incremental inventory associated with newly transitioned operations.

Fibre2fashion News Desk - India

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