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Ralph Lauren (RL) Q1 Earnings & Revenues Beat on Solid Demand
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Ralph Lauren Corp. (RL - Free Report) has posted impressive first-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Results have gained from brand strength, solid demand, and expansion across all channels and regions.
Ralph Lauren has reported adjusted earnings per share of $1.88 in the fiscal first quarter, surpassing the Zacks Consensus Estimate of $1.72. However, the bottom line declined 18% from the prior-year quarter’s $2.29.
Net revenues grew 8% year over year to $1,490.6 million and beat the Zacks Consensus Estimate of $1,413 million. On a constant-currency (cc) basis, revenues were up 13% from the prior-year quarter. The metric gained from solid growth across all regions. This was partly offset by the impacts of 510 basis points (bps) from adverse currency rates.
The company’s global digital ecosystem witnessed year-over-year low-double-digit revenue growth and revenue growth of more than 80% on a two-year basis. This was driven by strength across owned and wholesale digital channels globally. The company also introduced additional digital sites in key markets, including India and Israel, in the fiscal first quarter.
The Zacks Rank #3 (Hold) stock has gained 6.4% in the past three months compared with the industry’s growth of 2.5%.
Image Source: Zacks Investment Research
Segmental Details
North America: In the fiscal first quarter, the segment’s revenues advanced 6% from the year-ago quarter to $701 million but came below the consensus mark of $727.2 million. Comparable store sales (comps) for North America’s retail channel improved 5%, including a 5% increase in brick-and-mortar stores and 2% growth in digital commerce. Revenues from the North America wholesale business grew 5% year over year.
Europe: The segment’s revenues grew 17% year over year to $416 million, with a 28% improvement in currency-neutral revenues. The metric also came ahead of the consensus mark of $361.6 million. Comps for the retail channel in Europe were up 34%, owing to a 45% increase in brick-and-mortar stores and a 7% rise in digital sales. Revenues for the segment’s wholesale business rose 8% on a reported basis and 20% at cc.
Asia: The segment’s revenues increased 16% year over year to $334 million on a reported and 26% on a currency-neutral basis. The metric also came ahead of the consensus mark of $296.5 million. Comps in Asia were up 19%, backed by 17% growth in brick-and-mortar stores and a 37% increase in the digital business.
Margins
Ralph Lauren's adjusted gross profit margin contracted 180 bps year over year on a reported basis and 80 bps on a cc basis to 68%. However, the metric expanded 350 bps on a three-year basis on solid AUR growth. Improved pricing and promotions were more than offset by higher freight and global supply-chain delays.
Adjusted operating expenses increased 13% from the year-ago period to $823 million in the fiscal first quarter. The rise was driven by higher marketing investments, and compensation and selling expenses to drive both near and long-term growth. Adjusted operating expenses, as a percentage of sales, expanded 220 bps to 55.2% in the reported quarter.
The company’s adjusted operating income was $190 million, up 18% from $231 million in the year-ago quarter. The adjusted operating margin contracted 410 bps year over year to 12.7%.
Financials
Ralph Lauren ended the quarter with cash and short-term investments of $1,776.9 million, total debt of $1.1 billion, and total shareholders’ equity of $2,364.1 million. Inventory grew 47% year over year to $1,178.2 million. The company repurchased Class A shares for about $213 million in the fiscal first quarter.
Capital expenditure in the reported quarter was $39.4 million. Management expects capital expenditure of $290-$310 million for fiscal 2023.
Ralph Lauren Corporation Price, Consensus and EPS Surprise
As of Jul 2, 2022, Ralph Lauren had 526 directly operated stores and 708 concession shops globally. The directly operated stores included 185 Ralph Lauren and 341 Polo factory stores. The company operated 113 licensed stores globally as of the same date.
Outlook
Management has issued the second quarter and retained its fiscal 2023 guidance based on the supply-chain condition, inflationary pressures, foreign currency movement, the war in Ukraine, and COVID-19 variants and other COVID-related disruptions.
For fiscal 2023, RL continues to anticipate revenue growth in the high-single digits year over year on a cc basis, on a 52-week comparable basis. This includes a 600-bps negative impact of unfavorable currency. On a 53-week comparable basis, the metric is likely to be hurt by an unfavorable currency of 100 bps.
The operating margin is still forecasted to be 14-14.5% at cc, which includes a negative impact of unfavorable currency of 180 bps. Notably, it reported an operating margin of 13.1% on a 52-week comparable basis and 13.4% on a 53-week basis in the last year.
The gross margin is still envisioned to expand 30-50 bps at cc on a 52-week comparable basis, driven by solid AUR growth and positive product mix, which is expected to more than offset higher freight and product cost inflation. However, the unfavorable currency is likely to hurt the metric by 150 bps.
For the second quarter of fiscal 2023, the company expects year-over-year revenue growth of 11% at cc. This includes a 750-bps impact of unfavorable currency.
The company anticipates an operating margin of 15.4-15.7% at cc, which includes the negative impacts of higher freight and marketing expenses, which are likely to reduce in the second half of fiscal 2023. The metric is expected to be hurt by 240 bps of unfavorable currency. The gross margin is predicted to contract 40-80 bps year over year at cc due to rising freight and product costs, offsetting continued AUR growth. Unfavorable currency impacts of 190 bps are likely to dent the gross margin.
Oxford Industries is an apparel company that designs, sources, markets and distributes products bearing the trademarks of its owned and licensed brands. It currently has a Zacks Rank #2 (Buy). OXM has a trailing four-quarter earnings surprise of 99.7%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 14.6% and 23.5%, respectively, from the year-ago period's reported numbers.
Snap-on, a global provider of professional tools, equipment and related solutions for technicians, vehicle service centers, original equipment manufacturers and other industrial users, currently has a Zacks Rank #2. SNA has a trailing four-quarter earnings surprise of 8.9%, on average.
The Zacks Consensus Estimate for Snap-on’s current financial year’s sales and earnings per share suggests growth of 4.7% and 6.8%, respectively, from the year-ago period's reported numbers.
Vail Resorts, an operator of mountain resorts and urban ski areas in the United States, presently has a Zacks Rank #2. MTN has a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for Vail Resort’s current financial year’s sales and earnings suggests growth of 31.9% and 168.4% from the year-ago period’s reported numbers, respectively.
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Ralph Lauren (RL) Q1 Earnings & Revenues Beat on Solid Demand
Ralph Lauren Corp. (RL - Free Report) has posted impressive first-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Results have gained from brand strength, solid demand, and expansion across all channels and regions.
Ralph Lauren has reported adjusted earnings per share of $1.88 in the fiscal first quarter, surpassing the Zacks Consensus Estimate of $1.72. However, the bottom line declined 18% from the prior-year quarter’s $2.29.
Net revenues grew 8% year over year to $1,490.6 million and beat the Zacks Consensus Estimate of $1,413 million. On a constant-currency (cc) basis, revenues were up 13% from the prior-year quarter. The metric gained from solid growth across all regions. This was partly offset by the impacts of 510 basis points (bps) from adverse currency rates.
The company’s global digital ecosystem witnessed year-over-year low-double-digit revenue growth and revenue growth of more than 80% on a two-year basis. This was driven by strength across owned and wholesale digital channels globally. The company also introduced additional digital sites in key markets, including India and Israel, in the fiscal first quarter.
The Zacks Rank #3 (Hold) stock has gained 6.4% in the past three months compared with the industry’s growth of 2.5%.
Image Source: Zacks Investment Research
Segmental Details
North America: In the fiscal first quarter, the segment’s revenues advanced 6% from the year-ago quarter to $701 million but came below the consensus mark of $727.2 million. Comparable store sales (comps) for North America’s retail channel improved 5%, including a 5% increase in brick-and-mortar stores and 2% growth in digital commerce. Revenues from the North America wholesale business grew 5% year over year.
Europe: The segment’s revenues grew 17% year over year to $416 million, with a 28% improvement in currency-neutral revenues. The metric also came ahead of the consensus mark of $361.6 million. Comps for the retail channel in Europe were up 34%, owing to a 45% increase in brick-and-mortar stores and a 7% rise in digital sales. Revenues for the segment’s wholesale business rose 8% on a reported basis and 20% at cc.
Asia: The segment’s revenues increased 16% year over year to $334 million on a reported and 26% on a currency-neutral basis. The metric also came ahead of the consensus mark of $296.5 million. Comps in Asia were up 19%, backed by 17% growth in brick-and-mortar stores and a 37% increase in the digital business.
Margins
Ralph Lauren's adjusted gross profit margin contracted 180 bps year over year on a reported basis and 80 bps on a cc basis to 68%. However, the metric expanded 350 bps on a three-year basis on solid AUR growth. Improved pricing and promotions were more than offset by higher freight and global supply-chain delays.
Adjusted operating expenses increased 13% from the year-ago period to $823 million in the fiscal first quarter. The rise was driven by higher marketing investments, and compensation and selling expenses to drive both near and long-term growth. Adjusted operating expenses, as a percentage of sales, expanded 220 bps to 55.2% in the reported quarter.
The company’s adjusted operating income was $190 million, up 18% from $231 million in the year-ago quarter. The adjusted operating margin contracted 410 bps year over year to 12.7%.
Financials
Ralph Lauren ended the quarter with cash and short-term investments of $1,776.9 million, total debt of $1.1 billion, and total shareholders’ equity of $2,364.1 million. Inventory grew 47% year over year to $1,178.2 million. The company repurchased Class A shares for about $213 million in the fiscal first quarter.
Capital expenditure in the reported quarter was $39.4 million. Management expects capital expenditure of $290-$310 million for fiscal 2023.
Ralph Lauren Corporation Price, Consensus and EPS Surprise
Ralph Lauren Corporation price-consensus-eps-surprise-chart | Ralph Lauren Corporation Quote
Store Update
As of Jul 2, 2022, Ralph Lauren had 526 directly operated stores and 708 concession shops globally. The directly operated stores included 185 Ralph Lauren and 341 Polo factory stores. The company operated 113 licensed stores globally as of the same date.
Outlook
Management has issued the second quarter and retained its fiscal 2023 guidance based on the supply-chain condition, inflationary pressures, foreign currency movement, the war in Ukraine, and COVID-19 variants and other COVID-related disruptions.
For fiscal 2023, RL continues to anticipate revenue growth in the high-single digits year over year on a cc basis, on a 52-week comparable basis. This includes a 600-bps negative impact of unfavorable currency. On a 53-week comparable basis, the metric is likely to be hurt by an unfavorable currency of 100 bps.
The operating margin is still forecasted to be 14-14.5% at cc, which includes a negative impact of unfavorable currency of 180 bps. Notably, it reported an operating margin of 13.1% on a 52-week comparable basis and 13.4% on a 53-week basis in the last year.
The gross margin is still envisioned to expand 30-50 bps at cc on a 52-week comparable basis, driven by solid AUR growth and positive product mix, which is expected to more than offset higher freight and product cost inflation. However, the unfavorable currency is likely to hurt the metric by 150 bps.
For the second quarter of fiscal 2023, the company expects year-over-year revenue growth of 11% at cc. This includes a 750-bps impact of unfavorable currency.
The company anticipates an operating margin of 15.4-15.7% at cc, which includes the negative impacts of higher freight and marketing expenses, which are likely to reduce in the second half of fiscal 2023. The metric is expected to be hurt by 240 bps of unfavorable currency. The gross margin is predicted to contract 40-80 bps year over year at cc due to rising freight and product costs, offsetting continued AUR growth. Unfavorable currency impacts of 190 bps are likely to dent the gross margin.
Stocks to Consider
Some better-ranked stocks from the same industry are Oxford Industries (OXM - Free Report) , Snap-on (SNA - Free Report) and Vail Resorts (MTN - Free Report) .
Oxford Industries is an apparel company that designs, sources, markets and distributes products bearing the trademarks of its owned and licensed brands. It currently has a Zacks Rank #2 (Buy). OXM has a trailing four-quarter earnings surprise of 99.7%, on average.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 14.6% and 23.5%, respectively, from the year-ago period's reported numbers.
Snap-on, a global provider of professional tools, equipment and related solutions for technicians, vehicle service centers, original equipment manufacturers and other industrial users, currently has a Zacks Rank #2. SNA has a trailing four-quarter earnings surprise of 8.9%, on average.
The Zacks Consensus Estimate for Snap-on’s current financial year’s sales and earnings per share suggests growth of 4.7% and 6.8%, respectively, from the year-ago period's reported numbers.
Vail Resorts, an operator of mountain resorts and urban ski areas in the United States, presently has a Zacks Rank #2. MTN has a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for Vail Resort’s current financial year’s sales and earnings suggests growth of 31.9% and 168.4% from the year-ago period’s reported numbers, respectively.