Jul 30, 2019
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Ralph Lauren hints at weakness in North America business, shares fall

Jul 30, 2019

Ralph Lauren Corp said it expects full-year sales in North America to be pressured by a tough retail environment and weakness in spending by foreign tourists, overshadowing upbeat quarterly earnings and sending its shares down about 4%.

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The fashion house, like other apparel companies, is trying to revive growth after years of heavy discounting and a strategy of flooding the market with its lower-end goods.

The company has launched limited edition apparel and partnered with professional golfer Justin Thomas for the sporting season to reinvigorate sales of core products like its Polo shirts.

But fierce competition in the apparel industry and the popularity of online shopping have weighed on fashion houses, which rely heavily on brick-and-mortar stores for a major chunk of their sales.

The company has taken a slightly more cautious view of the retail environment for the year ahead and continues to see challenges with brick-and-mortar traffic, including foreign tourist volatility, Chief Executive Officer Patrice Louvet said on a post-earnings call with analysts.

Wholesale business was the biggest driver of the company’s 3.1% growth in North America revenue in the quarter, which was offset by weaker-than-expected retail same-store sales.

Internationally, the company continued to perform well, with revenue rising 1.5% in Europe and 4.3% in Asia. “We expect continued strength in our international businesses and a more challenging outlook for North America,” Chief Financial officer Jane Nielsen said.

For the second quarter, the company forecast net revenue to rise by about 1% on a constant currency basis and expects a stronger dollar to pressure revenue growth by about 90 to 100 basis points.The company maintained its revenue forecast for the rest of the year.

Net income rose to $117.1 million (96.2 million pounds), or $1.47 per share, in the first quarter ended June 29 from $109 million, or $1.31 per share, a year earlier. Excluding one-time items, the company earned $1.77 per share, while net revenue rose to $1.43 billion.

Analysts were expecting a profit of $1.66 per share and revenue of $1.42 billion, according to IBES data from Refinitiv. Shares of the New York-based company reversed course to fall about 4% after rising about 6% in trading before the bell.

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