May 9, 2014
Ralph Lauren store expansions to hurt profit margin in fiscal 2015
May 9, 2014
Ralph Lauren Corp warned on Friday that its efforts to open more stores would erode operating profit margin at the luxury fashion house in the fiscal year through March 2015, and that sales growth would also be slower. The company's shares fell 6.7 percent to $142 in premarket trading on the New York Stock Exchange.
Ralph Lauren, whose brands include Club Monaco stores, Chaps and its namesake brands, gets about 54 percent of its sales through department stores such as Macy's Inc and other retailers. But in recent years, it has been opening more stores to have more control over the brands. The company plans to spend $400 million to $500 million on capital projects in the new fiscal year, and expects operating profit margin to fall between 0.75 and 1.25 percentage points as a result.
In comparison, Macy's plans to spend about $1 billion but is about four times larger in terms of revenue.
The push comes amid tepid sales in its retail business. Sales at its own stores open at least a year fell 1 percent in the fourth quarter ended March 29, while wholesale revenue jumped 24 percent, lifted by big gains in the Americas.
Ralph Lauren projects global revenues will rise between 6 percent and 8 percent, a slower pace of growth than the 9 percent increase in the year through March 2014. Total revenue in the fourth quarter rose 13.6 percent to $1.87 billion, the company said. Net income rose 20.5 percent to $153 million, or $1.68 per share, from $127 million, or $1.37, a year earlier.
The company also announced Friday that Roger Farah, the long-time executive whom many in the fashion industry credit with turning Ralph Lauren into a global powerhouse, will retire at the end of May.
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