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Ralph Lauren Q2 profit rises 18%, beats estimates

Premium lifestyle products manufacturer Ralph Lauren Corp. (RL) reversed the lower revenue trend that it faced for more than three years for the second time in the second quarter with a 1.6% rise in revenue to $1.7 billion. The retailer gained from the rising consumer demand and reduced promotional activity along with improved pricing as well as favorable product mix.

The company’s results beat analysts’ expectations on both the revenue and earnings front. The stock also has been rallying for the past year, surging more than 50%.

Net income for the quarter increased 18% to $170 million or $2.07 per share. On an adjusted basis, earnings rose 14% to $2.26 per share.

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On a geographic basis, North America revenue rose 1% on a reported basis and 2% in constant currency for the quarter. Asia revenue grew 13% on a reported basis and 14% in constant currency on strength in both retail and wholesale channels. However, Europe revenue declined 1% on a reported basis and was flat to last year in constant currency as the shift in timing of shipments negatively impacted the results.

Looking ahead into the third quarter, the company expects net revenue to be up low single digits in constant currency. Foreign currency is expected to pressure revenue growth by about 100 basis points in the quarter. Operating margin is predicted to be up about 20 basis points in constant currency.

For fiscal 2019, Ralph Lauren now expects net revenue to be about flat to up slightly in constant currency as foreign currency will have about 75 basis points of negative impact on the top line growth. Operating margin is still predicted to be up 40 to 60 basis points in constant currency driven by gross margin expansion. Capital expenditures are still anticipated to be about $275 million.

The stock has risen over 31% since the start of the year. Despite the earnings and revenue beating the estimates for this quarter, the stock fell by 5% in the early pre-market session.

 

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