This winter has been warmer than usual, but apparel companies are experiencing a colder one. Ralph Lauren Corporation (NYSE: RL), the New York headquartered apparel and accessories company released its earnings for the third quarter of fiscal 2016 before the market open on thursday. Adjusted earnings were $2.27 per diluted share, beating the consensus estimate of $2.11, however, down from $2.41 reported for the third quarter 2015. For the guidance, the company expects revenues to fall 3% for fiscal 2016. Shares dropped over 18% to 52-week low this morning, down 30% during the past three months. Peer company PVH Corp., parent of Calvin Klein and Tommy Hilfiger, also saw a 18% decline in its stock price since November.
Ralph Lauren (RL) and PVH Stock Price 3 Month Movement
Ralph Lauren reported Q3 net revenue of $1.9 billion, a 1% decline on a constant currency basis. With foreign exchange impact, the revenues decreased 4% year-over-year. Wholesale revenue that accounts for 40% of the total revenue faced a 6% decline year-over-year during Q3, while retail revenue, capturing 57% of total revenue, shrank 3% in the quarter.
The unusually mild weather has hurt sales on winter clothing. A strong U.S dollar not only accounts for the 3% more decline in net revenue, but also causing fewer tourists to visit the U.S, which was said to be another explanation for the disappointing sales numbers . The company has tried to offset the unfavorable exchange rates by raising prices in regions including Europe, Japan, Canada and Australia.
For the Fiscal 2016 outlook, the company expects the negative impact of foreign currency to be around 400 basis points on revenue growth, and revenue to decrease about 3% for the year ending in 2017.
“While we are disappointed with the current business results, I was brought on board as CEO to institute change that will drive improved performance and strengthen Ralph Lauren’s position among the top luxury companies in the world. I am finalizing an extensive assessment into all aspects of the Company and working with my team to build a comprehensive strategic and financial plan to win. There is a lot of work to be done, but I am confident we will succeed”, said Stefan Larsson, the president and CEO of the company.