Ralph Lauren (RL 72.63, -0.12) has shed 0.2% despite reporting better than expected earnings for the fourth quarter. The company issued cautious guidance for fiscal year 2018, weighing on the stock, which is at its lowest level since the middle of 2010.
The apparel company delivered above-consensus fourth quarter earnings of $0.89 per share on a 16.4% year-over-year decline in revenue to $1.56 billion, which matched expectations.
The decline in revenue was due to actions associated with the company's Way Forward plan, and was consistent with internal expectations. Inventory levels were lowered by 30.0% to improve turnover and discount levels were moderated. The company reduced the number of SKUs offered, which should increase SKU productivity and lead to more focused, higher margin assortment. Lead times were shortened and the company closed 20 underperforming stores.
North America revenue fell 21.0% while International revenue declined 9.0%.
Wholesale revenue fell 17.0% to $777 million due to a strategic reduction in North American shipments. Shipments were lowered to increase quality of sales and to better align with demand.
Retail revenue dropped 16.0% to $745 million. Comparable store sales declined 11.0% due to challenging traffic and average transaction size trends.
Licensing revenue increased 7.0% to $43 million.
Gross margin improved by 90 basis points to 55.4% due to improved quality of sales, reduced promotional activity, lower product costs, and favorable geographic and channel mix shifts. Adjusted operating margin ticked up to 6.5% from 6.4% one year ago.
Looking ahead, the company expects that revenue for the full year will be between $5.95 billion and $6.02 billion, which is shy of current market estimates. Operating margin is expected between 9.0% and 10.5%. For the first quarter, the company expects to a see a low double-digit decline in revenue.