Ralph Lauren Corporation (NYSE:RL) today reported net income of $214 million, or $2.29 per diluted share, for the second quarter of Fiscal 2013, compared to net income of $233 million, or $2.46 per diluted share, for the second quarter of Fiscal 2012. Net income and net income per diluted share for the second quarter of Fiscal 2013 include the net negative impact of an approximate $15 million one-time discrete tax item.
“Our year-to-date results affirm the tremendous resilience of our business,” said Ralph Lauren, Chairman and Chief Executive Officer. “We continue to make excellent progress on our long-term growth objectives as we invest along many dimensions, including new stores and e-commerce platforms and emerging merchandise categories and regions. Our clarity of vision and purpose has us focused on the most compelling opportunities that we believe will create significant shareholder value over the long term."
“I am proud of our better-than-expected second quarter and first half results,” said Roger Farah, President and Chief Operating Officer. “In the context of a more challenging operating environment, and on top of double-digit sales and profit gains in the prior two years, disciplined execution enabled us to strengthen the margin structure of our business once again. While we expect continued margin improvement in the back half of the year, macroeconomic conditions lead us to be incrementally more cautious on near-term customer demand trends worldwide. Notwithstanding these macroeconomic challenges, the desirability of the Ralph Lauren brand is undeniable and we are well positioned for the upcoming Holiday season.”
Second Quarter Fiscal 2013 Income Statement ReviewNet Revenues. Net revenues for the second quarter of Fiscal 2013 were $1.9 billion, 2% below the comparable period last year. The decline in net revenues primarily reflects a planned contraction in wholesale shipments that was partially offset by continued retail segment expansion. Excluding the impact of strategic decisions to discontinue American Living and store closures associated with the Company’s Greater China network repositioning efforts, in addition to the net negative impact from foreign currency translation, net revenues increased approximately 3% in the second quarter.
- Wholesale Sales. Wholesale segment sales of $915 million in the second quarter were 8% below the prior year period, as a proactive reduction in shipments to certain European specialty stores and the net negative impact of foreign currency translation more than offset continued growth in core and emerging merchandise categories in the Americas. Comparisons with the prior year period were also impacted by the discontinuation of American Living in Fiscal 2013 and the global launch of Denim & Supply in the prior year period.
- Retail Sales. Retail sales rose 5% to $901 million from $861 million in the second quarter last year, reflecting growth in comparable store sales and the incremental contribution from new stores and e-commerce operations that was partially offset by store closures associated with the Company’s Greater China network repositioning efforts. Consolidated comparable store sales rose 3% on a reported basis during the second quarter and increased 5% in constant currency.
- Licensing. Licensing revenues of $47 million in the second quarter were 3% below the prior year period. The decline in licensing revenues is primarily due to the discontinuation of certain American Living and South American licensing arrangements.
- Wholesale Operating Income. Wholesale operating income declined 4% in the second quarter of Fiscal 2013 to $233 million from $242 million last year. Wholesale operating margin was 25.5% in the second quarter, 120 basis points stronger than the prior year. The improvement in wholesale operating margin was primarily due to higher gross margins as a result of lower input costs and operational discipline.
- Retail Operating Income. Retail operating income was $157 million, 8% greater than the $145 million achieved in the second quarter of Fiscal 2012, and retail operating margin was 17.4%, 60 basis points higher than the prior year period. The growth in retail operating income and the expansion in operating margin is a result of comparable store sales growth and disciplined operational management that more than offset continued investment in global e-commerce and the impact of the Company’s Greater China network repositioning efforts.
- Licensing Operating Income. Licensing operating income declined 2% to $35 million from $36 million in the second quarter of Fiscal 2012, primarily due to lower licensing revenues.