Slowing economies in Europe and the Far East are pinching Ralph Lauren Corp.
In reporting a 5.1 percent increase in profits in the first quarter, the fashion company Wednesday said it expects consolidated net second-quarter revenues to decline by a mid-single-digit percentage with a low-double-digit fall in wholesale revenues offset by a mid-single-digital increase in retail sales. Wall Street pushed the company’s stock down 1.2 percent to $151.17 on the second-quarter outlook.
Roger Farah, president and chief operating officer, told Wall Street analysts during a conference call that there were some challenging traffic trends in Ralph Lauren stores in Europe, and in concession shops in Korea and Japan, due to global economic issues impacting discretionary luxury spending. In addition, the company has found its factory stores to be “resilient” as consumers become more cautious in general around the world, Farah said. Also growing have been the company’s sales online, he added. RELATED STORY: Tod's Posts Double-Digit Growth in Half >>
In a telephone interview, Farah noted there’s been some slowdown in the gateway tourist locations. “Sales have flattened out, they’re not growing at the rate that it was,” he said, attributing the data extrapolation to purchasing patterns in the stores.
Still, fashion items are selling. “We see customers gravitating toward newness in fashion. When they’re buying what’s new in fashion, price doesn’t matter. [So far, based on] fall receipts, the early winners are the most fashionable items,” Farah said.
He noted leather and suede items that were hard to find in other markets were winners at Ralph Lauren stores. Also doing well were boot sales.
As for issues a year ago over raw goods costs, Farah said cotton is back to its normal range of 83 cents a pound, with other textiles, such as leather, trims and cashmere, flattening out.
Even labor costs, which had been rising, have flattened out.
“As demand for products has slowed up a bit, factories are not running up at full blast, so costs are coming back in line,” Farah said.
But Ralph Lauren’s warning about a softer second quarter comes amid growing concerns of weakening consumer demand worldwide — even as luxury groups such as PPR, LVMH Moët Hennessy Louis Vuitton, Tod’s and Compagnie Financière Richemont SA express optimism about the second half. Late last month, Coach saw its shares dive 18.6 percent after the company reported lower-than-expected sales. Lew Frankfort, chairman and chief executive officer of Coach, attributed the rare sales miss to a “softened” U.S. economic backdrop, despite internal research that consumer brand loyalty remained strong.
On Wednesday, Ralph Lauren said that for the three months ended June 30, net income attributable to the company was $193.4 million, or $2.03 a diluted share, from $184.1 million, or $1.90, a year ago. Total net revenues rose 4.4 percent to $1.59 billion from $1.53 billion. That includes a net sales gain of 4.4 percent to $1.55 billion from $1.49 billion. Included in the sales gain was an increase of 3.1 percent in wholesale sales to $694.1 million and a rise of 5.4 percent in retail net sales to $857.3 million.
Ralph Lauren, chairman and chief executive officer, said, “Our products are the lifeblood of our success, and we are building on our leadership position in apparel to create exciting new avenues of growth with handbags, footwear, watches and jewelry.”
Farah said on the conference call that “sales growth and margin structure were both better than we anticipate.” He also said consolidated sales growth was impacted in part by the closing of 60 percent of the company’s Greater China distribution network and unfavorable currency fluctuations.
There'll be no rest for those headed to Europe for men's, as Paris just closed the gap with Milan. According to a provisional calendar released by the Chambre Syndicale, Paris Men's Week will now open a day earlier on January 16. See new highlights on the official lineup on WWD.com. #wwdnews #wwdfashion (📷: @kukukuba)
BREAKING: Jonathan Saunders is leaving @DVF. The designer has resigned from his position as chief creative officer of Diane von Furstenberg, the company said in a statement on Friday. At the time of his hire, von Furstenberg said Saunders’ arrival symbolized and facilitated her stepping back from the day-to-day duties that occupy the work of a full-time creative director. The British designer joined DVF in May 2016 and was in charge of all product categories. #wwdnews
For @versace_official’s spring ad campaign, the brand emphasized the archival prints from the spring tribute collection dedicated to the late Gianni Versace. Closing out the show were five of Gianni’s favorite models: Cindy, Naomi, Carla, Helena, and Claudia. Bowing on December 18, the new campaign is yet another tribute to supermodel-dom as the images by Steven Meisel are fronted by @iamnaomicampbell, @cturlington, @gisele and more. #wwdfashion
Four-time Oscar-nominated actress Annette Bening has been waiting 20 years to play Gloria Graham in "Film Stars Don't Die in Liverpool," which will be released on December 29. The movie about Graham – a Hollywood star known for her controversial relationship with a younger Englishman named Peter Turner – is based off a memoir Turned wrote. "She felt vulnerable to him, because she loved him, she really did love him. And anyone that we really truly are in love with, we re vulnerable to in a very deep way," said Bening. Read our full interview with the modern icon of an actress on WWD.com. #wwdeye (📷: @ninebagatelles; Styled by @cristinaehrlich)
The crisp white button down: a staple that can be dressed up or down and accessorized throughout the decades. Here, on a Art Basel-goer in 2017 on the left and on the iconic Audrey Hepburn in “Roman Holiday” in 1953 on the right. #tbt #wwdfashion (📷: Andrew Morales)
Known for her work with @victoriassecret, 25-year-old model @georgiafowler is raising her profile in Hollywood. Fowler stars in @vincecamuto’s holiday campaign, which launched in partnership with “Pitch Perfect 3.” “Almost every shoot with Vince Camuto, I’ve had to face a fear…It was definitely a challenge. I’m so grateful for it, though. I’ve always wanted to be a pop star, so that was the perfect chance,” Fowler said. Head to WWD.com to read about Fowler’s experience modeling, including at the #VSFashionShow, and her relationship with Nick Jonas. #wwdeye (📷: @jilliansollazzo)
EXCLUSIVE: Huda Kattan just became the first beauty influencer to land a major beauty deal. Kattan's business, @hudabeauty, has received a minority investment from private equity firm TSG Consumer Partners. The brand, which industry sources say is on track to do $200 million in retail sales for 2017, will receive support on product, retail and geographic expansion through the deal. Get all the details on the deal and read @_a_collins' interview with Kattan on WWD.com. Link in bio. (📷: @jgreenery) #wwdbeauty #wwdnews
Peruvian model @juanaburga_official – who is known for walking the runways of @rodarte, @viviennewestwood and @torybuch – is making the move to the big screen with drama “Los Últimos.” The film premiered in Argentina in November and arrives in the U.S. and Europe in 2018. On making the switch from modeling to acting, Burga told WWD: “It’s a completely different thing – a lot of people think it’s similar or try to connect things, especially like getting used to the camera or being looked at all the time or playing these different characrers, but film is a completely different story.” #wwdeye (📷: @jgreenery)
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)