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Ralph Lauren North America sales decline amid fewer discounts – Financial Times

Ralph Lauren said revenues in its domestic market fell in its fiscal fourth quarter as it reduced off-price sales, overshadowing growth in its overseas markets and an adjusted profit beat as the retailer continues to make progress on its turnround.

The New York-based company known for its preppy Americana said revenues in its fiscal fourth quarter slid 1.6 per cent from a year ago to $1.5bn, ahead of analysts’ projections for $1.48bn, according to a Refinitiv survey.

In North America however, the company’s revenues fell 7 per cent to $708m as fewer promotions and some spring fashions that missed the mark weighed on sales. Same-store sales in the region were down 4 per cent, but when stripping out the timing of the Easter holiday, they declined 1 per cent.

Chief executive Patrice Louvet said he “recognises that we still have more work to do” in the company’s largest market.

Shares in the company fell 7 per cent to $110.35, on track for their worst day since October.

However, sales overseas jumped, with revenues up 4 per cent and 6 per cent respectively in Europe and Asia.

Net income fell to $32m, or 39 cents a share, down from $41m, or 50 cents a share, in the year-ago quarter. However, adjusting for restructuring charges and other one-time items, the company reported earings of $1.07 a share, ahead of analysts' expectations for 90 cents a share. Adjusted gross margins improved by 30 basis points to 60.1 per cent.

Ralph Lauren has been trying to win over shoppers with fashion shows that help build its brand, including its Ralph’s Café immersive fashion experience at its Madison Avenue flagship store. The company also said it leveraged cultural events like Priyanka Chopra and Nick Jonas’ wedding and sporting events through partnerships with Wimbledon, the US Open and the US team at the Ryder Cup.

The retailer said these efforts helped drive growth on Instagram as its followers increased 45 per cent from a year ago to 15m in fiscal 2019.

The company has also turned to categories like fragrances to draw in a new generation of consumers, focusing on millennials and Gen Z globally.

Ralph Lauren like other clothing retailers has suffered amid falling mall traffic and the rise of e-commerce. The company has also faced competition from fast-fashion brands like H&M and Zara that mimic runway styles for a fraction of the cost. In an effort to shore up its business and profits however, the company has cut back on promotions and reduced reliance on department stores.

Looking ahead, the company expects revenues to be up between 2 and 3 per cent in fiscal 2020.

It remains unclear how the ongoing trade war between the US and China could affect the company as its clothing items could be hit by a 25 per cent tariff as Washington mulls fresh levies on $300bn worth of goods.

“We are taking a more cautious approach to inventories, especially in light of the dynamic trade environment,” the company said on its earnings call. “The tariffs enacted to-date have a limited impact on our business model, but our teams are prepared for multiple scenarios and have accelerated the diversification of our supply chain to mitigate the long-term impact of any potential tariff outcomes.”

Ralph Lauren shares were up 6 per cent year-to-date as of Monday’s close.

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