Shares of Ralph Lauren Corp. took a hit in premarket trading on Thursday after the luxury lifestyle products company reported its fiscal first-quarter earnings. Although the company exceeded earnings expectations for the quarter, it provided a somewhat downbeat outlook for the second quarter due to inflationary pressures and reduced consumer spending.
Solid First-Quarter Performance
Ralph Lauren Corp. reported a net income of $132.1 million, or $1.96 per share, for the quarter ending July 1. This marked an increase from $123.4 million, or $1.73 per share, in the same period last year. Adjusted earnings per share of $2.34 beat the FactSet consensus of $2.14. The company also saw a modest revenue growth of 0.4%, reaching $1.497 billion, surpassing the FactSet consensus of $1.483 billion.
While the North America revenue experienced a decline of 10%, this was offset by an 8% rise in Europe revenue and a remarkable 13% increase in Asia revenue. However, the operating margin decreased to 11.1% from 11.8% in the previous year.
Second-Quarter Outlook
Ralph Lauren Corp. anticipates that its second-quarter revenue will remain relatively flat or experience slight growth in constant currency. Currency fluctuations are expected to contribute approximately 1 percentage point to revenue growth. However, the FactSet revenue consensus, which includes currency fluctuations, implies a more optimistic growth rate of 3.4% with a projected revenue of $1.63 billion.
The company foresees a decreased operating margin for the second quarter, expecting it to fall between 9.5% and 10%. This would be lower than the first-quarter level of 11.1% and significantly below the 13.1% margin recorded a year ago.
Market Performance
In recent sessions, Ralph Lauren Corp.’s stock has experienced a 2.8% decline following an 18-month high on August 3. Despite this, the stock has shown significant growth over the past three months, increasing by 17.1%. In comparison, the S&P 500 has gained 8%.
Ralph Lauren Corp.’s ability to surpass earnings expectations reflects its strength in the luxury lifestyle products market. However, concerns remain for the company’s second quarter due to inflation and changes in consumer spending patterns.