Ralph Lauren’s Wholesale Channel Faces Headwinds in North America



Weakness in sales driven by poor showing in all key segments

Ralph Lauren (RL) reported its fiscal 1Q17 results on August 10, 2016. The company reported weakness in all three segments, leading to a decline in the company’s total sales by 4.1% YoY (year-over-year) in fiscal 1Q17.

Ralph Lauren has categorized its business into three operating segments: Wholesale, Retail, and Licensing. In this article, we’ll discuss the performance of RL’s wholesale distribution channel in fiscal 1Q17.

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Wholesale is ~40% of RL’s sales

Ralph Lauren (RL) distributes its products under the Wholesale channel through specialty stores and department stores. Macy’s (M) and Kohl’s (KSS) sells Ralph Lauren fashions, and The Home Depot (HD) sells Ralph Lauren–branded paint. The company sells through more than 13,000 points in North America, Latin America, Europe, and Asia.

The share of wholesale in the company’s total revenue has fallen over the past few years. While this channel contributed ~45% of RL’s total sales in fiscal 1Q14, its current revenue share was around 39% in fiscal 1Q17. This reflects a general trend among apparel and fashion companies, who are increasingly shifting toward the retail medium in order to boost margins.

Wholesale channel’s performance in fiscal 1Q17

Ralph Lauren’s Wholesale revenue was down by 5% YoY on both a reported and constant currency basis in fiscal 1Q17 to $607 million. This decline was a result of continued retail headwinds that the company faced in North America. Europe, however, witnessed strong revenue growth driven by a benefit from the timing of shipments relative to the previous year and also by measures taken to clear excess inventory.

Ralph Lauren’s competitor Calvin Klein, which is owned by PVH Corp. (PVH), witnessed a growth of over 20% in North America’s wholesale sales. VF Corp. (VFC), on the other hand, reported sluggish wholesale sales in the last reported quarter. VFC’s North Face and Timberland brands saw wholesale sales declining by the high single digits and low double digits in 2Q16.

ETF investors looking to add exposure to Ralph Lauren can consider the iShares US Consumer Goods ETF (IYK), which invests 0.27% of its portfolio in the company.

Read on to learn about Ralph Lauren’s retail sales performance in fiscal 1Q17.


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