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What Drove Ralph Lauren’s Top Line Down in Fiscal 1Q18?

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Snapshot of Ralph Lauren’s performance in fiscal 1Q18

Ralph Lauren (RL) reported total revenues of $1.35 billion in 1Q18, down 13% as compared to the same period last year. The company beat Wall Street expectations by $10 million.

North America revenue plunged 17% to $710 million. The company has made ongoing initiatives to improve the quality of sales amid lower consumer demand.

Sales were lower in both the retail and wholesale channels. Wholesale was down 27%, while retail same-store-sales were down 8%. Within American retail, brick and mortar comps fell 4%, and e-commerce comps fell 22% during the quarter.

In Europe, sales fell 14% to $323 million. Retail sales were flat on a constant currency basis, while wholesale dropped 28%. Sales comps fell 8% on a constant currency basis as brick and mortar comps tumbled 8% and e-commerce dropped 5% during the quarter.

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The management attributed most of the sales decline in the two geographies to its Way Forward Plan initiative. As a part of this transformation plan, Ralph Lauren has been strategically reducing shipments in the wholesale channel, lowering off-price sales, and closing underperforming stores in order to improve brand image and increase profitability. Read about the impact of the Way Forward plan on the company’s margins in the next article.

ETF investors looking to add exposure to Ralph Lauren can consider the iShares US Consumer Goods ETF (IYK), which invests 0.3% of its portfolio in the company.

Other fashion companies are also fighting to maintain brand image

Handbag and accessories maker Michael Kors (KORS) reported results along with Ralph Lauren on August 8. The company also beat expectations for both top and bottom lines. Like Ralph Lauren, Kors has also been focusing on improving its brand image and margins through initiatives like lowering wholesale channel distribution and reducing promotional days.

Coach (COH) is another company that is focusing on revising brand image through similar measures. Its top line is expected to remain flat when it reports quarterly results on August 15.

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