=Ralph Lauren (RL) reported earnings on Tue 8 Aug 2017 (b/o)

Ralph Lauren beats by $0.17, reports revs in-line; affirms FY18 constant currency outlook, provides Q2 guidance

• Reports Q1 (Jun) earnings of $1.11 per share, excluding non-recurring items, $0.17 better thanthe Capital IQ Consensus of $0.94; revenues fell 13.2% year/year to $1.35 bln vs the $1.34 bln Capital IQ Consensus.
• The first quarter revenue decline is in line with the Company's guidance of down low double-digits excluding 225 basis points of negative foreign currency impact. Foreign currency pressured the first quarter revenue growth by approximately 130 basis points. The foreign currency impact is less than guidance as foreign exchange rates moved favorably during the quarter.
• Gross margin was 63.2% on both a reported and adjusted basis, 210 basis points above the prior year on an adjusted basis. The gross margin increase was driven by initiatives to improve quality of sales through reduced promotional activity, favorable geographic and channel mix shifts, and improved product costs. Gross margin improvement was partially offset by unfavorable foreign currency effects of 50 basis points in the first quarter.
• Inventory at the end of first quarter Fiscal 2018 was $860 million, down 31% to the prior year period, driven by both restructuring actions and improvement in operating processes, including a proactive pullback in receipts and moving towards a demand driven supply chain.
• Guidance:
  • FY18:
    • The Company's full year guidance on a constant currency basis is unchanged. The full year Fiscal 2018 and second quarter guidance excludes restructuring-related and other charges expected to be recorded primarily in connection with the Company's Way Forward plan.
    • For Fiscal 2018, the Company continues to expect net revenue to decrease 8% to 9%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have minimal impact on revenue growth in Fiscal 2018; this is more favorable than the previous guidance of 150 basis points of negative impact given recent movements in foreign exchange rates.
    • The Company continues to expect operating margin for Fiscal 2018 to be 9.0%-10.5%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to pressure operating margin for Fiscal 2018 by approximately 40-50 basis points, less than the previous guidance of 50-75 basis points due to recent movements in foreign exchange rates.
  • Q2:
    • In the second quarter of Fiscal 2018, the Company expects net revenue to be down 9-10%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have approximately 40 basis points of negative impact on revenue growth in the second quarter of Fiscal 2018.
    • Operating margin for the second quarter of Fiscal 2018 is expected to be up 40-60 basis points, excluding foreign currency impacts. Foreign currency is estimated to pressure operating margin by approximately 40 basis points in the second quarter.