NEW YORK – Preppy clothing retailer Ralph Lauren Corp. reported a quarterly loss and another drop in revenue on Thursday, a day after announcing a new chief executive.
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The latest report from the company known for its polo shirts and pony logo underscores the challenges that Patrice Louvet, who was a Procter & Gamble beauty executive, faces when he start the CEO job in July.
Like other retailers, Ralph Lauren's revenue has been hurt as more shoppers skip department stores and choose to shop online. Last month, the company closed its high-profile Polo store on New York's Fifth Avenue and said it may close other stores, cut jobs and shut down some corporate offices.
The brand has also lost luster with shoppers because it can be found many places and had been too reliant on discounting to get shoppers to buy. Consumers also have lots of options online for their fix on status goods. Retail revenue in the fourth quarter fell 16 percent, driven by a decline in revenue at established stores that were hurt by weak customer traffic and a lower average transaction total. Sales at established stores dropped for the ninth straight quarter.
Much may depend on how Louvet and Lauren work together. Louvet replaces Stefan Larsson, who was the first person other than Lauren himself to hold the CEO title. But Larsson announced in February that he would leave after less than two years, after he and Lauren clashed over creative control. Lauren said the decision to part was mutual.
Louvet will report to Lauren, who is the company's executive chairman of the board and chief creative officer. In announcing Louvet's hiring, Lauren cited his collaborative working style.
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"Finding the right partner to work with me to take us forward in our evolution has been my primary focus over the last several months," Lauren said.
The New York-based company has been working to cut the number of products it offers and shorten the lead time from when items are conceived to when they get to stores. Over the past year, inventory was down 30 percent and the number of items was down 20 percent for the spring and fall 2017 seasons. The company said it now has 50 percent of its business on a nine-month lead cycle and plans to have 90 percent on that cycle by the end of fiscal 2018.
As a result, revenue from its wholesale accounts in the fourth quarter decreased 17 percent to $777 million.
"While Ralph Lauren is supposed to be a premium brand, it has become far too ubiquitous and in so doing has become less special," said Neil Saunders, managing director of research firm GlobalData Retail. "It simply isn't credible for a high-end brand to simultaneously showcase itself in a glitzy store on Madison Avenue while at the same time hawking a random assortment of sweaters thrown in a ragtag way on a table in Macy's. The two are incongruous and, ultimately, cheapen the image of the brand. We see some early signs of Ralph Lauren pulling back from less favorable channels, but it needs to work much faster if it is to rebuild its cachet."
Overall, the company reported a loss of $204 million, or $2.48 per share, in the quarter. Earnings, adjusted for restructuring costs, came to 89 cents per share. The results topped the average estimate of nine analysts surveyed by Zacks Investment Research for earnings of 79 cents per share.
Revenue for the quarter came to $1.57 billion, down from $1.87 billion a year earlier. That missed the forecast of three analysts surveyed by Zacks for $1.59 billion.
Ralph Lauren's shares fell 1.4 percent, or $1.37, to close at $71.38 on Thursday. They are down 21 percent so far this year.
Elements of this story was generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on RL at https://www.zacks.com/ap/RL
Keywords: Ralph Lauren, Earnings Report