Turnarounds

Ralph Lauren Same-Store Sales Drop 12%

The retailer's stock falls 2% on the Q4 earnings report, indicating investors are skeptical about its turnaround strategy.
Matthew HellerMay 18, 2017

Ralph Lauren’s shares fell to levels not seen since the recession after the apparel chain reported a larger-than-expected decline in same-store sales.

For the fourth quarter, comparable sales fell 12% drop in comparable sales, easily missing analysts’ expectations of a 6.5% drop and contributing to a 16.3% fall in overall sales to $1.57 billion.

Ralph Lauren said same-store sales were “negatively impacted by challenging traffic and average transaction size trends, partially driven by our initiatives to improve quality of sales.” It was the ninth straight quarterly decline in comp sales.

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

Download our 2022 survey report for a high-level view of finance team projections and strategies, directly from our CFO.com executive readers.

According to Reuters, the average transaction size fell as Ralph Lauren’s move to sell more items at full price discouraged shoppers. The company has reduced discounting as part of a turnaround strategy that also includes cutting costs by shuttering stores, including its flagship Polo store on Fifth Avenue in New York.

In the earnings release, CFO Jane Nielsen said Ralph Lauren had strengthened its foundation in fiscal 2017 and that work would continue into fiscal 2018 “as we drive toward strengthening the brand, improving return on investment and creating value for shareholders.”

But Ralph Lauren’s stock dropped as much as 3% on Wednesday before closing at $71.38, down nearly 2%. “Ralph Lauren has been turning itself around for a very long time. It goes back to over two years now,” Neil Saunders, managing director of GlobalData Retail, told Reuters.

“There is a lack of confidence among investors that the company would be able to pull through all the initiatives it is now talking about.”

As a result of the cost-cutting efforts, selling, general and administrative expenses fell about 15% in the fourth quarter while cost of goods sold slumped nearly 13%. Ralph Lauren also posted an adjusted profit of 89 cents per share that topped analysts expectations by 11 cents.

On an unadjusted basis, the company posted a net loss of $204 million or $2.48 per share. The latest earnings report “underscores the challenges that Patrice Louvet … faces when he start the CEO job in July,” The Associated Press said.

4 Powerful Communication Strategies for Your Next Board Meeting