February 1, 2018 / 1:27 PM / 2 years ago

Ralph Lauren's turnaround efforts yet to pay off

(Reuters) - Ralph Lauren Corp (RL.N) reported a disappointing holiday quarter as fewer customers bought the luxury apparel maker’s products in North America, indicating that its turnaround efforts are yet to pay off.

People walk past Ralph Lauren Corp.'s flagship Polo store on Fifth Avenue in New York City, U.S., April 4, 2017. REUTERS/Brendan McDermid

The company’s shares fell as much as 6.4 percent in early trading on Thursday after it reported a bigger-than-expected drop in North American comparable store sales.

The New York-based company hopes that pulling products off department store shelves, where they have been discounted heavily, will help it regain an air of exclusivity — an image founder Ralph Lauren had envisioned when he started the company more than 50 years ago.

“The pullback from department stores and a reduction in shipments to off-price channels have both taken their toll on the revenue line, but they are essential steps on the path to rebuilding brand equity,” GlobalData Retail Managing Director Neil Saunders wrote in a note.

While there has been a moderate improvement in brand perception, Ralph Lauren has not regained all of the ground it lost over the last 10 years and is a long way from where a luxury brand of its kind should be, he said.

The company reported a 10 percent fall in North American comparable store sales, on constant currency terms, bigger than the 7 percent fall analysts had expected, according to research firm Consensus Metrix.

However, the company is looking to make up for falling demand in its home country by tapping into social media channels to entice new customers in China.

Ralph Lauren has a prominent presence on Snapchat and Instagram and said its WeChat fan base is up 50 percent over the last 3 months.

Revenue in Mainland China rose 28 percent in the quarter while sales in North America fell 11 percent in the holiday quarter to $886.4 million.

Net revenue in the quarter fell 4.4 percent to $1.64 billion.

The company reported a net loss of $81.8 million or $1 per share, compared with a profit of $81.3 million, or 98 cents per share, a year earlier as it incurred a $231 million charge due to the recent U.S. tax overhaul.

Excluding items, it earned $2.03 per share.

Analysts on average expected the company to post a profit of $1.87 per share on revenue of $1.63 billion.

Reporting by Uday Sampath in Bengaluru; Editing by Supriya Kurane

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