August 8, 2012 / 7:36 PM / 5 years ago

Ralph Lauren, Macy's warn about soft economy

(Reuters) - Ralph Lauren Corp (RL.N) and Macy’s Inc (M.N) each reported higher quarterly sales gains on Wednesday, but both companies said the economy remains tough and reported pressure from lower spending by tourists.

Ralph Lauren, which caters to shoppers up and down the price spectrum with brands such as Club Monaco and its namesake, said it expects net revenue to fall by a “mid-single-digit” percentage in the second quarter, largely because of economic turmoil in Europe.

Ralph Lauren shares lost 1.1 percent to $151.35.

In contrast, Macy’s shares rose 2.7 percent to $38.01 after the department store chain reported better-than-expected earnings and raised its profit forecast.

Ralph Lauren said it took a hit from fewer visits by tourists in Europe, its top market after North America. The clothier’s sales have been further hurt by its phase-out of stores operated by local partners in China. It plans to replace those in time with company-run shops in better locations that will enhance its brand in the world’s fastest-growing luxury market.

Chinese visitors account for less than 2 percent of Ralph Lauren’s sales in Europe, compared with as much as 40 percent for rivals, Chief Operating Officer Roger Farah said during a conference call with analysts, faulting Ralph Lauren’s relatively low profile in China.

At the same time, European department stores have been more cautious in ordering.

“We are seeing skittishness by our wholesale partners,” Farah said, speaking of European retailers that sell its wares.

A worker cleans windows at a Macy's store in Arlington, VA, February 21, 2012. REUTERS/Kevin Lamarque


Ralph Lauren fared better in North America, where department stores have been more eager to place orders: Wholesale sales there rose by a double-digit percentage. In contrast, they fell by at least 10 percent in Europe.

But Ralph Lauren’s sales have been hurt by U.S. department store chain J.C. Penney & Co Inc (JCP.N) dropping the American Living brand this summer.

    At the same time, Macy’s won some business during the quarter from the sales decline at Penney, which has lost many customers since eliminating the use of coupons and most sales events this winter.

    Still, Macy’s second-quarter sales came in below the department store operator’s own forecasts, hurt in part by lower spending by foreign tourists and disruptions from its $400 million makeover of its Manhattan flagship, itself a major tourist attraction.

    Analysts expect Penney’s same-store sales to be down 17.4 percent in the second quarter, according to Thomson Reuters. At Macy‘s, which attracts a more affluent clientele than its closest rivals, they rose 3 percent, and at Kohl’s Corp (KSS.N) they slipped 2.7 percent. Kohl’s reports results on Thursday.

    “We are entering the fall season with optimism about our ability to grow sales and capture market share,” Macy’s Chief Executive Terry Lundgren said in a statement.

    Ralph Lauren’s net income rose 5.1 percent to $193.4 million, or $2.03 per share, in the first quarter ended June 30, from $184.1 million, or $1.90 per share, a year earlier. Wall Street expected EPS of $1.78. Revenue rose 4.4 percent to $1.59 billion.

    At Macy‘s, net income was $279 million, or 67 cents a share, for the quarter that ended July 28, up from $241 million, or 55 cents a share, a year earlier and above analysts’ estimates of 64 cents a share. Macy’s raised its full-year profit outlook by 5 cents per share to a range of $3.30 to $3.35.

    Editing by Jan Paschal

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