Ralph Lauren Tumbles Despite Resilient Demand as 'Guidance Pressured'

© Reuters.

By Sam Boughedda

Investing.com - Ralph Lauren (NYSE:RL) shares tumbled Tuesday despite posting positive earnings before the open, topping earnings and revenue estimates as consumer demand for luxury items continues to remain elevated.

Ralph Lauren reported fiscal first-quarter earnings of $1.88, $0.17 better than the analyst estimate of $1.71, with revenue for the quarter coming in at $1.5 billion versus the consensus estimate of $1.4 billion.

Ralph Lauren reiterated its full-year fiscal 2023 outlook, expecting revenues to increase in the approximately high single digits compared to last year. However, gross margin is expected to contract 40 to 80 basis points compared to last year due to cost inflation. In addition, foreign exchange headwinds are expected to negatively impact Ralph Lauren's gross margins by approximately 190 basis points in the second quarter.

"Our strong first quarter performance underscores the power of our brand and momentum of our strategy around the world, following our significant multi-year reset," said Patrice Louvet, President and Chief Executive Officer of Ralph Lauren.

Following the report, a Goldman Sachs (NYSE:GS) analyst reiterated a Sell rating and $78 per share price target on the stock, saying in a note to clients that on first take, it was a strong beat, but gross margin was soft and guidance was pressured by FX headwinds.

"Ralph Lauren reported adjusted F1Q EPS of $1.88, above GS/FactSet consensus of $1.68/$1.71, with the beat driven by stronger international revenue and better SG&A control," said the analyst. "Net revenues grew 8.3% Y/Y, much stronger than GS/consensus expectations of 1.5%/1.6%. AUR across the company's DTC network grew 8% Y/Y. Gross margins of 68.0% were modestly below GS/consensus 68.6%/68.7%, with the gross margin miss offset by well-controlled SG&A expense at 55.2% of sales. Net, adjusted operating margins of 12.7% was stronger than GS/consensus at 12.1%/12.5%."