Although Ralph Lauren's revenue and earnings for 2QFY14 declined YoY, it beat Street estimates and expects a boost in revenue growth
(OPENPRESS) Ralph Lauren Corporation (RL) share price was up 6%. when the company announced that it beat estimates for earnings and revenues in the second quarter of fiscal year 2014 (2QFY14). The company also upped payouts 12.5%. To know about the recent earnings review of the company's main competitor, you can read Bidness Etc's article on Michael Kors Holdings Limited (KORS).
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Ralph Lauren's sales rose almost 3% and reached the high end of company guidance. The increase comes out to 4% if the effects of discontinued operations and currency exchange rates are excluded. Per-share earnings (EPS) were $2.23, a 3% decline from the previous year. Reported net income was $205 million, 4% lower than 2QFY13.
Gross profit margins fell 2.22ppts (percentage points) to 55.6% because of higher costs driven by strategic investments to boost revenue growth. Unfavorable foreign exchange rates, a negative impact of integrating licensed product lines with in-house product lines, and lower profits from concession shops also contributed to the decline in gross profit margins. Ralph Lauren's operating margins also declined 3.3ppts to 15.4%.
The company's inventory increased to $1.2 billion. This was driven by the conversion of licensed businesses to directly-operated businesses, a projected rise in sales and also a planned increase in inventory. The company ended its quarter with a cash balance of $1.4 billion.
Segments-wise Review
Retail segment sales rose to $944 million, a 5% improvement compared to 2QFY13. The increment comes from new operations in New Zealand and Australia, and growing e-commerce operations. Comparable store sales rose 1% on a constant currency basis. However, the unfavorable impact of currency fluctuations and negative growth at Japanese concession shops led to a 1% fall in comparable store sales.
Wholesale revenues were $928 million, a 1% bump. The increase was incremental since delays in shipments almost offset revenue growth from the integration of Ralph Lauren Chaps, the company's men's sportswear operations, and more sales in merchandise categories in North America.
The company's licensing business reported $43 million in revenues, a 6% fall YoY, mainly because the products in the men's line — Ralph Lauren Chaps — were shifted in-house.
Exxon Mobil Corporation (XOM) more than made up for the disappointing results in the previous quarter when it beat estimates and announced $112.4 billion in revenues for 3QFY13. This was a significant turnaround for the company which had recently announced its worst ever results since 2010.
Earnings from its Upstream segment noticeably improved on both a year-over-year (YoY) and quarter-over-quarter (QoQ) basis. The segment performed better because global oil pricing benchmarks like the price of Brent crude oil increased during 3QFY12. Exxon is also increasing its exposure in liquid production to capitalize on high crude oil prices and upstream volumes also increased 1.5% YoY.
The decline in refining and marketing margins is a cause for concern and hit earnings but the possible impact was partially offset by an increase in volumes in 3QFY13. The Dartmouth refinery, which is being converted into a marine terminal, remained functional over the quarter, which also contributed to the higher refining volumes.
Exxon's Chemicals business was the highest growing segment in the previous year. Margins as well as volumes have improved compared to the previous quarter and the previous year's same quarter.
Management also stated that in its earnings call that capex for FY13 was in accordance with guidance. The company's cash balance over the quarter rose by $700 million to $5.7 billion. This indicates Exxon's ability to keep on paying dividends and also continue its share buyback program. Dividend paid out by Exxon this quarter was $2.8 billion and the company also bought back 34 million shares worth $3 billion.
