Shares in Ralph Lauren took a dive today as the apparel brand saw first-half gross margin hit by higher input costs.
The company said that second quarter gross margin declined 140 basis points to 56.6%, and was down 10 basis points over the first-half to 59.5%. The company attributed the declines to the “negative impact of cost of goods inflation” that was partially offset by price increases and more favorable channel and geographic mix than the prior year.
Net income rose 13.6% to $233 million for the quarter and 28% for the half to $418m. Second-quarter revenue increase 24% to $1.9 billion while over the half, sales rose 28% to $3.4 billion. The company said the higher net revenues reflect global wholesale shipment growth, strong retail sales worldwide and favorable foreign currency effects.
For the full-year, the company expects consolidated revenues to increase to between the high-teens to low 20% rate, up on the prior expectation of mid-to-high-teens growth. It also expects operating margin to be down 50 basis points on the prior year, against prior guidance of a 50-100 basis point decline.
“Our momentum in the first half of the year demonstrates the incredible vitality of our brand and the growing desirability of our products around the world,” said chairman and CEO Ralph Lauren. “The progress we are making with our international development and the acceptance of our vibrant accessories merchandise confirms that we are paving important new avenues of growth. At the same time, demand for our products in more developed markets has been very strong. Customers around the world understand that Ralph Lauren stands for the highest quality products that withstand the test of time, and this is reflected in our strong performance over the last six months.”
Shares were down 6% to $149.46 a share at 11:12 ET today.
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