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Ralph Lauren expects tariff, freight costs to rise


By Kumar

(Reuters) - expects higher tariff and freight-related costs to hit profits in the second half of its fiscal year, the upscale group said on Tuesday, overshadowing upbeat quarterly and driving its shares down 6 percent.

Rising freight and commodity costs, a result of a shortage of truck drivers, has plagued nearly every consumer goods company this year. In response, most companies including are offering fewer discounts to shield profits.

expects higher commodity and freight costs to reduce profit margins by between 30 and 40 basis points by the end of its fiscal year in March.

Meanwhile, its inventories climbed 15 percent in the quarter ended September as the company used less air-freight to keep costs in check while expecting future growth from store openings and online

"They had a lot of excuses to why their inventory was up ... but you're talking about a that had a revenue increase of 2 percent against an inventory of up 15 percent," Jane Hali of research firm said. "That's not a good story."

Ralph Lauren shares have risen over 5 percent this month alone and have gained 32 percent this year. The stock was last down 7 percent at $127.27 on Tuesday morning.

However, Ralph Lauren's latest quarterly results showed it had managed to reverse a years-long trend of declining in North America, chiefly as a strategy to intensify marketing on begins to bear fruit.

The focus is aimed at wooing more high-spending millennials as a lack of big discounts and promotions shrinks its more bargain-hungry clientele.

The New York-based company, known for its preppy Polo shirts, spent about 30 percent more on marketing in the second quarter ended September compared with a year earlier, targeting events including its 50th Anniversary Show and the Week.

Its revenue overall climbed 1.6 percent to $1.69 billion and topped analysts' expectations of a 0.9 percent decline, according to IBES data from

The fashion house also boosted its annual revenue projections, now forecasting net revenue to be unchanged or rise slightly from a year earlier, compared with a prior forecast of a slight decline.

Quarterly net income rose to 18 percent to $170.3 million. Excluding one-time items, Ralph Lauren earned $2.26 per share, exceeding Wall Street estimates for the ninth consecutive quarter.

Analysts on average had expected earnings of $2.16 per share.

(Reporting by in Bengaluru; Editing by and Sai Sachin Ravikumar)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, November 06 2018. 22:02 IST