Executive Summary

• Ralph Lauren reported 3Q16 EPS of $2.27 (ex-items) versus consensus of $2.13.
• Total revenues were down 4% in the quarter, to $1.90 billion, versus consensus of $2.03 billion. The decrease was driven by weakness in the North American business, which declined by 4% due to unseasonably warm weather throughout the quarter, a drop in tourist traffic and product assortment challenges in the Lauren brand.
• Management provided 4Q guidance that calls for a 2% decline in revenues versus the consensus estimate of a 4% increase. Operating margins are expected to fall by 400–450basis points versus the prior year period due to excess inventory the company will need to clear as well as infrastructure investments and negative foreign exchange impacts.
• Results, particularly in terms of sales, were disappointing in the period. New CEO Stefan Larsson is conducting a thorough review of each business to understand where both the opportunities and inefficiencies are. The company plans to lay out a more detailed plan about its future strategy next quarter.