For the last three fiscal years, the well-known, highly reputable fashion designer Polo Ralph Lauren (NYSE:RL) has produced steady growth through its international expansion, innovative designs, brand development, and successful marketing campaigns. The company now operates 11 luxury brands featuring men's and women's apparel, accessories, home and lifestyle products, and fragrance collections. Lately, Ralph Lauren has made several key investments, hoping they pay off for the company in the long-run. Tomorrow the company will announce its Q2 fiscal 2014 results to the public. Will investors see positive results like the prior quarter or be disappointed with the company's latest projects/endeavors?
Ralph Lauren's past performance
So far in its Fiscal Year ending in 2014, Ralph Lauren has experienced "better than expected" results. However, this hasn't always been the case. For instance, Q2 fiscal 2013 results for net income decreased 2% year over year and net revenue declined 8% compared to the same period a year prior while retail sales increased by just 5%.
On a more positive note, Q1 fiscal 2014 results proved more promising as net revenues increased by 4% to $1.7 billion from $1.63 billion from Q1 fiscal 2013. It actually would have been higher by 6% were it not for adverse effects of currency translations. Capital expenditures also increased for the company from $62 million to $66 million which should not be surprising since they are still focused on growing their brand. Unfortunately, net income was down again from $193 million in Q1 fiscal 2013 to $181 million in Q1 fiscal 2014, a decrease of 7%, lowering the amount per diluted share from $2.03 to $1.94 .
How does Ralph Lauren compare against Coach and Michael Kors?
Ralph Lauren expects to pull off another "better than expected" quarter when results for the period are announced tomorrow. However, the company does not expect to do as well as its competitor Michael Kors Holdings (NYSE:CPRI), which reported its Q2 fiscal 2014 earnings earlier today. Thankfully for Ralph Lauren investors, it does have the potential of doing better than Coach (NYSE:TPR) which recently posted extremely disappointing results. Although Coach is still posting sizable revenues, its sales have stalled, leaving investors to wonder if the high-end, luxury fashion designer has lost its momentum due to the pressure of Michael Kors and whether it will regain its strength once it broadens its brand to include apparel, jewelry, and more along with a full-scale international expansion. Ralph Lauren may be able to compete with Michael Kors in the future once its investments in distribution, growing Chaps brand, and marketing campaigns pay off, but as for now, Michael Kors is on fire, announcing today that its retail net sales increased by 46.8% due to an increase of 22.9% in comparable same-store sales from Q2 fiscal results the previous year . These figures are not only impressive, but tough to beat.
Ralph Lauren, perhaps due to its size, has its expectations set much lower. At tomorrow's announcement, Ralph Lauren hopes net revenues increase 4%-7% with retail net sales also increasing in the single digits. The company is more focused on its newest innovative designs and Fall accessories that it expects to sell a lot of during the holiday season. In addition, Ralph Lauren is strategically planning its next move with new store openings overseas.
Should Investors be hopeful or nervous?
Investors should expect Ralph Lauren to report variable results among the different segments. Most likely, the company's Q2 fiscal 2014 results will be positive in some categories, but weaker in others with overall growth falling in the mid-single digit range. Foolish investors should not expect Ralph Lauren to do nearly as well as Michael Kors, but they should thank their lucky stars they are not in the same boat as Coach. As always Foolish investors should do their own research before making any decisions.