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(Bloomberg) -- Ralph Lauren Corp.’s comeback plan is showing signs of paying off, providing a tailwind to new Chief Executive Officer Patrice Louvet.
The New York company, known for its preppy fashion, posted earnings that easily beat analysts’ estimates in the first quarter -- a sign that efforts to combat discounting is making headway.
The results represent an early gift for Louvet, a Procter & Gamble Co. veteran who took the helm last month. He is tasked with continuing a turnaround effort at a brand hurt by a loss of prestige and heavy reliance on the troubled department-store industry. Ralph Lauren also has been closing its own retail locations as it copes with sluggish demand.
The shares rose as much as 6.2 percent to $83 in premarket trading after the report was released. The stock had fallen 13 percent this year through Monday’s close.
While same-store sales declined 6 percent, that was roughly in line with the 5.8 percent drop predicted by analysts, according to Consensus Metrix. Sales in the quarter were $1.35 billion, compared with the $1.34 billion average estimate.
Excluding some items, earnings amounted to $1.11 a share in the period, which ended July 1. Analysts projected 94 cents.
Louvet is working to revive sales and burnish the brand after years of heavy discounts robbed it of cachet. The turnaround effort has already been painful: The five-decade-old business has been closing retail locations, including its flagship Polo store on Fifth Avenue. And the previous CEO, Stefan Larsson, left the company after creative differences with its founder.
Louvet, a Frenchman who previously ran P&G’s beauty brands, has pledged to improve the digital and in-store experience at Ralph Lauren.
But the biggest challenge has been trying to get more customers to pay full price. In that arena, Ralph Lauren made progress last quarter. Its adjusted gross margin -- a key measure -- climbed to 63.2 percent from 62.1 percent.
Still, revenue continues to shrink as the company seeks to improve the “quality” of its sales. It’s expected to decline 8 percent to 9 percent this year, Ralph Lauren said on Tuesday.
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