Ralph Lauren Corp. (NYSE: RL) reported fiscal second-quarter 2013 earnings this morning. The apparel company posted diluted earnings per share (EPS) of $2.29 on revenues of $1.86 billion. In the same period a year ago, the company reported adjusted EPS of $2.46 on revenues of $1.9 billion. First-quarter results compare to the Thomson Reuters consensus estimates for EPS of $2.15 and $1.84 billion in revenues.

Retail sales grew 5% in the quarter, but wholesale sales dipped 8% and licensing revenues fell 3% compared with the third quarter of 2011. Gross margins rose 2.2% to 58.8%.

The company’s president and COO said:

In the context of a more challenging operating environment, and on top of double-digit sales and profit gains in the prior two years, disciplined execution enabled us to strengthen the margin structure of our business once again. While we expect continued margin improvement in the back half of the year, macroeconomic conditions lead us to be incrementally more cautious on near-term customer demand trends worldwide.

The company updated its fiscal third-quarter and full-year 2013 outlook, slightly lowering the full-year revenue growth forecast from “mid-single-digit” growth to 2% to 3% growth. The outlook includes a 400 to 500 basis point negative impact from store closures and currency exchange impacts, among other things. Operating margins for 2013 are expected to rise by 0.5% year-over-year. The consensus estimate for the full year calls for EPS of $7.86 on revenues of $7.16 billion.

Ralph Lauren expects third-quarter revenue growth in the “low-single-digit” range, as a rise in retail sales is offset by a decline in wholesale sales. The forecast includes a 400 basis point negative impact from store closures and currency translation effects. The consensus estimates for the quarter call for EPS of $2.30 on revenue of $1.94 billion.

The stock price is down about 2% over the past 12 months, while competitor Michael Kors Holdings Ltd. (NYSE: KORS) is up more than 135% since coming public in mid-December of 2011. The recently announced acquisition of The Warnaco Group Inc. (NYSE: WRC) by PVH Corp. (NYSE: PVH) will put even more pressure on Lauren’s revenues.

Ralph Lauren’s shares are trading down about 0.5% this morning at $159.04 in a 52-week range of $134.29 to $182.48. The consensus target price for the shares was around $174.90 before today’s report.

Paul Ausick

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