Dive Brief:

• Ralph Lauren on Thursday reported that in the third quarter of fiscal 2018 revenue dropped 4% to $1.6 billion on a reported basis and by 6% in constant currency, with the biggest declines in North America, where revenue in the quarter fell 11% to $866 million, due to lower sales in retail and wholesale channels, according to a company press release.

• In Europe, however, revenue rose 8% to $378 million on a reported basis, while comparable store sales on a constant currency basis were down 8%. In Asia, revenue rose 7% on a reported and constant currency basis to $251 million and comparable store sales increased 3% in constant currency due to improved conversion and number of transactions, the company said.

• The company is continuing incremental progress on its Way Forward turnaround plan launched in 2016, notably showing direct-to-consumer network was up 4% over last year, discount rates were down and stores are getting upgrades. The retailer spent $27 million on restructuring efforts in the quarter and looking ahead at the whole fiscal year, it still expects revenue to be down between 8% and 10%.

Dive Insight:

For nearly two years now Ralph Lauren has been on a quest to improve its brand image — and recent earnings suggest it still has a long and winding path before it will make it to the top of the luxury mountain. The results come with a "mixed dose of optimism and pessimism," according to Neil Saunders, managing director of GlobalData Retail.

"The pessimism is from the continued slide in sales, which tumbled on both a total and comparable basis. More optimistically, the drop in sales is now flattening out, with some of the decline deliberately engineered as the company looks to rebuild its brand," he said in a statement emailed to Retail Dive.

While the company's financials continue to slide, Saunders notes that the move to pullback from department stores and reduce shipments to off-price channels is more intentional on the part of the retailer and is an essential step to rebuilding its brand equity, which has been tarnished over the years thanks to a highly promotional strategy that has also plagued luxury players like Michael Kors, Coach and others.

Over the quarter, CEO Patrice Louvet said in a statement that the company focused on the execution of key initiatives, namely lower discounting and improving the quality of sales. "There is still a lot of work to be done to return to industry-leading revenue and earnings growth, but these results give us confidence that we are on the right track," she said.

Ralph Lauren is also making a pivot toward digital marketing by investing in social media campaigns like the Create-Your-Own Customization feature and the Polo Teddy Bear holiday campaign. Earlier this month, the company announced several senior appointments to help expand its digital presence globally, including the creation of a chief digital officer role, which will be led by former Burberry exec Alice Delahunt.

In a statement emailed to Retail Dive, Mike Zuccaro, Moody's Investors Service assistant vice president and apparel analyst, said the company's financial position "is strong, with over $2 billion of balance sheet cash and positive free cash flow, with $589 million of balance sheet debt." And while it's gaining traction with its Way Forward plan, the company's revenue is likely to continue to take a hit.

"There is still a ways to go in its multi-year restructuring plan, as the impacts of exited business lines, inventory reductions and pricing changes will continue to impact results," Zuccaro said.