New York–Polo Ralph Lauren Corporation said Wednesday it is planning “aggressive” growth of its business both in international markets and by selling direct to consumers, after its fourth quarter profit more than doubled.
“Our fourth quarter and full year results exceeded our expectations on virtually all operating metrics,” said Roger Farah, president and chief operating officer. “After generating more than $900 million in cash from operating activities last year, and with more than $1.2 billion in cash and investments on our balance sheet, we are planning an aggressive acceleration of our investment in our growth initiatives during fiscal 2011, particularly in international markets and with our direct to consumer efforts.”
Net income surged 153% to $114 million or $1.13 per share in the quarter, compared with $45 million or $0.44 per share, a year earlier. Excluding charges, last year’s profit would have been $87 million. Revenues rose 9% to $1.3 billion from $1.2 billion, with a 31% hike in retail sales partially offset by a 3% decline in wholesale revenues.
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Retail sales rose to $554 million from $422 million, helped by a 17% jump in same-store sales at the company’s freestanding stores worldwide. Ralph Lauren stores were up 17%, factory stores increased 9% and Club Monaco surged 29%. Online sales jumped 39% in the quarter.
But wholesale sales dropped to $736 million from $756 million as lower global apparel shipments were partially offset by higher footwear sales. Licensing royalties were flat at $47 million as higher domestic revenues were offset by a decline in international licensing revenues. During the year, profit rose 18.2% to $480 million or $4.73 per share, up from $406 million or $4.01 per share the year before.
“We achieved record earnings for the year in the context of the worst financial recession in my lifetime,” said chairman and ceo Ralph Lauren, adding that taking control of its Asian operations and opening several luxury stores in key global markets were notable achievements for the firm.
Since Polo counts some of the largest department store companies, ranging from Kohl’s, JCPenney to Neiman-Marcus and Saks Fifth AVenue, its results are often seen as a litmus testl
“The fourth-quarter dynamics suggest an inflection point in the marketplace,” Farah said during a conference call with analayts on Wednesday. Luxury consumers, he added, “are not spending at prerecessionary levels and can be focused on value, but they do recognize that product availability is limited, and there’s no price resistance on unique or novel items.”
Annual revenues fell 1% to $5.0 billion, which the company blamed on lower global wholesale shipment volumes that were partially offset by higher retail segment sales. Wholesale revenues for the year were down 8% to $2.5 billion, and licensing royalties fell 6% to $183 million. But retail sales were up 9% to $2.3 billion, helped by a 1% rise in same-store sales. Tight control of inventories led to reduced markdowns, and helped lift margins in both the wholesale and retail segments–leading to 720 basis points hike in fourth quarter gross profit rate of 59.0%. For the year, the rise was 380 basis points to 58.2%.
Looking ahead, the company expects consolidated revenues to increase at a low double digit rate. Wholesale revenues are seen rising at a low double digit rate in the first quarter and comparable store sales are projected to increase by a high single digit rate.