Polo Reports 57% Increase in 1st Quarter Profit

New York–Polo Ralph Lauren Corp. reported a better-than-expected 57% increase in its first-quarter profit today, helped by increases in department store orders and growth at its Club Monaco chain.

Net revenue rose 13.5% to $1.12 billon, slightly below the $1.14 billion forecast by analysts. Sales at stores open at least a year rose 7%, driven by an 8% increase at outlets and a 25% jump at its lower-priced Club Monaco chain. Same-store sales fell 2% at Ralph Lauren stores.

The rise in revenues was also fueled by an 11% increases in wholesale sales of apparel and footwear to department stores such as Macy’s, Nordstrom, JCPenney and Kohl’s, which reached $523 million.

Roger Farah, coo, said the company would still investing in growing its business despite uncertainty over the strength of the global economy. While the company upped its full year guidance to the mid- to high- digits from its May projection of mid-single digits, it said it expects a lower second-half operation margin due to currency exchange rates, investment in its expansion and lower sales in Japan.

Gross margin increased 3.1 percentage points to a record high of 61.8%, also beating market analysts’ estimates, as the company controlled inventory and lowered sourcing costs.

Full Year Projections

Wholesale revenue is expected to grow at a low-single-digit rate, with comparable-store sales rising by a mid-single-digit rate. Operating margin is projected to be as much as 1.5 percentage points below that of the year-earlier period.

The company also increased its operating-margin outlook to a low-teens rate from its previous guidance of a low-double-digit rate. Profit for the year will include charges of as much as 10 cents a share tied to the company’s taking control of its South Korean business later this year.

“In spite of the company’s ‘heavy’ investment in establishing the infrastructure to run an ever-increasing global brand, the results support the notion that a well-run firm with quality products in all price spectrums is enough to leverage operating expenses and ring the earnings register,” said Wall Street Strategies analyst Brian Sozzi, who called the full year guidance “conservative—barring a mass consumer exodus globally.”

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