Ralph Lauren Posts “Solid” Profit in “Shaky” Retail

RLNew York—Seemingly immune to pressures many other fashion companies have reported so far this season, Ralph Lauren Corp. today said its third quarter profit rose beyond expectations as its retail and wholesales sales increased.

For the quarter ended Dec. 28, Ralph Lauren posted a 9.7% increase in its net profit to $237 million, or $2.57 a share, compared with $216 million, or $2.31 a share, a year ago.

That was better than the $2.51 a share estimate analysts had predicted.

Net revenue rose 9.2% to $2.01 billion helped by a 15% increase in its wholesale sales. Analysts have expected $2.02 billion in sales.

Retail sales were up 6% to $1.13 billion helped by the newly transitioned operations in Australia and New Zealand. Comp store sales were up 1% (or 2% excluding currency fluctuations).

‘Insulated’ from Pressures?

Operating expenses rose 6%, reflecting overall business expansion and continued investment, the company said.

“We’ve accomplished a lot in the first nine months of the year,” said Ralph Lauren, chairman/ceo. “The accelerated revenue and profit growth we achieved this quarter across all markets is a tribute to the enduring strength and global appeal of the World of Ralph Lauren. Momentum was strong across our diverse brand portfolio that includes the pinnacle of luxury with Ralph Lauren Collection and Purple Label, as well as Polo, Denim & Supply, Chaps and Club Monaco. We are excited to build on that momentum by continuing to expand in new categories, like our growing accessories business, and launching women’s Polo, which will be heralded into the market when we open our Fifth Avenue Polo flagship in New York later this year.”

Licensing revenues of $45 million were 12% last year as higher licensing revenues for Ralph Lauren products were more than offset by lower Chaps and Australia/New Zealand licensing revenues due to recent license take-backs.

Ralph Lauren’s widening assortment of brands and its longevity has helped distinguish the company, analysts said.

“In difficult times, people go back and trust brands that have quality and heritage and you feel safe making the purchase,” Marie Driscoll of Driscoll Advisors. “They are great brand strategists and they have great product across the spectrum. There is something for everyone.”

Ralph Lauren “produced a solid quarter in a shaky retail backdrop,” said Michael Binetti, an analyst with UBS AG.

“The brand’s higher price points and general appeal to more affluent shoppers has insulated it from some of the pressures that affected more commoditized brands,” Moody’s senior credit officer Scott Tuhy said.

Looking ahead, Ralph Lauren forecast that its fourth quarter sales would rise between 10% to 12% or about $1.81 billion to $1.84 billion. Analysts’ estimate expects $1.81 billion.

For its full fiscal year, sales are expected to increase 7% up from the company’s prior forecast for a 5% to 7% increase. But in a conference call with analysts, the company warned that its operating margin would be pressure, about 110 to 120 basic points lower.

In other action, the company’s board of directors approved a new $500 million stock buyback for a total repurchase program of $730 million.

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com