Ralph Lauren Q3 Profit Exceeds Expectations as Sales Rise 17%

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Pastel palette from Ralph Lauren's Spring 2012 runway

New York—Shares of Ralph Lauren Corp. surged 10% in early trading today after the company reported better-than-expected results for the holiday quarter, helped by growth in retail sales worldwide and a double-digit wholesale revenue growth in the and Europe.

For its third quarter ended Dec. 31, 2011, Ralph Lauren Corp. reported its profit edged up 0.4% to $169 million, or $1.78 a share from $168.4 million, or $1.72 a share reported in the previous year. Although only a small increase, the earnings beat analysts’ average estimate expecting $1.67 a share.

Net revenues increased 17% to $1.81 billion from $1.55 billion in the prior year, which also again exceeded analysts’ average estimate for $1.75 billion. Much of the growth came from the company’s own retail sales worldwide as well as double-digit wholesale increases in here and in Europe.

In its company stores, sales rose 22% to $1.0 billion from $822 million a year ago, reflecting the contributions from new stores, concession shops, and from newly transitioned South Korean operations. Comparable store sales increased 12%, reflecting a 31% increase at Ralph Lauren.com, 7% growth at Ralph Lauren stores, 9% expansion at factory outlet stores and 17% growth at Club Monaco stores.

Forecasts Consolidated Revenue to Rise 20%

Wholesale sales were up 11% to $750 million from $676.3 million a year ago. Revenue from licensing fell 1% to $50 million.

But gross margin continued to be under pressure as costs rise. The company said its gross margin fell 1.5 percentage points to 57.1%. However, the company said it now expects operating margin to be the same or just below last year, compared to its previous forecast for a 0.5% decline.

“We’ve navigated through unprecedented gross margin pressure and challenging macroeconomic conditions while simultaneously supporting our global brand development efforts and maintaining excellent profitability,” said Roger Farah, president/ceo. “We believe sustained, disciplined investment in our growth initiatives, particularly our global retail and infrastructure development, will continue to yield strong returns for our shareholders over the long term.”

Thanks to its stronger-than-expected third quarter, the company now expects consolidated revenues to increase by 20%, ahead of its previous expectation of high-teens-to-low 20% growth.


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