Bloomberg News

Ralph Lauren Profit Tops Estimates on Department-Store Sales

February 05, 2014

Ralph Lauren Corp. (RL:US), the retailer of its namesake brand clothing, posted fiscal third-quarter profit that surpassed analysts’ estimates as demand from North American department stores boosted sales.

Net income in the three months ended Dec. 28 climbed 9.7 percent to about $237 million, or $2.57 a share, from about $216 million, or $2.31, a year earlier, the New York-based company said today in a statement. The average of 18 analysts’ estimates (RL:US) compiled by Bloomberg was $2.51.

Ralph Lauren has been expanding lines of luxury handbags, watches and fine jewelry to broaden its brand beyond polo shirts and casual wear. Revenue increased 9.2 percent to $2.02 billion in the quarter, helped by an approximately 14 percent increase in sales to other retailers such as Macy’s Inc. Analysts estimated $2.01 billion on average.

“In difficult times, people go back and trust brands that have quality and heritage and you feel safe making the purchase,” Marie Driscoll, founder of Driscoll Advisors, a New York-based retail consulting firm, said in a telephone interview. “They are great brand strategists and they have great product across the spectrum. There is something for everyone.”

Ralph Lauren fell 3.5 percent to $148.71 at the close in New York. The shares (RL:US) have dropped 16 percent this year, compared with a 5.2 percent decline for the Standard & Poor’s 500 Index.

Sales Forecast

Revenue in the year through March will increase 7 percent, the high end of its previous forecast (RL:US), Ralph Lauren said. The company said it is continuing to expand into new categories and is introducing a Polo line for women later this year. It also is expanding its Ricky handbag line, President Jackwyn Nemerov said on a conference call with analysts and investors.

Sales at its own stores in the quarter gained about 6.4 percent to $1.13 billion, Ralph Lauren said. Excluding the effect of foreign-currency exchange-rate fluctuations, sales at stores open at least a year rose 2 percent, the company said.

Revenue in fiscal 2015 will rise at a high single-digit percentage rate, Chief Financial Officer Chris Peterson said on the call. The momentum will be sustained by Ralph Lauren’s planned new flagship stores, e-commerce operations and new products, he said.

Nemerov on the call credited market-share gains in North America for the better-than-expected quarter that defied a tough environment for apparel retailers. Those chains will post a 1 percent gain in holiday quarter sales at stores open at least a year, compared with a 4 percent advance a year earlier, according to analysts’ estimates compiled by researcher Retail Metrics Inc.

‘Solid Quarter’

Ralph Lauren produced “a solid quarter in a shaky retail backdrop,” Michael Binetti, an analyst with UBS AG in New York, wrote in a note to clients today. He recommends buying the shares.

Michael Kors Holdings Ltd. (KORS:US), another luxury-goods seller, yesterday reported a 60 percent jump in holiday-quarter revenue and boosted its full-year profit and sales forecasts.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • RL
    (Ralph Lauren Corp)
    • $169.77 USD
    • 0.50
    • 0.29%
  • KORS
    (Michael Kors Holdings Ltd)
    • $82.64 USD
    • 0.91
    • 1.1%
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