Polo Ralph Lauren Derives 34% of Stock Value from Factory Stores

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Polo Ralph Lauren ( RL ) is a leading American luxury lifestyle company that specializes in high-end apparel for men and women as well as accessories, fragrance and home decor.  The company competes with other premium apparel and accessories players like Coach ( COH ), Liz Claiborne ( LIZ ) and Ann ( ANN ).

We currently have a $111 price estimate for Polo Ralph Lauren's stock , about 10% below market price. We estimate that the company derives a little over 34% of its value from Ralph Lauren factory stores, making this the single largest business division for the firm.

About Ralph Lauren Factory Stores

Ralph Lauren factory stores in the U.S., Europe and Japan offer selections of men's wear, women's wear, children's apparel, accessories, home furnishings and fragrances. The company also sells excess and out-of-season products through its factory stores.

Factory stores cater primarily to value-conscious customers.

Key Drivers of Factors Stores Profitability

1. Revenue per Square Foot of Factory Stores

2. Number of Ralph Lauren Factory Stores

3. Ralph Lauren Factory Stores EBITDA Margin

Below we highlight each of these key drivers in greater detail.

1.  Revenue per Square Foot of Factory Stores

Revenue per square foot at Ralph Lauren factory stores has increased from $743 in 2005 to about $1,020 in 2010, an annual growth rate of 6.5% due in part to a sharp rise in 2010. We anticipate continued annual growth at a high single digit rate. See more …

2.  Number of Ralph Lauren Factory Stores

The number of Ralph Lauren factory stores has increased from 144 in 2005 to 192 in 2010 with new stores added in North America, Asia Pacific and Europe.

Going forward, we anticipate that the number of Ralph Lauren factory stores will continue its growth trend towards 250 by the end of our forecast period. See more…

3. Ralph Lauren Factory Stores EBITDA Margin

EBITDA margin for Ralph Lauren factory stores decreased from about 15% in 2006 to 12% in 2008 before recovering towards 16% in 2010. We estimate roughly flat EBITDA margin for Ralph Lauren factory stores EBITDA going forward. See more…

See our complete analysis of Polo Ralph Lauren stock here



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: ANN , COH , LIZ , RL

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