Ralph Lauren Corp.
) posted its third-quarter 2013 adjusted earnings of $2.40 per
share, jumping 34.8% from the comparable year-ago quarter and
surpassed the Zacks Consensus Estimate of $2.21 per share. The
year-over-year increase was primarily driven by a rise in sales,
improved margins and a lower tax rate.
Polo Ralph Lauren's total revenues inched up 2% year over year
to $1,846.1 million. Per the company, the year-over-year increase
was a result of improved retail segment results, which was
partially offset by its planned strategy to reduce wholesale
shipments. However, revenue lagged the Zacks Consensus Estimate
of $1,873.0 million.
Ralph Lauren's gross profit in the quarter grew 6% year over
year to $1,094.1 million, while the gross margin expanded 220
basis points (bps) to 59.3% due to lower input costs and benefits
coming from better product mix and operational efficiency.
Total operating expenses climbed 4% year over year to $789.7
million, mainly due to overall business expansion, increased
marketing and advertising expenses as well as incremental
investments in growth initiatives and infrastructure. As a
percentage of sales, operating expenses expanded 60 bps year over
year to 42.8%.
Ralph Lauren's operating profit increased 13% to $304.4
million. Moreover, its operating margin improved 150 bps to
16.5%, reflecting gross margin expansion, partially offset by
increased operating expenses as a percentage of sales.
Overall, in the third quarter,
revenue increased 6% to $1,062.0 million primarily due to an
improvement in comparable store sales, increased e-commerce
business and contribution from new stores, partially offset by
store closures at Greater China and weak sales at Asian
Driven by improved revenue along with efficient cost
management, the segment's operating income increased 4% to $201.2
million. However, operating margin contracted 30 bps to 18.9%.
However, excluding the impact of discontinuation of Rugby brand
operations, operating margin improved 60 basis points to
Due to the company's planned strategy of reducing wholesale
shipments and the negative impact from discontinuing American
Living operations, its
segment's revenue inched down 2% to $733.9 million. However,
operating income increased 29% to $144.9 million while operating
margin improved 470 bps to 19.7%, primarily driven by higher
gross margin, favorable product mix and better cost
revenue inched up 1% year over year to $50.2 billion on the back
of improved domestic licensing revenues. Consequently, the
operating income increased 3% to $37 million during the
Polo Ralph Lauren exited the quarter with cash and investments
of $1.4 billion compared with $1.3 billion in the year-ago
quarter. During the quarter, the company deployed $78.0 million
and $150.0 million toward capital expenditure and share
repurchases, respectively. Moreover, inventory levels increased
10% in the quarter to $981.0 million compared with $895.0 million
in the comparable period last year.
Polo Ralph Lauren expects net revenue in the fourth quarter to
increase by mid-single-digit percentage points, while
anticipating a flat wholesale sales growth and 8%-11% growth in
the retail sales segment. Moreover, the company now expects the
operating margin to expand in the range of 125-150 bps mainly due
to gross margin expansion, partially offset by a negative impact
from continued investment in long-term growth initiatives and
overall channel mix.
For fiscal 2013, the company expects net revenue to increase
by 2%, lower than its previously guided range of 2%-3%. However,
bolstered by better-than-expected improvement in operating
margin, the company now expects it to grow in the range 75-100
bps, up from its earlier guidance of 50 bps.
Other Stocks to Consider
Ralph Lauren currently holds a Zacks Rank #2 (Buy). Other
stocks in the same industry that are worth considering include
Abercrombie & Fitch Company
Michael Kors Holdings Limited
Joe's Jeans Inc.
). Abercrombie and Michael Kors hold a Zacks Rank #1 (Strong Buy)
while Joe's Jeans has a Zacks Rank #2 (Buy).
ABERCROMBIE (ANF): Free Stock Analysis Report
JOES JEANS INC (JOEZ): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
RALPH LAUREN CP (RL): Free Stock Analysis
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