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Polo Pounds Wall Street Estimates

Polo's income vaulted 298.5 percent to $50.7 million in the quarter ended July 2, as sales rose 24.1 percent to $751.7 million.

NEW YORK — Thanks to strong brand momentum in the market, Polo Ralph Lauren’s first-quarter earnings of 48 cents a share leapt far ahead of Wall Street analysts’ estimates, which pegged EPS at 36 cents.

For the three months ended July 2, income skyrocketed 298.5 percent to $50.7 million, or 48 cents a diluted share, from $12.7 million, or 12 cents, in the year-ago quarter. Total revenues in the period rose 24.1 percent to $751.9 million from $606 million.

Included in the revenues mix were a 41.1 percent jump in wholesale sales, to $337.2 million from $239 million, and a 15.3 percent increase in retail sales, to $357.4 million from $310 million. Same-store sales rose 7.3 percent, driven mostly by improved sell-throughs at full price. Comps rose by 7.1 percent at Ralph Lauren stores, 6.5 percent in its factory stores and 12.6 at Club Monaco stores. Ralph Lauren Media revenues rose 22 percent. Licensing revenues inched up 0.7 percent to $57.3 million from $56.9 million.

“We continue to be excited by the strong customer response to our brand and its growing appeal,” said Ralph Lauren, chairman and chief executive officer, in a statement.

The ceo added, “One of the keys to our success is that we are not about a season or a fashion moment. We are unique in our industry. The breadth and depth of our brands across all product categories distributed through multiple channels and in multiple geographies show the strength of our business.”

The firm guided the second-quarter fiscal 2006 outlook to the low-double digits for revenue growth, reflecting high-single-digit growth in wholesale sales, midteen growth in retail sales and licensing royalty flat with last year’s. For the half, consolidated revenue growth is projected to be in the midsingle-digit range, reflecting a slight decline in wholesale sales, and the company expects low-double-digit growth in retail sales and licensing royalty flat with last year’s.

“We had a fantastic quarter,” boasted Roger Farah, president and chief operating officer, in a telephone interview.

Farah was highlighting the company’s retail comps gain of 7.3 percent on top of the strong comps in the year-ago quarter, which rose 12.6 percent. Operating profit for the wholesale business was $46 million, up from a loss of $2.6 million last year.

Polo’s retail and wholesale components are fairly evenly divided.

“As far as retail versus wholesale, the two are running neck and neck. We’re not arbitrarily making one bigger than the other. Owning the kids’ operation helped out our retail business,” Farah said.

As for Club Monaco, several analysts at equity firms on the buy side have speculated that the specialty chain might be put on the auction block. Farah said the firm “is not looking at selling it.” During a conference call with analysts, Farah said the focus is to “grow the business and grow it profitably.”

The company is focusing some of its energies on expansion of the Rugby concept, which so far has three stores. A new Rugby store will open in the fall in New York City, followed by one in New Canaan, Conn. An aggressive rollout of the stores is expected in fiscal year 2007, Farah told analysts during the conference call. While the company is still scouting sites near college campuses, Farah didn’t rule out the possibility of expanding into malls.

Farah also said the firm will be busy with its Chaps lines at Kohl’s. “They are pushing us like mad to be aggressive. We think women’s and kids, which will be the next categories launched by us in spring, are categories that [Kohl’s] should be very, very successful with,” Farah said.

The early read on fall sales, particularly in women’s, seems promising, said Farah, thanks to the “Wear Now” strategy of using fabrications appropriately weighted for the selling season and waiting until much later to ship product featuring “heavy, tweedy weights.”