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The Polo Recipe for Profits

Polo Ralph Lauren Corp.'s ability to innovate, create new brand strategies and extend existing brands not only resonates well with consumers, the firm's strategies also pay off with robust top- and bottom-line growth.

Polo Ralph Lauren Corp.’s ability to innovate, create new brand strategies and extend existing brands not only resonates well with consumers, the firm’s strategies also pay off with robust top- and bottom-line growth.

Delivering consistent profit growth — while maintaining operating costs and keeping debt in check — is also something that goes down well with investors.

As a result, Polo Ralph Lauren stock was one of the top performers in the sector for 2006, gaining 40 percent over the course of the year. The stock closed the last day of trading in 2006 at $77.66, which compares with the year’s opening price of $55.58.

The stock set a 52-week high on Dec. 7 of $83.15. Its 52-week low was set in July at $45.65. The group’s market capitalization is $8.3 billion.

Behind the top performance of the stock is total revenue that has gained 41 percent over the past three years to $3.75 billion. And since fiscal year 2004, the annual gross margin rate has jumped over 400 basis points. As a result, the company’s operating income rose from $274 million for the fiscal year ended April 2004 to $517 million for the annual period ended April 2006.

On its balance sheet for its most recently reported fiscal year, the company recorded no long-term debt, which compares with $277.3 million in the period ended April 2004. And over the past three years, total assets of the company have grown to $3 billion from $2.3 billion.