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Shares of Polo Ralph Lauren Corp. jumped 11.9 percent Wednesday after the luxury goods firm said fourth-quarter profits rose 41.4 percent, beating Wall Street estimates by 35 cents.
The firm intends to rev up its accessories business in fiscal 2009, but steer clear of initiating retail partnerships, such as the one it has with J.C. Penney for the American Living brand, Roger Farah, president and chief operating officer, told WWD.
Boosted by strong international sales and the American Living launch, the firm said Wednesday that profits for the quarter ended March 29 increased to $103.5 million, or $1 a diluted share, from $73.2 million, or 68 cents, in the year-ago period.
Total revenues gained 20.3 percent to $1.24 billion from $1.03 billion. Revenues included a 21.5 percent increase in wholesale and retail sales to $1.19 billion from $975.1 million, with the balance from licensing income. By operation, wholesale volume increased 24.9 percent to $785.6 million, while retail sales rose 15.5 percent to $400 million. Total comparable-store sales rose 8.9 percent, which reflected a 5.6 percent comp gain at Ralph Lauren stores, a 10 percent increase at factory stores and a 12.5 percent rise at Club Monaco stores.
For the year, income rose 4.7 percent to $419.8 million, or $3.99 a diluted share, from $400.9 million, or $3.73, in the prior year. Total revenues were up 13.6 percent to $4.89 billion from $4.3 billion.
Shares of the company closed at $69.07 in trading Wednesday on the Big Board.
Ralph Lauren, chairman and chief executive officer, commented, “It is the spirit of entrepreneurship that keeps us nimble, allowing us to develop exciting products, retail formats and even entirely new brands on a global platform.”
In a phone interview, Farah said, “This is as difficult a market as I have seen,” adding he was confident that strong companies will “come out just fine.”
One of Polo’s long-term goals is to diversify its geographic revenue mix to the point where each of the three regions represent one-third of its income stream. Currently the U.S. represents 65 percent of branded sales and Europe 17 percent, while Asia and other international fronts bring in 18 percent.
“It’ll take some time” to achieve this balance, Farah said, “but I do believe that it will not be that far off. While the U.S. is still growing, the international markets are growing more quickly.”
Polo has been able to grow its European sales to nearly $1 billion from $200 million in volume several years ago when the company first began assuming direct control of the region. Following successful flagship openings in Paris and Moscow, the company is planning to open a store in Istanbul with a licensing partner in fall 2008.
For the balance of the fiscal year, the company’s in-house product development design and supply chain capability will be focused on handbags, not forming additional retail alliances.
“Having taken all the major categories back in-house, we can now begin to build our accessories with handbags, footwear and small leather goods. With Luxottica [eyewear] and Richemont [Ralph Lauren watches in spring 2009], we have the two best global partners, and we are now able to speak with one voice [in the] accessories [category],” said Farah.
In the past year, the company also saw much activity as it developed more than 40 product categories in a 575-door launch of the American Living brand at J.C. Penney. It’s an initiative from the firm’s Global Brand Concepts group. The company will add new American Living categories during fiscal 2009, and while the intent is to build more proprietary brands for retail partners, the firm isn’t planning on tackling any new projects in the current year, Farah said.
He gave much of the credit for Polo’s recent successes to the $1.9 billion it’s invested over the last five years in acquisitions, retail expansion, wholesale shop-in-shops and infrastructure upgrades. These investments have aided the company’s ability to push ahead with its three main goals: New merchandise and product development, expansion of direct-to-consumer business, and growth of international operations.
Polo said it continues to expect diluted earnings per share for fiscal year 2009 to be between $3.95 and $4.05.