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Shares of Polo Ralph Lauren Corp. hit a new 52-week high in intraday trading Wednesday, after the firm reported second-quarter profits that strongly outpaced analysts’ expectations despite the continuing cautiousness of consumers.
This story first appeared in the November 11, 2010 issue of WWD. Subscribe Today.
Shares of Polo closed at $108.28, up $7.36, or 7.3 percent, and had reached a new high for the past year of $109.28 in intraday trading.
The company also made a series of changes to its executive lineup, including the appointment of Mark Daley as president of Asia-Pacific.
For the three months ended Oct. 2, net income rose 15.6 percent to $205.2 million, or $2.09 a diluted share. That was 39 cents better than the earnings per share of $1.70 expected by Wall Street. Year-ago profits were $177.5 million, or $1.75.
Total revenues increased 11.5 percent to $1.53 billion from $1.37 billion, which included an 8.2 percent gain in wholesale sales to $826.8 million from $764.3 million. Retail sales escalated 17.1 percent to $658.8 million from $562.8 million as comparable-store sales gained 8 percent. Comps were up 1 percent at Ralph Lauren stores, 8 percent at factory stores, 10 percent at Club Monaco and 21 percent at ralphlauren.com.
“The customer is responding to the strength of our product offerings, our innovative and unique marketing and advertising platforms, and the exceptional experience and service we provide,” said Ralph Lauren, chairman and chief executive officer.
Roger Farah, president and chief operating officer, noted during the company’s conference call, “Our year-to-date results are a culmination of several years of consistent execution against our long-term objectives.”
Farah boasted that Polo’s teams “leveraged these investments to drive robust sell-throughs and deliver excellent profit margins that are yielding incremental market share opportunities” worldwide.
He said that while customers have indicated a greater willingness to spend, they’re still selective in what they buy and traffic trends remain inconsistent. The firm’s operational discipline and balanced contributions from all merchandise categories, channels and regions made a big contribution to the quarter’s results, Farah said. Despite macroeconomic and geopolitical uncertainty, the company is “encouraged by our current business momentum heading into the holiday season,” Farah told Wall Street.
He said on the call that much of the cost pressure, particularly with raw materials, will be felt for fall 2011. While the company hasn’t yet made any final decisions on pricing for the season, he emphasized the firm has brand strength and pricing power based on both its appeal and distribution.
Farah told WWD, “From fall to date, knits and sweaters in women’s have sold very well, with cashmere selling and fashion [items] selling. In men’s wear, it’s really the same, with knits and outerwear driving the business.”
He added, “When [our] customers see product they want to buy, they are spending. We are definitely seeing in the U.S. that people are paying down debt and savings are higher. Unemployment is higher than we’d like, but the customer is spending if they like the product, which was not true two years ago at the depths of the recession.”
The company said, due to stronger than expected second-quarter revenues, it now expects revenues for fiscal 2011 to increase by a low-double-digit percentage. For the third quarter, consolidated revenues are expected to rise at a high-teen percentage rate.
In executive changes, Daley, the new head of Asia-Pacific, will be charged with leading the company’s strategic growth plan and brand development in the region. Daley succeeds George Hrdina, who plans to retire after assisting with the transition.
Most recently, Daley was ceo of Dean & DeLuca for its U.S. and international markets. Before that, he was group president of worldwide operations and business development at DFS, a division of LVMH Moët Hennessy Louis Vuitton.
Daley will report to Jackwyn Nemerov, executive vice president of wholesale brands, licensed products, sourcing, merchandising, home and Asia-Pacific at Polo.
David Lauren, formerly senior vice president of advertising, marketing and corporate communications, has been promoted to executive vice president with responsibility for the same areas. He continues to report to Farah and Ralph Lauren.
Eric Korman, formerly president of Ticketmaster, has been named senior vice president of strategy and business development, a new post. He will support global businesses and oversee the development of new media, global customer loyalty and customer relationship management initiatives, database marketing and new business development. He will report to Farah and David Lauren.
Susie McCabe has been named president of Rugby Ralph Lauren. She succeeds Maurizio Donadi, who left the company. McCabe will be responsible for leading all aspects of global business strategies for Rugby, and will have direct responsibility for the U.S. business. She will also retain her duties as president of Polo’s Factory Store Concepts in the U.S.