NEW YORK — For Ralph Lauren Corp., the focus is on retail, whether domestically, overseas in Asia, or in a newer market in Brazil.
This story first appeared in the May 24, 2013 issue of WWD. Subscribe Today.
The company is gearing up to roll out Polo stores worldwide, and is contemplating adding a women’s component to the brand. The firm is also planning on opening stores in Brazil in 2014.
News of the planned rollout was disclosed during the firm’s conference call to Wall Street analysts following Ralph Lauren’s report of fourth-quarter and full-year results.
The company on Thursday reported a 34.7 percent jump in fourth-quarter profits, beating Wall Street’s estimates.
For the three months ended March 30, net income rose to $127.2 million, or $1.37 a diluted share, from $94.4 million, or 99 cents, last year. Lauren beat Wall Street’s consensus estimate by 7 cents. Total revenues gained 1.3 percent to $1.64 billion from $1.62 billion, which included a 1.3 percent increase in net sales to $1.6 billion from $1.58 billion. Included in net sales is a 3.9 percent decline in wholesale net sales to $795.8 million and a 7 percent gain in retail net sales to $804.4 million. Consolidated comparable-store sales rose 3 percent. The balance in net revenues was from licensing income.
For the year, net income rose 10.1 percent to $750 million, or $8 a diluted share, from $681 million, or $7.13, on a 1.2 percent gain in net revenues to $6.94 billion. Net revenues included a 1.3 percent rise in net sales to $6.76 billion.
Ralph Lauren, chairman and chief executive officer, said, “Our relentless focus on innovation and our commitment to superior craftsmanship continued to build our global customer base. We have an exciting next few years ahead of us, especially as we grow our global store network and e-commerce platforms to showcase the full scope of our brand portfolio and lifestyle sensibilities.”
Roger Farah, president and chief operating officer, told analysts during the call, “We are confident we have the right strategies and teams to execute our goals, and with $1.4 billion in cash and investments on our balance sheet, we certainly have the means to fund our strategies. Those of you familiar with our company understand that our consistent reinvestment back in the business has been an important driver of sales and profit performance.”
He spoke about the firm’s multiyear strategy to grow the brand presence in Asia and the initiatives to enhance the firm’s global e-commerce capabilities.
During the call, Christopher H. Peterson, chief financial officer, spoke about the plan to roll out Polo branded stores, which currently sell men’s apparel and accessories. The first Polo store was opened recently in East Hampton, N.Y., and a second one is set to open at The Mall at Short Hills in New Jersey in September. The rollout is still in the early stages, he said.
Peterson also said that the store concept will “likely become the primary platform by which the brand is distributed in certain international markets such as Asia and parts of Latin America, where the wholesale channel is less developed.”
In a telephone interview, Farah said, “There are serious discussions between Ralph and the design team” to expand Polo into the women’s category. It wasn’t immediately clear whether it would be a new line or something that would incorporate the current Blue Label collection.
The company earlier this month disclosed that it signed a lease for a 35,000-square-foot store at 711 Fifth Avenue here, between 55th and 56th Streets. Farah said that the store site will be home to the Polo flagship, set to open around fall 2014. The ground floor will house men’s, the second floor is earmarked for women’s and the third floor for children’s. There’s also a side entrance to a bar that leads to the restaurant on the lower level.
With the increased focus on retail — Ralph Lauren, Denim & Supply and Polo — plus e-commerce, Farah said direct selling accounts for 52 percent of the business, compared with 40 percent five years ago. “This trend is moving. E-commerce keeps growing, [while] most of Asia and South America is direct-to-consumer,” he said.
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Farah also noted, “The flip side is that wholesale is very strong, but the megatrends are changing the mix of our company over time.”
While Asia continues to grab the lion’s share of the company’s focus and capital, Farah said there are “small opportunities [that are] not insignificant. One we think is Brazil.”
He said the company has for years sold in South America through licensing relationships, but now is planning for the launch of company-owned stores — its current model overseas — in Brazil in 2014. That will serve as the expansion of the brand into South America.