All the arrows pointed upward for Polo Ralph Lauren Corp. Wednesday.
This story first appeared in the February 10, 2011 issue of WWD. Subscribe Today.
The company said third-quarter profits and sales rose at a double-digit pace and raised its 2011 profit outlook, as well as its quarterly dividend and stock buyback authorization.
And by the time the trading day was over, Polo’s shares had hit an all-time high of $128.04 before closing at $125.35, up $9.58, or 8.3 percent.
“We are clearly picking up substantial market share in the United States and in Europe,” Roger Farah, president and chief operating officer, told Wall Street analysts during a conference call. “Simply put, we had a superb holiday season.”
In the three months ended Jan. 1, Polo’s net income rose 51.6 percent to $168.4 million, or $1.72 a diluted share, versus a profit of $111.1 million, or $1.10, in the year-ago quarter. The performance easily beat the consensus analyst estimate of $1.29 carried by Yahoo Finance.
Total revenues gained 24.4 percent to $1.55 billion from $1.24 billion. Wholesale sales rose 20.7 percent to $676.3 million as retail sales jumped 29.3 percent to $821.6 million. Comparable-store sales, including the reclassified Japanese concession shops, gained 15 percent. Comps were up 7 percent at Ralph Lauren stores, 15 percent at factory stores, 12 percent at Club Monaco stores and 33 percent at ralphlauren.com. Licensing income rose 3.7 percent to $50.1 million.
For the nine months, earnings rose 35.3 percent to $494.4 million, or $5.01 a diluted share, from $365.4 million, or $3.60, in the year-ago period. Total revenues grew 16.2 percent to $4.23 billion from $3.64 billion.
The outlook for the remainder of its fiscal year also improved, with the company saying it now expects operating margins for the full year to be flat versus its previous forecast of a decline of about 50 basis points, despite higher costs for raw materials.
Farah noted the company took direct control of its previously licensed South Korean operations on Jan. 1, as it has done with various components of its Asian distribution network since 2008, when it took over its former licensed Japanese operation.
He said the company will approach its Asian retail network much as it has its two Madison Avenue locations in New York and some of its key European flagships, with larger footprints and emphasis on premium product. It’s a strategy that will take several years to complete as the operations in Japan, South Korea and China “are each at different stages of development for us, and it takes time to understand the varying tastes and preferences of our customers throughout this region.”
The president noted specifically: “The Asian customer is driving a large part of the growth in the luxury market, both at home and abroad.”
Although conceding that recent price hikes for raw materials have been “extraordinary,” he said it was too early to tell what kind of price increases might be passed on to the consumer, although the firm’s “brand equity” gave him confidence that Polo would be able to boost prices in the second half, if needed.
Farah told WWD that the aspirational consumer is clearly back, but isn’t engaged in the “frothy spending of the prerecession days. When she likes something, she’s willing to buy.”
International tourists also have returned, and in force, helping to boost holiday sales. Much of the sales activity was driven by women purchasing for themselves. “What women were saying was they wanted something new, and if you gave them a reason to buy, [they’d] come out of hibernation,” Farah said.
Ralph Lauren, chairman and chief executive officer, said, “Our company is always looking to the future, innovating with new merchandise categories, creating exciting new shopping experiences and developing important new regions of the world.…I look forward to continuing to raise the bar on how we excite our customers and deliver returns for our shareholders.”
With that in mind, the company said Wednesday that it had doubled its quarterly cash dividend to 20 cents a share from 10 cents. Its board also added $250 million to its stock repurchase authorization plan for Class A common stock. Supplementing $469 million available from a previous buyback program, authorizations now total $719 million.