Polo Ralph Lauren CORP. has more than $1 billion in the bank — and now wants to spend some of it.

This story first appeared in the May 20, 2010 issue of WWD. Subscribe Today.

Roger Farah, president and chief operating officer, told analysts on a morning conference call to discuss the firm’s fourth-quarter and year-end earnings that, with “more than $1.2 billion in cash and investments,” the company is reinvesting in its businesses. In addition to ongoing stock buybacks and debt reduction, he noted, Polo is planning an “aggressive acceleration of our investment in growth in 2011” with international retail and e-commerce initiatives slated for specific attention.

Farah told analysts the firm is “seeing our core luxury customers returning to the stores with an openness to spend. While they are not spending at prerecession levels and they can be focused on value, they do recognize that product availability is limited and there is no price resistance on unique or novel items.…[The] rebound has been most pronounced in our women’s products.”

Farah told WWD that Polo’s men’s business has remained strong throughout the recession. “In a lot of recessions, men stop spending first and women continue to spend and then maybe cut back,” he said. “This time, men’s stayed strong, but the falloff was in women’s and accessories.”

While aspirational consumers have remained cautious, Farah said they, too, didn’t show much resistance to buying “unique and different items, as long as they are fairly priced.” Women’s purchases have shifted toward wear-to-work and away from casual and denim.

Commodity items, however, remain under price pressure.

While interest in fashion has been rebounding, retail discipline is not. Farah said stores’ desire for leaner inventories is an “operating discipline that could stay around for a while, maybe even remain permanent.” He cautioned that, with production mostly offshore involving requisite lead times, it might be “more difficult [for suppliers] to react as quickly as some stores would like. Retailers will need to learn what is realistic and what is not.”

His comments came as Polo said that, for the three months ended April 3, net income was $114.1 million, or $1.16 a diluted share, 52 cents ahead of analysts’ expectations for 64 cents, compared with profits of $44.5 million, or 45 cents, in the year-ago quarter. Excluding impairment and restructuring costs in the 2009 period, income last year would have been $87 million, or 86 cents a diluted share.

Revenues in the quarter rose 9.2 percent to $1.34 billion from $1.22 billion. Sales gained 9.5 percent to $1.29 billion from $1.18 billion, as retail sales jumped 31.4 percent to $554.3 million from $421.9 million, offsetting a 2.6 percent decline in wholesale sales to $736 million from $756 million. The retail gain includes a reclassification of Japanese concession shop sales to retail from wholesale and a 16 percent comparable-store sales gain at company stores.

By retail concept, comps rose 17 percent at Ralph Lauren stores, 9 percent at factory stores, 29 percent at Club Monaco stores and 39 percent at ralphlauren.com.

Additionally, licensing revenue ticked up to $46.8 million from $46.5 million a year ago.

Summarizing the quarter, Ralph Lauren, chairman and chief executive officer, said: “We successfully took control of our important Asian operations, we made great strides in the development of our accessories products and we opened several luxury stores in key global markets.”

For the year, income rose 18.1 percent to $479.5 million, or $4.73 a diluted share, from $406 million, or $4.01, a year ago. Revenues inched down 0.8 percent to $4.99 billion from $5.02 billion. The firm said for the first quarter of fiscal year 2011, it expects wholesale revenues to increase at a low-double-digit rate and comps to grow in the high-single digits.

On the day, shares rose $2.32, or 2.7 percent, to $88.10.

Meanwhile, on Wall Street Wednesday, the S&P Retail Index dipped 0.5 percent, or 2.22 points, to 441.99, as the Dow Jones Industrial Average retreated 0.6 percent, or 66.58 points, to 10,444.37.

European stocks weathered sharp declines as the market continued to grapple with the fallout of a sovereign debt crisis sparked by Greece’s ballooning deficit and reacted with alarm to Germany’s decision to ban naked short selling of certain stocks and bonds. The FTSE 100 fell 2.5 percent to 5,173.18 in London and the CAC 40 dropped 2.5 percent 3,526.80 in Paris.

Asian investors pushed the Hang Seng Index down 1.8 percent to 19,578.98 in Hong Kong as the Nikkei 225 slid 0.5 percent to 10,186.84 in Tokyo.

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