Ralph Lauren Beats on EPS - Analyst Blog
06 February 2013 - 9:49PM
Zacks
Ralph Lauren Corp. (RL) posted its
third-quarter 2013 adjusted earnings of $2.40 per share, jumping
34.8% from the comparable year-ago quarter and surpassed the Zacks
Consensus Estimate of $2.21 per share. The year-over-year increase
was primarily driven by a rise in sales, improved margins and a
lower tax rate.
Quarterly Details
Polo Ralph Lauren's total revenues inched up 2% year over year
to $1,846.1 million. Per the company, the year-over-year increase
was a result of improved retail segment results, which was
partially offset by its planned strategy to reduce wholesale
shipments. However, revenue lagged the Zacks Consensus Estimate of
$1,873.0 million.
Ralph Lauren's gross profit in the quarter grew 6% year over
year to $1,094.1 million, while the gross margin expanded 220 basis
points (bps) to 59.3% due to lower input costs and benefits coming
from better product mix and operational efficiency.
Total operating expenses climbed 4% year over year to $789.7
million, mainly due to overall business expansion, increased
marketing and advertising expenses as well as incremental
investments in growth initiatives and infrastructure. As a
percentage of sales, operating expenses expanded 60 bps year over
year to 42.8%.
Ralph Lauren's operating profit increased 13% to $304.4 million.
Moreover, its operating margin improved 150 bps to 16.5%,
reflecting gross margin expansion, partially offset by increased
operating expenses as a percentage of sales.
Segment-Wise
Overall, in the third quarter, Retail
revenue increased 6% to $1,062.0 million primarily due to an
improvement in comparable store sales, increased e-commerce
business and contribution from new stores, partially offset by
store closures at Greater China and weak sales at Asian concession
shops.
Driven by improved revenue along with efficient cost management,
the segment’s operating income increased 4% to $201.2 million.
However, operating margin contracted 30 bps to 18.9%. However,
excluding the impact of discontinuation of Rugby brand operations,
operating margin improved 60 basis points to 19.8%
Due to the company’s planned strategy of reducing wholesale
shipments and the negative impact from discontinuing American
Living operations, its Wholesale
segment’s revenue inched down 2% to $733.9 million. However,
operating income increased 29% to $144.9 million while operating
margin improved 470 bps to 19.7%, primarily driven by higher gross
margin, favorable product mix and better cost efficiency.
The company’s Licensing revenue inched
up 1% year over year to $50.2 billion on the back of improved
domestic licensing revenues. Consequently, the operating income
increased 3% to $37 million during the quarter.
Balance Sheet
Polo Ralph Lauren exited the quarter with cash and investments
of $1.4 billion compared with $1.3 billion in the year-ago quarter.
During the quarter, the company deployed $78.0 million and $150.0
million toward capital expenditure and share repurchases,
respectively. Moreover, inventory levels increased 10% in the
quarter to $981.0 million compared with $895.0 million in the
comparable period last year.
Guidance
Polo Ralph Lauren expects net revenue in the fourth quarter to
increase by mid-single-digit percentage points, while anticipating
a flat wholesale sales growth and 8%–11% growth in the retail sales
segment. Moreover, the company now expects the operating margin to
expand in the range of 125–150 bps mainly due to gross margin
expansion, partially offset by a negative impact from continued
investment in long-term growth initiatives and overall channel
mix.
For fiscal 2013, the company expects net revenue to increase by
2%, lower than its previously guided range of 2%–3%. However,
bolstered by better-than-expected improvement in operating margin,
the company now expects it to grow in the range 75–100 bps, up from
its earlier guidance of 50 bps.
Other Stocks to Consider
Ralph Lauren currently holds a Zacks Rank #2 (Buy). Other stocks
in the same industry that are worth considering include
Abercrombie & Fitch Company (ANF),
Michael Kors Holdings Limited (KORS) and
Joe’s Jeans Inc. (JOEZ). Abercrombie and Michael
Kors hold a Zacks Rank #1 (Strong Buy) while Joe’s Jeans has a
Zacks Rank #2 (Buy).
ABERCROMBIE (ANF): Free Stock Analysis Report
JOES JEANS INC (JOEZ): Free Stock Analysis Report
MICHAEL KORS (KORS): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis Report
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