Wednesday, February 9, 2011

Polo Ralph Lauren (RL) Smashes Estimates, Doubles Dividend, and Announces $250M Stock Buyback

Polo Ralph Lauren (RL) continued it's excellent earnings performance this morning, and showcases the high end is where it's at.  [Oct 8, 2010: No Recession in High(er) End]  On the U.S. front, within an increasingly bifurcated society almost all the actions of The Bernank flow to the top sliver of the economic demographic, [Nov 10, 2010: Who Will Any Form of Intermediate Term Wealth Effect Help? Not the Masses] and the increasing global consumption (especially in Asia) of high end 'aspirational brands' is benefiting the company as well. 

While we can wring our hands about the economic and policy decisions stateside, this is the reality on the ground and one has to invest accordingly... the high end (and low end in the States) is where the"growth" is as the middle classed slowly erodes.  RL has pricing power (to offset commodity inflation) and a global consumer who is far less affected by the economic cycle.  Period.

EPS was off the charts at $1.72 versus estimates of $1.29, and revenue beat a bit $1.5B v $1.46B.  This puts the company in line to print $6 of EPS for (fiscal) year end 2011 which for RL is March 2011.

Via Reuters:

  • Polo Ralph Lauren Corp (RL) posted a bigger-than-expected jump in quarterly profit on strong clothing sales over the holiday season and said its momentum should continue in the current quarter.
  • The upscale clothier and retailer, whose brands include Polo, Club Monaco and Chaps, reported double-digit percentage sales increases in every part of the business, including sales to department stores and sales at its high-end shops and outlets.  Polo also doubled its dividend.
  • Revenue from its wholesale business, which accounted for nearly half of overall sales and includes sales to chains such as Macy's Inc (M) and Nordstrom Inc (JWN) rose 21 percent. 
  • Sales at Polo's own stores open at least a year, or same-store sales, were up 15 percent.
  • Polo, which posted its fourth consecutive quarter of sales gains, has also succeeded in catering to "aspirational shoppers" who crave brand names but are on tighter budgets than luxury shoppers through its chain of outlets. Same-store sales at those locations rose 15 percent. 
  • Polo predicted its hot streak would continue in the current quarter, its last of the fiscal year, forecasting revenue for the full year will be up by a low double-digit percentage.
  • Polo said net income rose to $168.4 million, or $1.72 a share, in the fiscal third quarter ended Jan. 1, from $111.1 million, or $1.10 a share, a year earlier. That was far above the $1.29 analysts polled by Thomson Reuters I/B/E/S had expected. 
  • Net revenue rose 24 percent to $1.5 billion, also above Wall Street forecasts.
  • Gross margins grew by 40 basis points on a strong selling mix offset by inflation in the cost of goods sold.
  • sales increased 33% in the third quarter of Fiscal 2011.

RL now has a $12B market cap so $250M of stock buyback is not a big deal, but better than a sharp stick to the eye.
  • The company's board doubled the quarterly cash dividend to 20 cents a share and authorized an additional $250 million stock buyback program.

No position

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