Polo Ralph Lauren Home Decor
NEW YORK (MarketWatch) -- Polo Ralph Lauren Corp. said Wednesday that its second-quarter profit dropped 16%, hurt by acquisition-related items and increased discounts.
Citing macroeconomic concerns in the United States, the apparel company also lowered its full-year profit forecast.
Net income fell to $115.3 million, or $1.09 a share, exceeding analysts' estimates, from $137 million or $1.28, a year earlier. New York-based Polo RL,
Unseasonably warm weather hurt demand for colder-weather merchandise, prompting additional discounts, according to Polo. Against near-term U.S. economic concerns that led the company to lower its outlook, Polo said that international demand is strong and strategies remain on track, including unveiling the exclusive American Living apparel collection at J.C. Penney Co. JCP in February.
"The macroeconomic headwinds of the weak housing market and consumer-credit concerns, along with unseasonably warm weather this fall make us more cautious" about the United States this holiday season, President and Chief Operating Officer Roger Farah said. "Nothing about our strategy has changed. The high-end customer continues to spend."
Shares of Polo rose 2.5% to $68 in late-morning trading after retreating from an all-time high of $102.58 in July.
Polo lowered its full-year profit forecast to a range of $3.50 to $3.60 a share from a previous range of $3.64 to $3.74. Its trimmed outlook added it to the list of retailers including Nordstrom Inc. JWN,
Analysts, on average, estimated Polo would earn $1.03 a share in the second quarter and $3.71 a share for the year, according to Thomson Financial.
Wholesale sales surged 17% to $772 million, boosted by sales in Europe, demand for men's apparel and Chaps at Kohl's.
Retail sales increased 7% to $474 million with comparable-store sales rising 4.5%. RalphLauren.com sales surged 28%.
International opportunity
Polo is introducing American Living, following the launch of its Chaps collection at midpriced retailer Kohl's Corp. KSS,
In addition, Polo plans to introduce dresses and a high-end watch collection; it has acquired former Japanese and U.S. handbag licensees, following the previous purchases of licensees in Europe. Finally, Polo bought back the rest of Ralph Lauren Media that it didn't already own to expand its Internet sales.
"International is a big driver. Sales have picked up now that the weather has improved," said Needham & Co. analyst Christine Chen in an interview. She rates Polo a buy. "Their brand and business continue to be strong against their competitors," such as Jones Apparel Group Inc. JNY and Liz Claiborne Inc. LIZ
Acquisitions of the former Japanese sublicensee and a small leather-goods licensee in the United States, among others, hurt profit by $20 million during the quarter and expects to cut earnings by a total of $60 million on a pretax basis for the year, the company said.
Polo had 302 company-owned stores at the end of the quarter, about 10% of which was based overseas.
The company said that it wants the United States, Europe and Asia each to eventually account for about a third of sales. Last year, Europe was about 18% of sales, while Japan, its second-largest country by sales after the United States, represented 2%, Needham's Chen said.
"It's a huge opportunity," she added.
Source: https://www.marketwatch.com/story/polo-ralph-lauren-profit-drops-collars-outlook