Apparel maker Ralph Lauren Corp. (RL) reported Wednesday a profit for the third quarter that grew 28 percent from last year, reflecting improved margins and revenue growth. Earnings per share for the quarter topped analysts' expectations, while quarterly revenues matched their estimates.
The company also provided revenue growth guidance for the fourth quarter, below Street view, while trimming revenue growth forecast for the full-year 2013.
"The robust profit growth we achieved in the third quarter demonstrates the strength of our operating model. The relevance of our brand, product and merchandising strategies resulted in a strong holiday season for us, one that was characterized by continued momentum in the Americas and improved trends in Europe," President and Chief Operating Officer Roger Farah said in a statement.
The New York-based fashion company, whose brands include Polo, American Living, Chaps and Club Monaco, reported net income of $215.7 million or $2.31 per share for the third quarter, higher than $169 million or $1.78 per share in the prior-year quarter.
Excluding rugby-related impairment and restructuring charges, adjusted net income for the latest quarter was $224.0 million or $2.40 per share. On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $2.19 per share for the third quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter grew 2.2 percent or 2.8 percent in constant currency, to $1.85 billion from $1.81 billion in the same quarter last year, and matched eleven Wall Street analysts' consensus estimate of $1.85 billion.
Excluding the impact of discontinuing American Living and China store closures as well as the net negative foreign currency translation impact, net revenues grew 5 percent.
The company said the growth in revenues reflects continued strong retail segment expansion, partially offset by planned contraction in wholesale shipments. Comparable store sales increased 4 percent on both reported and constant currency basis, including an estimated 1 to 2 percent negative impact due to disruption caused by Super Storm Sandy.
Wholesale net sales declined 2.1 percent or 1.2 percent in constant currency, to $733.9 million, while retail net sales grew 5.6 percent or 5.9 percent in constant currency, to $1.06 billion from a year-ago quarter. Licensing revenues edged up 1.2 percent or 1.6 percent in constant currency to $50.2 million from last year's $49.6 million.
Operating margin for the quarter expanded 150 basis points to 16.5 percent, primarily due to a 220 basis points improvement in gross profit margin to 59.3 percent, partially offset by a 60 basis points increase in operating expense as a percentage of revenues.
Looking ahead to the fourth quarter, the company expects consolidated revenues to increase at a mid-single-digit percentage, while analysts currently expect revenues to grow 7.0 percent to $1.74 billion.
For fiscal 2013, the company now anticipates consolidated revenues to increase by about 2 percent, down from the prior growth expectation of 2 to 3 percent. Street is currently looking for full-year 2013 revenues of $7.03 billion.
RL closed Tuesday's regular trading session at $164.91, up $2.05 on a volume of 1.49 million shares.
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