Apparel maker Ralph Lauren Corp. (RL) reported Friday a profit for the second quarter that declined from last year, reflecting higher expenses and a revenue decline that more than offset higher margins. However, both earnings per share and quarterly revenues topped analysts' expectations.
The company also provided revenue growth guidance for the third quarter, below Street view, while trimming revenue growth forecast for the full-year 2012.
"I am proud of our better-than-expected second quarter and first half results. In the context of a more challenging operating environment, and on top of double-digit sales and profit gains in the prior two years, disciplined execution enabled us to strengthen the margin structure of our business once again," 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 $213.7 million or $2.29 per share for the second quarter, lower than $233.5 million or $2.46 per share in the prior-year quarter.
On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $2.15 per share for the second quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter declined 2.2 percent to $1.86 billion from $1.90 billion in the same quarter last year, but topped twelve Wall Street analysts' consensus estimate of $1.84 billion.
The company said the decline in revenues reflects planned contraction in wholesale shipments that was partially offset by continued retail segment expansion. Comparable store sales increased 3 percent or 5 percent in constant currency.
Wholesale net sales declined 8.1 percent or 5.3 percent in constant currency, to $914.5 million, while retail net sales grew 4.6 percent or 6.8 percent in constant currency, to $900.9 million from a year-ago quarter.
Operating margin for the quarter expanded 30 basis points to 18.7 percent, primarily due to lower input costs, beneficial channel mix and operational discipline that drove a 220 basis points improvement in gross profit margin to 58.8 percent, partially offset by a 190 basis points increase in operating expense as a percentage of revenues.
Looking ahead to the third quarter, the company expects consolidated revenues to increase at a low-single-digit, with analysts currently expecting revenues to grow 7.7 percent to $1.94 billion.
For fiscal 2012, the company now anticipates consolidated revenues to increase by 2 to 3 percent, down from the prior expectation of mid-single-digit percentage growth. Street is currently looking for full-year 2012 revenues of $7.16 billion.
"While we expect continued margin improvement in the back half of the year, macroeconomic conditions lead us to be incrementally more cautious on near-term customer demand trends worldwide," Farah added.
In Friday's regular trading session, RL is currently trading at $163.66, up $4.62 or 2.91% on a volume of 61,992 shares. In the past 52-week period, the stock has been trading in a range of $134.29 to $182.48.
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