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Earnings per share for the latest quarter grew 11%, and significantly topped analysts' expectations, while quarterly revenues declined 6%, but came in above consensus estimate.
The company also raised its sales expectations by projecting a lower decline in revenues from the prior forecast, citing better-than-expected revenue performance for the first six months.
In a statement, chairman and chief executive officer, Ralph Lauren said, "We continue to invest in our competitive advantages in design and marketing and to grow our presence around the world, which is helping to mitigate sustained market challenges. We are operating today as a leaner, stronger organization than ever before, even as our long-term growth prospects remain compelling."
Second Quarter Results
The New York-based fashion company, whose brands include Polo, American Living, Chaps and Club Monaco, reported net income of $177.5 million or $1.75 per share for the second quarter, lower than $161.0 million or $1.58 per share in the prior-year quarter.
On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $1.31 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter declined 4% to $1.37 billion from $1.43 billion in the same quarter last year, but topped eleven Wall Street analysts' consensus estimate of $1.31 billion.
The company attributed the decline in net revenues primarily to lower same-store sales at retail segment, a decline in domestic wholesale sales and about 1% net unfavorable effect of foreign currency translation. These were partially offset by higher wholesale revenues as the company gained direct control of childrenswear and golf apparel in Japan.
Segmental Details
Wholesale net sales for the second quarter decreased 4% to $814.6 million from $846.2 million in the year-ago quarter, hurt by lower global shipment volumes and the unfavorable effect of foreign currency translation, partially offset by higher international wholesale revenues primarily in Japan. Segment operating income rose to $220.7 million from $211.7 million last year.
Retail net sales for the quarter totaled $512.5 million, down 3% from $530.6 million the prior-year quarter, hurt by lower same-store sales and the unfavorable effect of foreign currency translation. Same-store sales declined 6%, reflecting a 18% fall at Ralph Lauren stores, 4% drop at factory stores and a 3% decline at Club Monaco stores. RalphLauren.com sales increased 12% during the quarter. Retail operating income grew to $63.5 million from $57.4 million a year ago.
Licensing revenues declined 10% to $47.1 million year-over-year from $52.1 million, reflecting a decline in Japanese product licensing revenues and lower fragrance and home product licensing revenues, partially offset by higher Chaps licensing royalties. Licensing operating income decreased to $23.5 million from $26.8 million last year.
Other Metrics
Operating income for the third quarter edged up to $245.9 million from $242.9 million in the prior-year quarter, while operating margin was 17.9%, up 90 basis points from the same quarter last year.
Total operating expenses for the quarter were $538.9 million, down 1% from $545.3 million in the year-ago quarter. Gross profit decreased to $784.8 million from $788.2 million in the same quarter last year, while gross profit margin increased 190 basis points to 57.1% from last year's 55.2%.
Tax rate for the second quarter was 750 basis points lower at 26.7%,due to the resolution of certain discrete tax items and a more favorable geographic income mix.
During the second quarter, the company opened five directly operated stores and closed two directly operated stores. At the end of the second quarter, the company operated 328 stores, remaining flat with last year.
Half Yearly Highlights
For the first six months, the company reported net income of $254.3 million or $2.51 per share, compared to $256.2 million or $2.51 per share in the prior-year period.
Net revenues for the year-to-date period declined to $2.40 billion from $2.54 billion in the same period last year.
Outlook
"Our results have exceeded our expectations for the first half of the year, reflecting market share gains across products and regions and disciplined operational management," said Roger Farah, President and Chief Operating Officer. "In the back half of Fiscal 2010, we will continue to invest in high growth international markets and exciting new product categories, both critical components of our long-term strategic objectives," stated Roger Farah, president and chief operating officer.
For the third quarter of fiscal 2010, the Company expects net revenues to decline at a low single digit rate. This included an anticipated flat to low single digit comparable store sales growth for the retail segment. Analysts expect the company to report revenues of $1.20 billion for the third-quarter. For fiscal 2010, the company raised its sales expectations by projecting a lower decline in revenues to a mid single digit rate from the prior guidance of a high single digit decline, citing better-than-expected revenue performance for the first six months. The Street is currently looking for full year revenues of $4.73 billion.
The company also projects operating expenses for the third quarter to grow at a high single digit rate from the prior-year quarter to reflecting incremental spending related to its Asia-Pacific initiatives and higher incentive compensation accruals.
While reporting results for the fourth quarter back in May, Polo Ralph Lauren decided not to provide any per share guidance for fiscal 2010, continued to provide revenue forecast for the quarters and fiscal 2010.
Stock Quote
In Tuesday's regular trading session, RL is currently trading at $77.45, up $0.74 or 0.96% on a volume of 0.28 million shares. In the past 52-week period, the stock has been trading in a range of $31.22 to $80.45.
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