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Ralph Lauren shares surge on attractive third-quarter earnings

by Jessica DuBois-Maahs
Feb 06, 2013


Jessica DuBois-Maahs/MEDILL

Ralph Lauren Corp.'s earnings per share have consistently beat analyst expectations.

Ralph Lauren Corp. share prices jumped Wednesday after the high-end retailer posted a 27 percent increase in its fiscal third-quarter earnings.

The company attributed its ongoing success to improving European market trends, a continued momentum in the Americas, and a strong holiday season.

In the quarter ending Dec. 29, Ralph Lauren earned $215.7 million, or $2.31 per diluted share, an increase from $169 million, or $1.78 per diluted share, in the same period a year ago. Excluding certain one-time charges, diluted earnings per share would have been $2.40. Analysts surveyed by Bloomberg were expecting the company to earn $2.05 per diluted share.

The stock surged almost 6 percent, closing up $9.72 to $174.63.

Sales rose 2.2 percent to $1.795 billion from $1.756 last year. Company executives estimate Superstorm Sandy, which hit the East Coast in October, and sluggish sales in China suppressed sales by 1 to 2 percentage points.

“Our third-quarter performance is a testament to the enduring appeal of our brand and the dedication of our passionate team,” said CEO Ralph Lauren. “Our orientation as a design-led, marketing and merchandising organization has enabled us to deepen our connection with our customers.”

The company has been trying to strengthen its image as a designer store by closing small-distribution stores such as Rugby and American Living while expanding more profitable stores like Polo.

But that's just one component of the company's long-term plans to redefine its brand, according to Erinn Murphy, an analyst for Piper Jaffray. “This is an example of how they could spend a lot more of that capital in core concepts,” Murphy said.

She said some of the company's long-term growth strategies include an expansion of its accessories line and increased marketing in Asia.

The company posted year-to-date profits of $622.8 million, or $6.63 per diluted share, a 6 percent increase from $586.6 million, or $6.14 per diluted share, a year ago.

The company's year-to-date net sales of $5.162 billion were an increase from $5.099 billion in the same period a year ago.