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* Q2 EPS $1.75 tops Wall Street view of $1.31
* Net revenue $1.37 bln, down from $1.43 bln
* Strengthens full-year revenue view; sees higher spending
* Shares up 3.1 pct (Recasts first paragraph with context for strengthened outlook; adds comments from conference call, analysts)
By Martinne Geller
NEW YORK, Nov 3 (Reuters) - Polo Ralph Lauren Corp (RL.N) posted a quarterly profit far above Wall Street estimates and strengthened its full-year revenue outlook, as demand for its fashions picked up as the quarter progressed.
The maker of clothing brands such as Ralph Lauren, Chaps and Club Monaco saw its shares rise 2.6 percent as investors hoped results indicated more sustainable demand.
"I am of the opinion the customer has begun to move back into a more balanced point of view," Chief Operating Officer Roger Farah said on a conference call. "Those that have money are beginning to spend it again."
While retailers have been keeping inventory tight to prevent a need for deep discounts to move merchandise, Farah said retail partners like department stores are likely to resume larger orders in the fall of 2010.
Chief Financial Officer Tracey Travis said both wholesale and retail sales were stronger than expected in the fiscal second quarter, saying the strength extended across regions and product categories. But Travis said it was too early to talk about a full revival of consumer interest in clothing.
"The reality is that sales and order trends still remain at depressed levels," Travis said. "The whole macro environment continues to be weak."
Polo attributed its earnings beat to the better than expected sales as well as a lower tax rate and tight control of inventories and costs.
Net income rose to $177.5 million, or $1.75 per share, in the fiscal second quarter that ended Sept. 26, from $161.0 million, or $1.58 per share, a year earlier.
Analysts on average were expecting $1.31 per share, according to Thomson Reuters I/B/E/S.
Net revenue fell to $1.37 billion from $1.43 billion a year earlier, hurt by lower domestic wholesale sales and a decline in retail sales at stores open at least a year. Analysts were expecting $1.31 billion.
Same-store sales fell 6 percent in the quarter, driven by declines of 18 percent at Ralph Lauren stores, 4 percent at factory stores and 3 percent at Club Monaco stores. Wholesale sales fell 4 percent.
For the current third quarter, Polo said it expects net revenue to fall at a low-single-digit rate with same-store sales ranging from flat to up at a low-single-digit rate.
In the current quarter, Polo sees operating expenses increasing at a high single-digit rate, due to higher compensation expenses and larger investments in Asia. Morgan Stanley analyst Chi Lee said Wall Street estimates implied roughly flat expense growth.
Goldman Sachs analyst Adrianne Shapira said it was possible for Polo to increase third-quarter operating earnings, given recent sales trends, and said she would recommended buying shares on any pullback.
The company will assume control of distribution of its products in eight Asian countries, including China, Indonesia and Thailand in January, and plans to expand its business in the region.
Polo also strengthened its revenue outlook for fiscal 2010. It expects net revenue to fall at a mid-single-digit rate this year compared with a previous forecast for high-single-digit rate decline.
Polo shares rose 3.1 percent to $79.12 in afternoon trading on the New York Stock Exchange. (Reporting by Martinne Geller, editing by Dave Zimmerman and Tim Dobbyn)