* Sees Q4 net sales up "mid-single-digit" percentage
* Revenue rose 2.2 percent to $1.85 billion
* Shares up 7.5 percent in morning trading
(Adds analyst comment, details from conference call)
By Phil Wahba
Feb 6 Both Ralph Lauren Corp's holiday
quarter results on Wednesday and its early sales forecast for
next year pointed to renewed momentum for the fashion company
after a rough patch in 2012, sending shares to their highest
levels since May.
The company cited strong demand in the Americas and an
improvement in Europe, its second biggest market, as well as its
fast growing e-commerce business. It forecast sales growth would
accelerate in the fiscal year starting in April.
"It shows there's still so much untapped demand for his
brands," said independent equities analyst Marie Driscoll.
The clothier and retailer, whose portfolio also includes
brands such as Club Monaco and Chaps, said gross profit margin
rose 2.2 points to 59.3 percent during the quarter that ended
Dec. 29, helped by lower product costs and a bigger percentage
of sales coming from more profitable items.
The company now expects a bigger improvement in its
operating profit margin for the year than initially projected,
and shares were up 7.5 percent to $177.26 in morning trading.
Net revenue including licensing sales in the quarter rose
2.2 percent to $1.85 billion.
Ralph Lauren forecast that company wide revenues would rise
by a "mid-single-digit" percentage in the current fourth
The performance, and the forecasts, stand in contrast to
earlier reports by Ralph Lauren, when it spoke of weak sales in
Europe and when sales at its own stores were growing more
Sales at Ralph Lauren this fiscal year have suffered from
its decision to phase out stores and boutiques operated by local
partners in China and replace them over time with company-run
shops in better spots.
The discontinuation of the American Living brand, which was
dropped by low-price department store J.C. Penney Co Inc
last year, also hurt.
Excluding those two factors, revenue rose 5 percent in the
Wholesale revenue, which comes from sales to department
stores such as Macy's Inc and others that carry its
brands, was down 2 percent, a much gentler drop than in the
previous quarter. The company was hurt by a decision to pull
back on shipments to department stores in Europe, where shoppers
have broadly cut back on shopping.
At Ralph Lauren's own stores open at least a year, revenue
was up 4 percent, also a better performance than last quarter.
The company said that Superstorm Sandy, which debilitated a huge
swathe of the U.S. East Coast last fall for days, lowered that
figure by between 1 and 2 percentage points.
More of future sales growth is expected to come from its
retail efforts as it looks to become less reliant on its
wholesale business, Chief Operating Officer Roger Farah told
investors on a call.
The improvement in Europe, where Farah said business is
"probably better than we expected" was a big reason shares rose,
Morningstar analyst Peter Wahlstrom said.
"The fact that shoppers there bought Ralph Lauren shows how
strong the brand is," he said.
Investors were also buoyed by news that the company would
open a number of stores in China next fiscal year, including a
flagship, positioning to begin taking advantage of Chinese
consumers' appetite for Western high end brands.
Net income rose 27.6 percent to $215.7 million, or $2.31 per
share, in the third quarter ended Dec. 29, from $169.0 million,
or $1.78 per share, a year earlier.
(Reporting by Phil Wahba in New York; Editing by Gerald E.
McCormick, Kenneth Barry and Nick Zieminski)