Ralph Lauren’s Premium Results
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Euro crisis and the uncertain economic conditions have had an adverse effect on the performance of many luxury products retailers. An example is the famous watch maker Fossil (NASDAQ: FOSL), which reported a weak performance a few weeks back. It was mainly due to the soft European market, which constitutes around 30% of Fossil’s universe. Its results brought fear and despair and shares fell drastically, losing nearly 50% after the results.
But the earnings report of Ralph Lauren (NYSE: RL), another luxury retailer, suggests that we shouldn’t let this fear get the better of us. Let’s understand why.
Revenue for the fourth quarter was up 14%, reaching $1.6 billion, and the adjusted earnings came in at 99 cents a share, surging a mind-blowing 34%. It is actually quite heartening to see a premium fashion chain perform remarkably well in such an uncertain situation with the difficulties of rising costs and inflation, which increased input prices. Moreover, this is the fourth consecutive quarter that the company has posted increases in sales and profits. However, this is just the beginning. The apparel retailer doubled down on its dividend, paying out 40 cents a share for the quarter. This has certainly brought great smiles to the investors’ faces and they have reasons to keep smiling.
Lower tax rate and a decrease in the number of shares outstanding increased profits for the quarter. Strong growth in the wholesale and the retail segments along with Ralph Lauren’s efforts to expand its operations helped drive sales volumes north. The growth in the wholesale division was driven by increased demand for accessories, especially handbags, and also due to eliminations of certain home product categories that were previously licensed and are now under the direct control of the company.
The company has been putting a lot of effort in its online operations and is planning to strengthen its foothold further in the online shopping market. The efforts paid off and the revenues from the segment increased 30%, driving the overall retail sales. Growth in retail sales was also driven by new stores introduced by the retailer recently. In fact, Ralph Lauren has massive expansion plans. It is planning to expand its geographical presence by opening a total of 60 new stores in the next three years.
Though such impressive results have shown positive signs and the fact that there are cash-rich consumers who are willing to spend on lifestyle products, there are huge concerns about economic conditions in Europe that might bring less powerful or rather weak performances in the coming year. On the other hand, the growing accessories segment and the company’s plans to expand its presence in China can do wonders, especially if the economic uncertainty stabilizes in the coming months. On the whole, the company’s products are finding takers in good numbers; it has good strategies in place and would do even better once everything starts falling in place.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Fossil. Motley Fool newsletter services recommend Fossil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.