Polo Ralph Lauren Corp.‘s (RL) fiscal 2010 fourth-quarter earnings more than doubled to $1.13 per share from 44 cents in the year-ago period, driven by higher sales and robust gross margin. In addition, quarterly earnings surged past the Zacks Consensus Estimate of 63 cents derived from 14 covering analysts.
Quarterly Details
Polo’s net revenues during the quarter rose 9.2% to $1.3 billion from $1.2 billion in the prior-year quarter. The growth was primarily driven by strong retail sales, which grew 31% year over year to $554.3 million, mainly due to solid growth in same-store sales, benefit of a 53rd week and contribution from newly-assumed Asian operations. However, overall revenues were partially offset by wholesale revenues, which declined 3% year over year to $736.0 million due to lower global apparel shipments.
Polo’s gross profit expanded 24.4% year over year to $789.4 million, while gross margin surged 720 basis points (bps) to 59.0%. The strong expansion was primarily attributable to higher wholesale and retail segment margins, lower merchandise markdowns and benefits from supply chain initiatives.
Total operating expenses increased 3.8% year over year to $617.6 million, primarily due to incremental business expansion costs and higher compensation expense. However, increased sales and robust gross margin more than offset the increase in operating expenses. Consequently, Polo’s operating profit more than quadrupled to $171.8 million from $39.5 million in the year-ago period.
Balance Sheet & Cash Flow
At quarter-end, Polo had cash and cash equivalents of $563.1 million and long-term debt of $282.1 million, compared to $481.2 million of cash and $406.4 million of long-term debt in the year-ago quarter. During fiscal 2010, the company generated $907 million of cash from operations and deployed $201 million towards capital expenditures. Moreover, the company also utilized $216 million towards share buybacks and currently has $550 million remaining under stock repurchase programs.
Guidance and Zacks Consensus
Moving forward, Polo expects fiscal 2011 first-quarter net revenues to increase in the low-double-digit range, with wholesale revenue expected to grow by low double digits and same-store sales by high single digits.
The Zacks Consensus Estimate is currently pegged at 81 cents per share for the fiscal first quarter of 2011, which increased 2 cents over the past month as 4 of 8 covering analysts raised projections. For the entire fiscal 2011, the Zacks Consensus Estimate has increased 4 cents over the past month to $4.27 per share as 4 of 11 covering analysts increased expectations.
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