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Polo Ralph Lauren`s Q1 net revenues receive 13% boost

Published: 21:34 04 Aug 2010 BST

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Global clothing retailer Polo Ralph Lauren (NYSE:RL) has released its financial results for the first quarter of the fiscal year 2011, reporting an increase of 13% on net revenues to $1.2 billion, compared to $1 billion the previous year.


"Our first quarter results are outstanding by any measure," said Roger Farah, President and Chief Operating Officer. "The broad-based strength we've achieved across regions, product categories and channels is testimony to the growing appeal of our brands and the discipline of our global teams, particularly as we continue to reinvest heavily back into the business.”


The growth in net revenues is a reflection of double-digit gains in the wholesale and retail segments that were partially offset by lower licensing revenues. Wholesale sales rose 11% to $523m from the same period last year, while retail sales jumped 16% to $593 million from the first quarter of fiscal 2010, supported by incremental sales from new Asian stores and concession shops. RalphLauren.com continued to expand at a double-digit rate, with sales up 15% in the first quarter.


These results come as government statistics released yesterday show that  consumer spending and personal incomes were flat in the United States in June - the latest indication that the economy will continue to fall this year.

Disposable personal income, or income after taxes and expenditures, was also flat, compared to slight increases in May. This does not necessarily bode well for the retail sector and could spell trouble in the coming months, especially for higher end clothing stores like Ralph Lauren.


Still though, net income for the first quarter of fiscal 2011 increased 57% to $121 million from $77 million the same period last year. Operating income rose 49% to $174 million from $117 million in the first quarter of fiscal 2010. The company ended the first quarter of this fiscal year with $1.1 billion in cash and investments, or $801 million in cash and investments net of debt.


The clothing retailer also repurchased approximately 2.7 million shares of common stock during the first quarter, using $231 million of its authorized share repurchase programs.


The company expects its consolidated revenues to increase at a high single-digit rate in the next quarter. Nevertheless, it also anticipates the operating margin for the second quarter of fiscal 2011 to be 100-150 basis points below that in the comparable prior year period, primarily due to net unfavorable foreign currency effects, increased investment in strategic growth initiatives and lower Japanese shipments to calibrate inventory with sales trends.


The market responded well to the company`s results, bumping its stock up by more than 3% to $81.80.

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