Polo revenue misses Street view; shares sink

By Martinne Geller

NEW YORK, Feb 3 (Reuters) - Polo Ralph Lauren Corp (RL.N) reported lower-than-expected quarterly revenue and forecast a hit to earnings in the current fourth quarter, helping to send the fashion company's shares down more than 6 percent.

Ralph Lauren

The maker of clothing brands including Polo, Chaps and Club Monaco forecast a hit of 8 cents to 10 cents per share in its current quarter, related to investments it recently made in Asia.

With expectations running high before the company's results, Wall Street Strategies analyst Brian Sozzi said the fourth-quarter guidance will suppress consensus forecasts moving forward. He also cited the company's weakened operating margin in its wholesale segment.

"With the stock trading on a premium valuation to our retail sector coverage average, if the company does not suggest business trends post-holiday are strong ... a downgrade in our rating and price target revision could be in order," Sozzi wrote in an early note to clients.

Polo said net income rose to $111.1 million, or $1.10 per share, in its fiscal third quarter, ended on Dec. 26, from $105.3 million, or $1.05 per share, a year earlier.

Excluding items such as impairment and restructuring charges and foreign currency losses, Polo earned $1.14 per share, topping analysts' average estimate of $1.01 per share, according to Thomson Reuters I/B/E/S.

Net revenue declined 0.6 percent to $1.24 billion, falling short of analysts' forecast for revenue of $1.26 billion.

Sales at the company's retail stores open at least a year, or same-store sales, rose 6 percent, driven by increases of 4 percent at Ralph Lauren stores, 6 percent at factory stores and 7 percent at Club Monaco.

Sales in the company's wholesale segment fell 8 percent. The wholesale segment's operating margin was 17.7 percent in the third quarter, 2.1 percentage points below last year.

Polo said it now expects fiscal 2010 net revenue to decline by a low-single-digit rate. Its prior forecast called for a mid-single-digit rate decline.

The company recently assumed control of distribution of its products in some Asian countries, including China, Indonesia and Thailand, and is planning to expand its business in the region. Beginning in the current quarter, Polo said results for the Asian operations will be reflected in its retail segment.

It also forecast fourth-quarter operating expenses to grow at a mid-single-digit rate from the prior year, due mostly to the new Asian operations, a higher amount of sales from the retail segment and additional incentive compensation.

Polo's shares were down $5.34 at $80.33 in early trading on the New York Stock Exchange. (Reporting by Martinne Geller, editing by Dave Zimmerman)

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