Earnings Preview for Polo Ralph Lauren

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 |  About: Polo Ralph Lauren Corporation (RL)
by: Selerity Research

By Brendan Gilmartin

Overview

Polo Ralph Lauren (NYSE:RL) is slated to release its 1Q 2012 on Wednesday, August 10 at approximately 8:00 a.m. EST with a conference call to follow at 9:00 a.m. Ralph Lauren is a leader in premium lifestyle products and a gauge for high-end luxury consumer spending.

Outliers & Strategy

  • Key measures:
    • Earnings Per Share (EPS): The value for this measure usually compares with consensus estimates. Earnings Per Share estimates range from $1.36 to $1.52 bracketing the consensus of $1.45 (Source: Yahoo! Finance)
    • Revenues: In the first quarter of Fiscal 2012, the Company previously said it expects consolidated revenues to increase in the mid 20% range. That would equate to $1.41 bln to $1.46 bln. The current consensus is $1.43 bln.
    • Recent earnings from top luxury brands have come in toward the higher end of Street expectations.
      • Coach (NYSE:COH) reported 2Q 2011 EPS of $0.68 beating consensus estimates of $0.65, citing higher productivity and distribution expansion, globally, with increasing contributions from China and East Asia.
      • Despite a recent pullback, Polo Ralph Lauren is trading at 15.6x forward earnings, a premium compared to Jones New York (NYSE:JNY). Jones New York recently reported better than expected earnings for the 2Q 2011.
      • Polo Ralph Lauren has met or exceeded consensus estimates in the past four quarters by an average of 23.7%.
      • Approximately 19% of Polo Ralph Laurens revenues are derived from sales through Macy’s (NYSE:M), according to Revere Data (www.reveredata.com). Macy’s reported a 5% increase in same store sales for the month of July, a stronger than expected figure, particularly when measured up against a tough year over year comparison.
      • Polo Ralph Lauren stated in their 4Q 2011 earnings release that higher input costs, including a rise in the price of cotton hurt their earnings, which sent shares down 11%. Cotton prices have come down approximately 49% since the 4Q highs.

Recent News

  • 07/08: Bank of America raised the price target on Polo Ralph Lauren from $125 to $142. (Yahoo! Finance)
  • 06/20: Polo Ralph Lauren declared a regular quarterly dividend of $0.20 per share.
  • 06/22 Wells Fargo initiated coverage on share of Polo Ralph Lauren with an Outperform rating and a price objective in the range of $138 to $145. With the company being in its early stages of growth in Asia, Wells Fargo believes it is better positioned to pass along cost increases given its premium position. (StreetInsider.com)

Technical Review

Polo Ralph Lauren shares recently penetrated the 200 Day SMA near $120, en route to the lowest levels since the start of the year. Recall, the shares fell sharply last May (-11.35%) in reaction to the 4Q 2011 earnings release, dipping to a recent low near $115. Following the recent slip, a bullish “Hammer” candlestick pattern has formed, coinciding with the previous low near 4115, resulting in a possible Double-Bottom formation. Both the RSI and MACD are also pointed toward oversold conditions. (Chart courtesy of StockCharts.com)

Summary

Polo Ralph Lauren shares have been hit hard in recent weeks due to a weak economic backdrop in the US, as well as higher input costs. However, Polo Ralph Lauren is well positioned pass these higher cost to consumers due to their position as a luxury brand. The numbers also follow solid results from several counterparts in the high-end space, including Coach (COH) and Jones New York (JNY).

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