Earnings Preview: Polo Ralph Lauren

Polo Ralph Lauren (RL) is expected to report Q3 earnings with a conference call scheduled for 9:00 a.m. ET, Wednesday, February 6th.

Guidance

Analysts are looking for a profit of 78c on revenue of $1.19B. The consensus is 70c to 93c for EPS, and revenue of $1.12B to $1.22B, according to First Call. In November, the company said it saw 2008 EPS of $3.50 to $3.60 vs. First Call consensus of $3.48, and sees 2008 revenue "up in the low teens."

Analyst Views

Analysts will look at the effect reduced consumer spending has had on Polo's quarter; consumers have cut their spending due to higher gas prices and weakness in the credit, housing and job markets. Banc of America recently downgraded Polo to Neutral from Buy, and cut their target to $63 from $90. While the company should gain long-term global market share, analysts believe it will be difficult for the company to drive EPS and sales, given the tough retail environment. Also, that earnings may be pressured in 2008 by new investment locations such as Japan.

Morgan Keegan downgraded the stock to Underperform from Market Perform, given a softening U.S. economy and mistakes the company has made in fashion. Specifically, they believe the company's denim introduction "missed the mark," and the company subsequently dropped prices to stimulate demand.

Goldman Sachs lowered its rating to Neutral from Buy, as it expects overall margin pressure to worsen, and to last longer than previously expected. Analysts believe spending on luxury items is beginning to weaken, and see no visible catalyst in the near-term.