Poor sales for Polo Ralph Lauren

Polo Ralph Lauren Corp reported lower-than-expected quarterly revenue, hurt by a decline in wholesale sales as retail customers remained conservative in their orders, and its shares fell 9 percent.

Chief Operating Officer Roger Farah said the clothing maker's wholesale segment faced tough comparisons with a year ago, when orders were still strong before retailers cut back in the wake of the financial crisis. Yet demand at the retail level has picked up, and wholesale orders should begin to reflect some of that rebound later in the year, he said.

``I think it is just the timing of the two, wholesale and retail segments,'' Farah told analysts on a conference call. ``The sell-through ... for our wholesale customers was significantly better this third quarter and I think that bodes well for our orders going forward into the fall and holiday of next year.''

The wholesale segment's operating margin was 17.7 percent in the company's fiscal third quarter, ended December 26, 2.1 percentage points below last year.

But Polo, whose clothing brands include Polo, Chaps and Club Monaco, raised its outlook for the full fiscal year, forecasting a percentage decline in the low-single digits. Its prior forecast called for a drop in the mid-single digits.

It also reported better-than-expected third-quarter profit, but some analysts had come to expect an even greater upside surprise, said Needham & Co analyst Christine Chen.

``The main reason for the sell-off is the slight miss in topline and concern that wholesale isn't picking up faster,'' Chen said. ``There is probably (also) some sort of whisper disappointment because they didn't beat by 20 cents or 15 cents.''

Still, Chen said Polo had ``a great holiday quarter, hands down.''

Polo's net income rose to $111.1 million, or $1.10 per share, in the third quarter 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.

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

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

It forecast fourth-quarter operating expenses would grow by a percentage in the mid-single digits compared with a year earlier, due mostly to the new Asian operations, a higher amount of sales from the retail segment and additional incentive compensation.

Polo also forecast a hit of 8 cents to 10 cents per share in its current quarter related to the Asian investments.

Polo shares were down $7.67 at $78 in afternoon trade on the New York Stock Exchange.

- Reuters