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business newsPolo Ralph Lauren Is Dressed to Impress
By
Justin Sharon
Nov 10, 2010 4:55 pm
The stock ended today as the top performer of all S&P 500 stocks, surging more than 6% after announcing results that easily beat the Street.
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The stock in fact ended today as the top performer of all S&P 500 stocks, surging more than 6% after announcing results that easily beat the Street. Second-quarter net income increased 16% to $205.2 million at the clean-cut clothing company, founded rather ironically in the same long-haired ’67 Summer of Love that also introduced the Birkenstock sandal to America. Polo of course always appealed less to hippie icons like Abbie Hoffman than bluebloods such as Anderson Cooper, son of a Vanderbilt and appropriately enough an ex-Ralph Lauren model himself.
Per share earnings of $2.09 not only improved upon its year-ago $1.75 but also comfortably exceeded consensus profit estimates calling for only $1.69. Revenue rose 11% to $1.53 billion in a rebounding, if still fitful, economy, and encouragingly Polo is also projecting sales will increase at “a low double-digit” rate going forward. COO Roger Farah, while wary of FX headwinds, is nonetheless encouraged by “our current business momentum heading into the holiday season.” Same-store-sales comparisons rose an impressive 8% as customers continue to snap up the company’s labels, which include Chaps and Club Monaco in addition to its best known eponymous brand.
Caveats? Shares, already up over 33% in 2010, aren't inexpensive by most metrics. Polo also remains disproportionately dependent on the department stores, those diminishing dinosaurs -- Macy’s (M) alone accounted for about 10% of its total sales in 2009. For now, however, the firm, which at 8 tonight simultaneously lights up both its brand new Big Apple flagship and a store on London’s Bond Street, is fullly entitled to enjoy this afternoon’s stock strut on Easy Street.
Please see We’re An American Brand.
If preppies had a preferred store, Williams-Sonoma (WSM) would very likely be it. This upscale specialty home products retailer, the only non-New York name on our list, scored an upgrade from a researcher at Think Equity Partners today. The broker boosted their recommendation to Buy from Hold and also took up its price target by $7 to $40 for the firm, which also owns Pottery Barn and West Elm.
Shares are up sharply as a result and stand not far from a fresh 52-week peak. Sales are expected to increase at a quicker rate than previously anticipated by the analyst, and the equity got a further fillip from Brian Nagel at Oppenheimer, who wrote in a note that “The market appears to still underappreciate the earnings power of the now more cost-conscious and return-focused hardlines sector in a macro rebound.”
Williams-Sonoma reported a record quarter in August, and most subsequent metrics appear to be trending positively. Some 60% of its products are made overseas, so FX fluctuations are always a wild card. But at the moment the company that will forever be -- erroneously -- associated with the “Pottery Barn rule” is again illustrating the wisdom of an old maxim. If it ain’t broke…
Trendspotting: Investing in a Retail Rebound and Catalog Themes In Keeping With the Times have related content.
With the worldwide epidemic of obesity reaching even England, whose food is of a sufficiently inedible standard to be an effective enough antidote against piling on the pounds, it’s not as if any diet firm’s potential client pool is limited to slim pickings. How then to explain why Weight Watchers International (WTW) stock is sick to its stomach? Earnings, of course.
Although adjusted third-quarter EPS of $0.69 beat the Street by a nickel, the eighth straight time it has exceeded estimates, Weight Watchers also unexpectedly lowered its full-year profit projections. It now sees 2010 per share earnings in a range of only $2.42 to $2.47, well below the $2.35 to $2.50 that Wall Street was looking for. With the stock having surged more than 20% since its last quarterly release in August, investors are understandably adopting a shoot first, ask questions later approach to the disappointing guidance and sent shares sliding over 6%.
Chief Executive David Kirchhoff professed himself “pleased by the robust revenue growth in our WeightWatchers.com business” but an increase in expenses was a worry. The company’s headquarters inhabit the same Fat City, indeed an identical Madison Avenue, as northern neighbor Ralph Lauren. However, as every Manhattanite knows, it’s a long way from the lower 20′s to the tony Upper East.
Also check out Economics and Employee Wellness and Shrinking Your Way to Growth.
No one should ever wear a Speedo without first proving himself proficient with the points system at Weight Watchers but Warnaco Group (WRC), which makes the skimpy swimwear as well as intimate apparel, finds itself similarly an emperor without clothes today. Shares in the company whose underwear includes Chaps ended underwater to the tune of almost 5% after it was among five apparel vendors downgraded to Neutral from Buy by Bank of America/Merrill Lynch this morning.
Piling it on, analysts at Sterne Agee also downgraded the stock and set a $55 price objective. Merrill made reference to a “challenging sourcing environment” that could “weigh on margins” in reducing its rating, although Warnaco's international outlook remains rosy especially with its Calvin Klein Jeans.
It's a company that's seen it all since arriving on the scene in 1874, surviving a brush with bankruptcy nine years ago, and has given the world both Health Corsets and an ABC Alphabet Bra. For now however, the firm isn't appropriately dressed for success.
Turn to The Ever-Evolving World of Novelty Underwear and When Ads Go Strange: Calvin Klein Conducts Kiddie Porn Auditions for more.
No positions in stocks mentioned.
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