Polo's Earnings Meet, Tommy Hilfiger Beats

The two retailers' stocks move in different directions.
By Meredith Derby ,

Polo Ralph Lauren

(RL) - Get Report

and

Tommy Hilfiger

(TOM)

reported varying third-quarter results and guidance Wednesday, sending their shares in different directions in Wednesday trading.

Ralph Lauren's quarterly earnings fell to $35.4 million, or 35 cents a share, from $42.8 million, or 43 cents a share, a year earlier. Excluding restructuring charges and other items, the company earned $47.7 million, or 47 cents a share -- meeting Wall Street expectations. Shares of the company were down 67 cents, or 2.2%, at $29.60.

Meanwhile, net income at Tommy Hilfiger swung to a better-than-expected third-quarter profit from a loss a year ago, and that sent its shares up $1.02, or 8%, at $13.75 in morning trading.

Ralph Lauren's total revenue increased 1% to $645.4 million. Gross margin for the quarter was 51.6%, up from 48.2% a year earlier. The apparel retailer also said overall same-store sales rose 8% in the quarter. The company cited mid-teens sales comps at Ralph Lauren stores, low-20s sales comps at Club Monaco stores and mid-single-digit sales comps at outlet stores.

Looking to the fiscal fourth quarter, the company sees a profit of 75 cents to 80 cents a share. This would compare with earnings of 77 cents a share in the fourth quarter a year earlier. The company forecast fiscal 2005 earnings of $2.35 to $2.45 a share, excluding foreign currency gains. Analysts expect 78 cents a share in the fourth quarter and $2.42 a share in 2005, according to Thomson One Analytics.

Ralph Lauren also said it plans to file a secondary stock offering to the

Securities and Exchange Commission

of 10.6 million shares owned by GS Capital Partners, Stone Street Fund 1994 and Bridge Street Fund 1994, which are investment funds managed by Goldman Sachs. Neither the company, Mr. Ralph Lauren nor any of his related entities will be converting or selling any shares in the offering or receiving any proceeds from the offering, the company said in a statement.

Meanwhile, Tommy Hilfiger reported that it earned $23.6 million, or 26 cents a share, compared with a loss of $22.1 million, or 24 cents a share, a year ago. The company said it benefited from increased sales in its U.S. wholesale business, a reduced level of price adjustments provided to U.S. department stores for the fall and holiday season, and increased revenue from Tommy Hilfiger Europe.

Before certain charges, the company earned $25.8 million, or 28 cents a share, compared with $34.8 million, or 38 cents a share, in the prior-year quarter. Analysts had been expecting 13 cents a share.

Revenue declined to $450.6 million, from $477.3 million a year earlier. Tommy Hilfiger Europe had a 41% increase in total revenue to $59.8 million, from $42.4 million a year earlier. But revenue in the U.S. fell 12.6% to $359.3 million from $411.3 million in the prior-year quarter.

Additionally, Tommy Hilfiger said that it plans to reduce its deliveries to the department store chain

Dillard's

(DDS) - Get Report

in April by 30% in order to better balance supply and demand.

"We believe that refining the distribution of Tommy Hilfiger merchandise in U.S. department stores is in the best interests of both the company and our retailing partners," the company said in a statement. "We will continue to look for other opportunities to exit less profitable doors and selectively reposition our merchandise based on our evaluation of individual accounts and markets."

In the fourth quarter, the Hong Kong-based company said it thinks the consensus estimate provided by Thomson One Analytics of 36 cents a share is "reasonable." Assuming fourth-quarter earnings come in as expected, Tommy Hilfiger said earnings before special items for full-year 2004 would be $1.46 a share, above analysts' current consensus estimate of $1.30 a share.

But the company said that because of seasonally low shipping patterns in Europe, its consolidated results for the first-quarter 2005 ending June 30 could be a loss. Analysts' consensus is for a profit of 13 cents a share.

The company also reduced its estimate of capital expenditures for fiscal 2004 to $65 million and $70 million. In 2005, the company plans to open about 20 new stores, but it said it may close about five stores in the fourth quarter of 2004.

Lastly, Tommy Hilfiger said it is considering whether to stop providing quarterly earnings projections but said it would continue to provide annual estimates.

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