Fashion Houses Post Mixed Earnings

Polo slips after meeting estimates, but Donna Karan jumps on a strong number.
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A pair of earnings reports from the fashion industry Tuesday brought mixed results, as

Polo Ralph Lauren

(RL) - Get Report

met expectations and

Donna Karan

(DK) - Get Report

beat estimates. Polo shares slipped while Karan shares rallied on the news.

Polo Ralph Lauren reported second-quarter earnings of 56 cents a share, but analysts expected greater action on the restructuring front and noted unkind economic developments in the retailing sector. Shares of the apparel and fragrance retailer slid 7/8, or 5%, to 16 3/8 around midday.

Polo Ralph Lauren closed down 1/16 to 17 3/16.

"The interest-rate environment is negative for retailers like Polo," said

Brown Brothers Harriman

analyst Leslie McCall, who has a short-term neutral rating on the stock. The firm hasn't underwritten any Polo offerings.

Lead by 16% gains in retail and licensing, Polo Ralph Lauren said revenue in the latest quarter jumped 11% to $543.9 million from $491.7 million the same quarter last year.

But those gains come on the heels of a six-month slide. Polo has reported earnings in line with expectations in recent quarters, but the stock has toppled 44% from its 52-week highs, partly on analyst expectations of a more aggressive restructuring. "The scope of cost cuts was more narrow than they could have been," says McCall.

Bothered by a glut of inventory last year, the company spent most of the year selling off extras through wholesale outlets, hurting profit margins. McCall said Polo managers executed that plan well but "still have some room for improvement."

Donna Karan, meanwhile, is back in style on Wall Street, with former Polo executive John Idol at the reins. The fashion retailer said third-quarter earnings rose 71% to 60 cents a share from 35 cents a year earlier, far ahead of Wall Street estimates. Revenue jumped 19% to $202.5 million from $170.6 million in the comparable quarter a year ago.

Investors welcomed the pleasant surprise, sending the stock up 9%, or 5/8, to 8 3/4.

Donna Karan finished up 5/8 to 8 3/4.