Polo Ralph Lauren Corporation (RL)
F2Q2011 Earnings Call Transcript
November 10, 2010 11:00 am ET
James Hurley – IR
Roger Farah – President and COO
Tracey Travis – CFO
Christine Chen – Needham & Company
Omar Saad - Credit Suisse
Robert Drbul - Barclays Capital
Adrianne Shapira - Goldman Sachs
Michael Binetti - UBS Investment Research
Kate McShane - Citigroup
Brian McGough - Hedgeye Risk Management
Previous Statements by RL
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Good morning, and thank you for calling the Polo Ralph Lauren's second quarter fiscal 2011 earnings conference call. As a reminder, today's conference is being recorded. All lines will be in a listen-only function during the presentation today. At the end of the presentation, we will conduct a question-and-answer session. Instructions on how to ask a question will be given at that time.
Now, for opening remarks and introductions, I will turn the conference over to Mr. James Hurley. Please go ahead, sir.
Good morning, and thank you for joining us on Polo Ralph Lauren's second quarter fiscal 2011 conference call. The agenda for the call includes Roger Farah, our President and Chief Operating Officer, who will give you an overview of the quarter and comment on broader strategic initiatives, and then Tracey Travis, our Chief Financial Officer will provide operational and financial highlights from the second quarter in addition to reviewing our expectations for fiscal 2011. After that, we will open the call up for your questions, which we ask that you please limit to one per caller.
During today's call, we will be making some forward-looking statements within the meaning of the Federal Securities Laws, including our financial outlook. Forward-looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings.
Now, I'd like to turn the call over to Roger.
Thank you, Jim, and good morning, everyone. We're pleased to be reporting excellent second quarter results today. Consolidated sales rose 11% and operating profits increased 25%, delivering record operating profit margins of 20.1%.
The results were substantially better than we had planned for. They reflect the exceptional appeal of our brands, our products, which drove strong retail sell-throughs. Around the globe our teams are leveraging the strength of our product with compelling merchandise strategies and effective and innovative marketing efforts and world-class customer service. As a result, our momentum was broad-based across regions, channels and products.
We achieved some important milestones over the last several months. We opened our spectacular new global flagships on Madison Avenue in New York, with the historic Rhinelander Mansion has been dedicated to our men's products and we built a new store for our women's and home collection merchandise that is adjacent to our existing kids stores.
Simply put, the Madison Avenue flagships are the most spectacular retail environments in the world. For the first time customers are able to experience each of our labels in an environment that was custom designed to showcase their unique lifestyle sensibilities. The clarity of the presentations that these stores offer speak not only to the tremendous growth potential we have across brands and products, but also to the financial, creative and managerial strengths of this organization.
In fact, they are microcosm of the strategic work we have done over the last decade on many dimensions. They reflect our success with elevating the brand, taking more direct control of our strategies in high growth product categories, as well as innovating with new labels and lifestyle opportunities. They also showcase product with key partners such as eyewear, watches and fine jewelry.
Ralph's vision is supported and executed by talent in design, production, distribution, visual merchandising, creative services and marketing and advertising. The competitive advantage we have by controlling all these aspects of our business is tremendous and you can see it all coming together in the flagships.
The new Madison Avenue stores follow the opening of our Paris flagship in the first quarter and the reopening of our renovated Milan flagship this quarter. Together, these stores showcase the world of Ralph Lauren for the 21st Century.
You'll notice that all feature bold accessory statements across a wide array of categories, from dedicated handbag areas and footwear and watch salons, to more comprehensive assortments of small leather goods, eyewear, scarves and belts. While stores like these tend to have a favorable impact on our local business trends across channel and we are experiencing that dynamic with each of the flagships now, there is no doubt the halo effect is much broader.
These stores are tourist destinations that resonate on a global level. This is particularly true for our Asian tourists who still do not have easy access to many of our brands and products in their local markets and who are really only beginning to get acquainted with the world of Ralph Lauren.
Another recent milestone was the launching of our first collection of Lauren handbags in a 150 North American department stores and on RalphLauren.com. We're encouraged by the early results, which demonstrated broad acceptance of the products across styles and price points. Customers are responding to the quality of the make and the iconic detail that has supported the Lauren status as the leading women's apparel brand in the United States department stores.
We intend to add incremental distribution over the next several seasons with exciting holiday assortments featuring new silhouettes and vibrant color choices, which will be in the stores soon. We're particularly excited about our giftable small leather goods merchandise for this holiday and beyond, recognizing the importance of small leather goods as a pillar of our broader accessory efforts.