Ralph Lauren Guides Lower

The third quarter beats targets, but the going looks slower in 2007.
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Polo Ralph Lauren (RL) - Get Report beat third-quarter targets and set a plan to close 13 Club Monaco home and outlet stores to focus on its core apparel-retail business.

The New York-based fashion outfit made $91 million, or 84 cents a share, for the quarter ended Dec. 31, up from the year-ago $75 million, or 72 cents a share. Revenue rose 10% from a year ago to $995 million. Analysts surveyed by Thomson First Call were looking for a 76-cent profit on sales of $958 million.

Retail sales rose 15% from a year ago to $479 million, with same-store sales rising 10.2% at Ralph Lauren stores, 7.1% at Club Monaco stores and 6.3% in our factory stores. Wholesale sales rose 6% from a year earlier to $454 million, and licensing revenue rose 8% to $62 million.

"This is an exciting time for our company as we continue to introduce new product categories and take more direct control of our brand. The Ralph Lauren brand has never been stronger as the demand for our luxury products around the world is accelerating," said CEO Ralph Lauren. "We look forward to launching our footwear line this year and developing our denim business now that we have bought back Polo Jeans. We remain committed to opening new retail stores around the world and are excited about our newest flagship store opening in Tokyo next month. We believe the sound fundamentals of our business will allow us to take advantage of the growing global appeal of the Ralph Lauren brand."

The company said it would close eight Club Monaco Caban Home stores and five Club Monaco outlet stores to focus on the core clothing business. The company said those moves would shave a dime a share off earnings for the year ending next month. Also, the company's $355 million repurchase of its Polo Jeans business from

Jones New York

(JNY)

will hit earnings by a nickel. Ralph Lauren guided to full-year earnings of $2.80-$2.85 a share including those items, down from its previous $2.85-$2.92 forecast and below the $2.93 Wall Street estimate.

For fiscal 2007, the company expects to make $3.20 a share or so, excluding stock-based compensation expense, against a $3.34 Wall Street estimate. Polo Ralph Lauren expects low double-digit revenue growth and flat operating margins for the year.