Ralph Lauren Forecasts Softer Fiscal '13 Sales

Ralph Lauren (NYSE:RL) reported sales that just met Wall Street expectations in the fourth quarter and said it predicts wholesale sales will slip in fiscal 2013 on economic jitters in Europe and the closure of some operations in China.

The New York-based maker of clothes, fragrances and accessories under the Ralph Lauren and Polo brands revealed total sales for the three months ended March 31 of $1.6 billion, up 14% from $1.4 billion a year ago, even with average analyst estimates in a Thomson Reuters poll.

The company’s chief financial officer, Roger Farah, said the quarterly results were noteworthy because of the sharp rise in raw material costs in fiscal 2012. He attributed the growth to productivity gains in existing locations.

Net income in its latest quarter was $94 million, or 99 cents a share, compared with a year-earlier $73 million, or 74 cents, beating the Street’s view of 84 cents.

“We made significant progress with our international expansion efforts and we launched exciting new products during the year,” the company’s chief executive, Ralph Lauren, said in a statement. “We are in the midst of transforming our presence in Greater China, a region that we believe will become an important driver of growth for us over the long term.”

Farah noted that while the company is excited about its global growth initiatives, Ralph Lauren is cautious about near-term economic trends, particularly in Europe.

While wholesale sales were up 10% to $828 million from $751 million a year ago and retail sales climbed 19% to $751 million from $631 million, Ralph Lauren expects revenue in the current fiscal year to be up by just a “mid-single digit” percentage, compared with a 20% rise in fiscal 2012.

The results are expected to be led by a decline in wholesale, partially offset by retail sales growth in the low-double-digit percentage.

The decision by J.C. Penney (NYSE:JCP) to drop Ralph’s “American Living” brand later this year as well as turnaround plans in China that will temporarily shut many of its distribution points will also hurt sales, the company said.