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Polo Ralph Lauren Corp. Reports Operating Results (10-Q)

November 02, 2012 | About:

10qk

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Polo Ralph Lauren Corp. (RL) filed Quarterly Report for the period ended 2012-09-29.

Ralph Lauren Corp has a market cap of $13.9 billion; its shares were traded at around $160.75 with a P/E ratio of 21 and P/S ratio of 2.1. The dividend yield of Ralph Lauren Corp stocks is 1.1%. Ralph Lauren Corp had an annual average earning growth of 11.4% over the past 10 years. GuruFocus rated Ralph Lauren Corp the business predictability rank of 5-star.

Highlight of Business Operations:

Selling, General and Administrative Expenses. SG&A expenses primarily include compensation and benefits, marketing, distribution, bad debts, information technology, facilities, legal and other costs associated with finance and administration. SG&A expenses increased by $19.9 million, or 2.8%, to $740.2 million in the second quarter of Fiscal 2013 from $720.3 million in the second quarter of Fiscal 2012. This increase included a net favorable foreign currency effect of approximately $19 million, primarily related to the weakening of the Euro and the South Korean Won against the U.S. Dollar during the second quarter of Fiscal 2013 as compared to the related prior fiscal year period. Excluding the effect of foreign currency, SG&A expenses increased by $38.6 million, or 5.4%. SG&A expenses as a percentage of net revenues increased to 39.8% in the second quarter of Fiscal 2013 from 37.8% in the second quarter of Fiscal 2012. The 200 basis point increase was primarily due to operating deleverage on lower net revenues and an increase in operating expenses to support the growth of our retail business, our new business initiatives, and our repositioning efforts in the Asia-Pacific region. The $19.9 million increase in SG&A expenses was primarily driven by:

Net Revenues. Net revenues increased by $24.4 million, or 0.7%, to $3.455 billion for the six months ended September 29, 2012 from $3.431 billion for the six months ended October 1, 2011. The increase was primarily due to higher revenues from our retail businesses, which were partially offset by lower revenues from our wholesale businesses and net unfavorable foreign currency effects. Excluding the effect of foreign currency, net revenues increased by $101.3 million, or 3.0%.

Selling, General and Administrative Expenses. SG&A expenses increased by $41.0 million, or 2.9%, to $1.434 billion for the six months ended September 29, 2012 from $1.393 billion for the six months ended October 1, 2011. This increase included a net favorable foreign currency effect of approximately $31 million, primarily related to the weakening of the Euro and the South Korean Won against the U.S. Dollar during the six months ended September 29, 2012 as compared to the related prior fiscal year period. Excluding the effect of foreign currency, SG&A expenses increased by $72.0 million, or 5.2%. SG&A expenses as a percentage of net revenues increased to 41.5% in the six months ended September 29, 2012 from 40.6% in the six months ended October 1, 2011. The 90 basis point increase was primarily due to an increase in operating expenses to support the growth in our retail business, our new business initiatives and our repositioning efforts in the Asia-Pacific region, partially offset by operating leverage on higher net revenues. The $41.0 million increase in SG&A expenses was primarily driven by:

Operating Income. Operating income increased by $7.4 million, or 1.2%, to $640.3 million for the six months ended September 29, 2012 from $632.9 million for the six months ended October 1, 2011. Operating income as a percentage of net revenues increased 10 basis points, to 18.5% for the six months ended September 29, 2012 from 18.4% for the six months ended October 1, 2011. The increase in operating income as a percentage of net revenues primarily reflected the increase in gross profit margin, largely offset by the increase in SG&A expenses as a percentage of net revenues, both as previously discussed.

Provision for Income Taxes. The provision for income taxes increased by $14.6 million, or 7.1%, to $219.0 million for the six months ended September 29, 2012 from $204.4 million for the six months ended October 1, 2011. The increase in the provision for income taxes was primarily due to the increase in our reported effective tax rate of 210 basis points, to 35.0% for the six months ended September 29, 2012 from 32.9% for the six months ended October 1, 2011, as well as the slightly higher overall level of pretax income. The higher effective tax rate for the six months ended September 29, 2012 was primarily due to the inclusion of a reserve for an interest assessment on a prior year withholding tax, partially offset by a greater proportion of earnings generated in lower-taxed jurisdictions. The effective tax rate differs from statutory rates due to the effect of state and local taxes, tax rates in foreign jurisdictions and certain nondeductible expenses. Our effective tax rate will change from period to period based on various factors including, but not limited to, the geographic mix of earnings, the timing and amount of foreign dividends, enacted tax legislation, state and local taxes, tax audit findings and settlements, and the interaction of various global tax strategies.

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