Ralph Lauren Profit Tops Estimates on Lower Cotton Costs

Ralph Lauren Corp., the retailer of its namesake brand clothing, reported fiscal third-quarter profit that topped analysts’ estimates, helped by lower-than-expected expenses and cheaper cotton.

Net income in the three months ended Dec. 29 climbed 28 percent to $215.7 million, or $2.31 a share, from $169 million, or $1.78, a year earlier, the New York-based company said today in a statement. Excluding some items, profit totaled $2.40 a share. Analysts projected $2.20 a share, the average of 14 estimates compiled by Bloomberg.

Ralph Lauren’s profitability improved more than analysts estimated as it benefited from lower product costs, including cheaper cotton, said Liz Dunn, an analyst at Macquarie Group in New York. Expenses also were lower than she had projected as the company invested in growing businesses such as Asia.

“It’s a really great result,” Dunn, who recommends investors buy the shares, said in a phone interview today. “The bottom-line beat is very high quality.”

Gross margin, or the fraction of revenue left after subtracting the cost of goods sold, expanded 2.2 percentage points to 59.3 percent. Analysts projected 59.1 percent.

Ralph Lauren advanced 5.9 percent to $174.63 at the close in New York. The shares climbed 8.6 percent last year compared to a 22 percent gain for the Standard & Poor’s 500 Consumer Discretionary Sector Index.

The quarter was helped by “continued momentum in the Americas and improved trends in Europe,” President and Chief Operating Officer Roger Farah said in the statement.

Revenue gained 2.2 percent to $1.85 billion in the quarter, matching the average of analysts’ estimates.

Selling, general and administrative expenses rose 2.4 percent to $768.9 million. Barbara Wyckoff, an analyst at Credit Agricole in New York who rates the shares outperform, the equivalent of a buy, estimated $790 million.

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