Net income grew in Q3, but wholesale revenue fell

Net income grew in Q3, but wholesale revenue fell

US fashion firm Polo Ralph Lauren has reported impressive sell-through rates for its wholesale fashion goods during the third quarter, but cautious orders in the first place have thwarted top line sales growth.

The company's 8% decline in wholesale sales to US$604m during the third quarter is a result of retailer cutbacks for autumn 2009, the company told analysts today (3 February).

Polo Ralph Lauren's own retail business, meanwhile, grew 8% to $592m during the third quarter, helping the firm towards a 5% gain in quarterly profit.

Roger Farah, president and chief operating officer, told a conference call this afternoon: "We have experienced terrific sell-through of wholesale items and the women's business is really beginning to perform. However, the spring and summer buys were bought well before this.

"In the the markets we have to-date, retailers are coming in positive about the results and the mood going forward into fall buys should reflect this."

The company says that wholesale declines in the third quarter reflect lower domestic and Japanese wholesale sales, and are despite mid single-digit constant currency growth in Europe.

It means total net revenues for the third quarter were $1.2bn, 1% below the prior year period, despite higher same-store sales at the company's retail segment.

Indeed, an 8% improvement in Polo Ralph Lauren's gross profit rate reflects the same disciplined inventory management that affected its own wholesale orders earlier this year.

Having assumed direct control of its key Asian markets on 1 January, the company is expecting its operations there to share the buoyant characteristics of its retail model.

However, being well-aware there is more money to be made in wholesale - $12m during the third quarter in Polo Ralph Lauren's case - it will be looking to get wholesale orders back on track in its next fiscal year.