Earlier today Polo Ralph Lauren (NYSE:RL) shocked the street with a huge earnings surprise to the upside. Analysts had been expecting the company to earn 65 cents per share, but they came in with results of $1.00 per share. As one might expect the stock has responded very positively, jumping by more than 11% on the day. The fact that RL was able to bring in this kind of a number in this negative of a retail environment was a huge surprise to everyone on the street.
So how exactly did they do it? First of all the company had surprisingly strong sales of its products. Retail sales grew 16 percent from a year ago. Wholesale sales jumped by 25 percent from this period a year ago. Another big help in the quarter was the much lower tax rate of 28% versus 39% in the same quarter a year ago. The company said that much of that lower tax rate was achieved due to a higher portion of their sales coming from lower-taxed jurisdictions outside the United States. The company's COO said that he was particularly impressed by their quarterly results because of the long-term commitments they have made during the past few months.
Other companies in the same type of market saw their shares react very positively to the Polo Ralph Lauren news today as well. Coach Inc (NYSE:COH), which also operates in the high-end retail group, shares are higher by 3.55% thus far on the day. VF Corporation (NYSE:VFC) shares are higher by almost 2% on the day. The Warnaco Group (NYSE:WRC), which sells apparel under names such as Calvin Klein, shares have popped higher by 5.23% so far today.
It will be interesting to see whether this is a company specific surprise or if more and more retail names come in with results that are not nearly as bad as analysts have expected. If more retail companies start surprising to the upside it will most certainly give investors hope that the consumer spending fallout will not be as substantial as many have feared.
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