Ralph Lauren Impressed With Ralph Lauren's Performance

When your brand is all about image and making people feel good about the way they look, it's no wonder you might be a little self-centered. Yesterday, Ralph Lauren (NYSE: RL  ) released its fourth-quarter results, announcing that they were "better-than-expected" -- it's unclear who was expecting worse. Apparently, not Ralph Lauren itself.

Back in the third quarter, the company forecast fourth-quarter retail revenue growth of 8% to 11% -- it managed 7%. It also predicted flat wholesale revenue, which actually fell 4% instead. In Ralph's defense, it did manage to beat its own expectation on operating margin expansion, pushing the metric up to 11.1%.

Hold off on that champagne for just a second
Investors were less impressed with the designer. The stock fell 2.3% on the day, and was down after-hours as well. While the company did beat analysts' expectations on a per-share basis, the revenue miss dragged the price down.

On the retail side, comparable-store sales grew 3% in the fourth quarter. That's a better result than most companies have been turning in this week, but not as strong as other luxury players. Saks (UNKNOWN: SKS.DL  ) , which reported first-quarter results on Tuesday, grew comparable-store sales by 5.9%, leading the current pack. Saks' strong growth reflected the company's strong brand, and the smaller growth at Ralph does the same.

Still, it could have been worse. The increase in operating margin shows that management has a hold on the company's costs, even if sales are sluggish. Even the 3% comparable-sales growth wasn't bad. Gap (NYSE: GPS  ) also released earnings yesterday, and it only managed a 2% increase in comparable sales.

Even with all those positive points, Ralph Lauren still didn't turn in what anyone would call a "great" quarter. Wholesale revenue, which makes up almost half of total revenue, dropped 4%. That fall was due to the discontinuation of the company's American Living line, but it also stemmed from less demand overall. Putting a positive spin on things, the company did manage to increase operating margin in the wholesale channel through favorable product mix.

The bottom line
Ralph Lauren has been pretty good to investors over the last year, but I don't see anything special about this company. It has the benefit of being cheaper -- on a price-to-earnings basis -- than Saks, but doesn't seem to be even close to as dynamic. Even Gap seems to be doing more interesting things than Ralph, and it's substantially cheaper.

Ralph's main benefit is that the company is so well known that it feels very low-risk. It's clicking along, growing but not astounding. I think the company has a lot of potential in its wholesale business, especially as it looks to expand in Asia and Latin America, but that growth is still a ways off. Instead of jumping in with both feet, I'm looking for other brands that manage to impress me -- instead of just themselves.

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