Shares of Polo Ralph Lauren (NYSE:RL) stumbled more than 4% in early trading on Tuesday while the market digested the company's announcement that full-year fiscal 2006 earnings will come in below earlier projections. But even though no one likes lower earnings, investors would be smart to ride out this bump in the road. Let's take a closer look.

The luxury-goods outfit reported Tuesday that fiscal third-quarter revenue rose 10% year over year to $995 million, while earnings per share climbed 16.7% to $0.84. The bottom line easily outpaced analysts' estimates of $0.76 per share, but Polo soured the mood by noting that its earnings for the year will fall in the $2.80- to $2.85-per-share range, down from a forecast of $2.85 to $2.92 laid out last quarter.

Polo cited two culprits behind the reduced expectations. First, the company's recently disclosed acquisition of the Polo Jeans business from Jones Apparel (NYSE:JNY) is expected to shave $0.05 from full-year EPS. Second, the scuttling of Club Monaco Caban Home Stores and the closure of all five Club Monaco outlets stores are projected to trim $0.10 per share.

But here's the silver lining that makes Polo worth owning. Polo is closing the Club Monaco stores because it is doing a better job of managing inventory; it no longer needs to sell Club Monaco merchandise at cut-rate prices through outlet locations. Outlets only tend to dilute the value of a luxury brand like Club Monaco, so getting rid of the stores is not necessarily a bad thing.

What's more, if we look again at Polo's third-quarter results, we see numbers suggesting that there's a lot going right. Wholesale sales rose just 6% to $454 million, but the wholesale operating margin hit 18.1%, compared with 14.4% in 2005's fiscal third quarter. Retail sales jumped 15% to $479 million, and the operating margin increased to 13.3% from 11.8%. And comparable-store sales rose 7.4% overall -- at the unit levels, those increases were 10.2% at Ralph Lauren, 7.1% at Club Monaco, and 6.3% at factory stores.

Polo's longer view is also encouraging. The company expects fiscal 2007 earnings between $3.00 and $3.10 per share; that includes stock compensation expense of $0.15 per share, to be factored in starting with 2007's fiscal first quarter. At about 18.5 times the low-end estimate of 2007 GAAP earnings, Polo shares seem worth a look.

Ultimately, in the long run, Polo will pick up the pace.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.