Ralph Lauren Soars, but Was the Quarter Really So Stellar?

[Stocks-to-Watch]

Ralph Lauren (RL) rose sharply in early trading after beating fiscal third quarter earnings expectations.

The preppy apparel maker posted $1.78 of EPS, 11 cents better than expectations. Revenue of $1.81 billion beat expectations for $1.75 billion. The company said it now expects to post 20% sales growth for its current fiscal year (the company is in the fourth fiscal quarter), narrowing its prior forecast for growth in the high-teens to low-20′s.

Shares rose 12% in early trading. But analyst Brian Sozzi,, chief strategist for NBG Productions, wrote that the earnings beat was of only “so-so” quality, as the timing of expenses appeared to account for part of it.

“I wouldn’t characterize the quarter as amazing, rather very much reflective of why I wasn’t going to recommend the name into the release. There were soft spots to the report that are at least warranting of a near-term reassessment on the company’s valuation. The market is fixated on the next six months for Polo, which is likely to be a period where rampant inflation from calendar 2011 that hammered gross margins will reverse, leaving that tailwind along with good realization of price increases and increasing international sales mix.”

Original Article Source by Barrons.com