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Ralph Lauren's Prospects Look Impressive: Should You Hold?
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Premium lifestyle retailer Ralph Lauren Corporation (RL - Free Report) appears promising given its Way Forward Plan, robust brand portfolio and impressive earnings surprise history. The stock yielded a return of 13.6% in the past six months, outperforming the Zacks categorized Textile-Apparel Manufacturing industry's 3% decline. Let’s find out more about the stock.
Driving Catalysts
Ralph Lauren is a leading specialty retailer of premium lifestyle merchandise in the U.S., commanding a stellar portfolio of globally recognized brands that provide it an edge over its peers. Further, the company is on track with its Way Forward Plan, announced in Jun 2016, aimed at evolving the company’s core business and reviving its operating structure. Further, in a bid to improve assortments, it is planning to discontinue unproductive styles, thus reducing the number of Stock Keeping Units.
Additionally, management continues to identify and close underperforming stores under its Way Forward Plan. We believe that this will not only aid the company in lowering its operating costs, but also aid the top and the bottom line, going forward.
All these factors helped the company deliver the seventh straight quarter of a positive surprise in second-quarter fiscal 2017. Notably, this Zacks Rank #3 (Hold) company presents a solid earnings history, with positive earnings surprises delivered in 20 out of the past 22 quarters. Consequently, the Zacks Consensus Estimate of $5.52 and $5.90 for fiscal 2017 and fiscal 2018 has increased 8 cents and 7 cents, respectively, in the past 60 days.
Looking ahead, Ralph Lauren targets generating annualized cost savings worth $180–$220 million, on the back of its fiscal 2017 restructuring activities. Moreover, management remains confident of its performance, based on systematic infrastructural investments, eCommerce enhancements and improved product pricing.
Hurdles
However, we believe the company’s results will suffer in the near term, particularly fiscal 2017. In sync with its Way Forward Plan, the company reiterated its previously stated dismal fiscal 2017 view, and provided a soft sales and margins outlook for the fiscal third quarter. Moreover, revenue growth for both periods is expected to be impacted by the company’s actions to improve the quality of sales, lowered inventory buys, store closures, price management and other initiatives. It expects fiscal third-quarter revenues to be down in the low double digits to down low-teens range.
Further, the company’s margins are expected to be hurt by a rise in new store expenses, negative currency impacts, infrastructure investments and fixed expense deleverage. Though the company anticipates currency headwinds to have lesser impact on the company’s revenue growth, it is likely to reduce gross margin by about 120 bps.
Some better-ranked stocks include The Children's Place, Inc. (PLCE - Free Report) , Perry Ellis International, Inc. , and Tailored Brands, Inc. .
The Children's Place, with a long-term earnings growth rate of 10.3%, has surged 96.4% year to date. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Perry Ellis, which carries a Zacks Rank #2 (Buy), has gained roughly 49.5% year to date.
Tailored Brands, a Zacks Rank #2 stock with a long-term earnings growth rate of 17.5%, has skyrocketed 137.4% in the past six months.
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Ralph Lauren's Prospects Look Impressive: Should You Hold?
Premium lifestyle retailer Ralph Lauren Corporation (RL - Free Report) appears promising given its Way Forward Plan, robust brand portfolio and impressive earnings surprise history. The stock yielded a return of 13.6% in the past six months, outperforming the Zacks categorized Textile-Apparel Manufacturing industry's 3% decline. Let’s find out more about the stock.
Driving Catalysts
Ralph Lauren is a leading specialty retailer of premium lifestyle merchandise in the U.S., commanding a stellar portfolio of globally recognized brands that provide it an edge over its peers. Further, the company is on track with its Way Forward Plan, announced in Jun 2016, aimed at evolving the company’s core business and reviving its operating structure. Further, in a bid to improve assortments, it is planning to discontinue unproductive styles, thus reducing the number of Stock Keeping Units.
Additionally, management continues to identify and close underperforming stores under its Way Forward Plan. We believe that this will not only aid the company in lowering its operating costs, but also aid the top and the bottom line, going forward.
All these factors helped the company deliver the seventh straight quarter of a positive surprise in second-quarter fiscal 2017. Notably, this Zacks Rank #3 (Hold) company presents a solid earnings history, with positive earnings surprises delivered in 20 out of the past 22 quarters. Consequently, the Zacks Consensus Estimate of $5.52 and $5.90 for fiscal 2017 and fiscal 2018 has increased 8 cents and 7 cents, respectively, in the past 60 days.
Looking ahead, Ralph Lauren targets generating annualized cost savings worth $180–$220 million, on the back of its fiscal 2017 restructuring activities. Moreover, management remains confident of its performance, based on systematic infrastructural investments, eCommerce enhancements and improved product pricing.
Hurdles
However, we believe the company’s results will suffer in the near term, particularly fiscal 2017. In sync with its Way Forward Plan, the company reiterated its previously stated dismal fiscal 2017 view, and provided a soft sales and margins outlook for the fiscal third quarter. Moreover, revenue growth for both periods is expected to be impacted by the company’s actions to improve the quality of sales, lowered inventory buys, store closures, price management and other initiatives. It expects fiscal third-quarter revenues to be down in the low double digits to down low-teens range.
Further, the company’s margins are expected to be hurt by a rise in new store expenses, negative currency impacts, infrastructure investments and fixed expense deleverage. Though the company anticipates currency headwinds to have lesser impact on the company’s revenue growth, it is likely to reduce gross margin by about 120 bps.
RALPH LAUREN CP Price and Consensus
RALPH LAUREN CP Price and Consensus | RALPH LAUREN CP Quote
Stocks that Warrant a Look
Some better-ranked stocks include The Children's Place, Inc. (PLCE - Free Report) , Perry Ellis International, Inc. , and Tailored Brands, Inc. .
The Children's Place, with a long-term earnings growth rate of 10.3%, has surged 96.4% year to date. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Perry Ellis, which carries a Zacks Rank #2 (Buy), has gained roughly 49.5% year to date.
Tailored Brands, a Zacks Rank #2 stock with a long-term earnings growth rate of 17.5%, has skyrocketed 137.4% in the past six months.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>