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Ralph Lauren (RL) Down 11% Since Q3 Earnings: Here's Why
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Major designer, marketer and distributor of premium lifestyle products Ralph Lauren Corporation (RL - Free Report) has been appearing bearish for quite some time. The company drew attention when it provided a bleak outlook, following its third-quarter fiscal 2017 results. Concurrently, management announced that Stefan Larsson, the company’s CEO and President, will step down from the posts on May 1.
The decision came after a conflict of opinions occurred between Stefan and the company’s Executive Chairman and Chief Creative Officer, Ralph Lauren, on the development of creative and consumer-facing parts of the business. Together, these factors weighed upon investors’ sentiment, which has caused Ralph Lauren’s shares to tumble 11.3%.
Moreover, shares of this New York based company have declined 26.7% in the last three months, underperforming the Zacks categorized Consumer Discretionary sector’s growth of 9%. Moreover, its shares dropped 6.3% in the last one year, against the sector’s growth of about 32%.
Taking a look at the quarterly results, though Ralph Lauren topped third quarter earnings estimates, both top and bottom line declined year over year. Also, following the results, the company reiterated its dismal fiscal 2017 guidance and provided a bleak outlook for the fourth quarter.
Management expects fourth-quarter reported revenues to be down in the mid-teens range owing to the smooth execution of its actions to improve the quality of sales, lowered inventory receipts and fleet optimization plans which are in sync with the Way Forward plan. Further, the company expects currency woes to hurt revenue growth by nearly 100 bps and gross margin rate by about 70 bps respectively.
Further, sales calculations for the fourth quarter will be impacted by the inclusion of an additional 53rd week in fourth-quarter fiscal 2016. Finally, operating margin is expected to bear negative currency impact of nearly 100 bps. As a result of this drab view, the Zacks Consensus Estimate for the fourth quarter has trended downwards from 86 cents to 81 cents, over the last seven days.
Coming to fiscal 2017, the company reiterated its low double-digit percentage revenue decline forecast, in line with the Way Forward plan. The fall is likely to reflect from an intentional pullback in inventory receipts, closing of stores, harmonizing pricing and other quality of sales initiatives. However, the company expects currency to bear minimal effect on fiscal 2017 revenues, based on current exchange rates.
Nonetheless, Ralph Lauren remains on track with its Way Forward Plan that was announced in Jun 2016. In a nutshell, the plan is all about refocusing on the core business, strengthening the brands and returning the company to profitable growth in the long term. Ralph Lauren targets generating annualized cost savings worth $180–$220 million, on the back of its fiscal 2017 restructuring activities.
We remain confident of this Zacks Rank #3 (Hold) company’s solid brand portfolio and healthy financial status, which along with these constant growth initiatives should drive long-term profitability.
Lululemon has an average positive earnings surprise of 3.9% in the trailing four quarters. The stock, with a long-term growth rate of 15.9%, has seen positive estimate revisions in the last 30 days.
Rocky Brands carries a Value Style Score of “A” and shares of the company have gained 5.4% in the last six months.
Francesca's Holdings has a long-term EPS growth rate of 13.8%. Moreover, the company has delivered earnings beat consecutively, in the last four quarters.
Zacks' Top 10 Stocks for 2017
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Ralph Lauren (RL) Down 11% Since Q3 Earnings: Here's Why
Major designer, marketer and distributor of premium lifestyle products Ralph Lauren Corporation (RL - Free Report) has been appearing bearish for quite some time. The company drew attention when it provided a bleak outlook, following its third-quarter fiscal 2017 results. Concurrently, management announced that Stefan Larsson, the company’s CEO and President, will step down from the posts on May 1.
The decision came after a conflict of opinions occurred between Stefan and the company’s Executive Chairman and Chief Creative Officer, Ralph Lauren, on the development of creative and consumer-facing parts of the business. Together, these factors weighed upon investors’ sentiment, which has caused Ralph Lauren’s shares to tumble 11.3%.
Moreover, shares of this New York based company have declined 26.7% in the last three months, underperforming the Zacks categorized Consumer Discretionary sector’s growth of 9%. Moreover, its shares dropped 6.3% in the last one year, against the sector’s growth of about 32%.
Taking a look at the quarterly results, though Ralph Lauren topped third quarter earnings estimates, both top and bottom line declined year over year. Also, following the results, the company reiterated its dismal fiscal 2017 guidance and provided a bleak outlook for the fourth quarter.
Management expects fourth-quarter reported revenues to be down in the mid-teens range owing to the smooth execution of its actions to improve the quality of sales, lowered inventory receipts and fleet optimization plans which are in sync with the Way Forward plan. Further, the company expects currency woes to hurt revenue growth by nearly 100 bps and gross margin rate by about 70 bps respectively.
Further, sales calculations for the fourth quarter will be impacted by the inclusion of an additional 53rd week in fourth-quarter fiscal 2016. Finally, operating margin is expected to bear negative currency impact of nearly 100 bps. As a result of this drab view, the Zacks Consensus Estimate for the fourth quarter has trended downwards from 86 cents to 81 cents, over the last seven days.
Ralph Lauren Corporation Price and Consensus
Ralph Lauren Corporation Price and Consensus | Ralph Lauren Corporation Quote
Coming to fiscal 2017, the company reiterated its low double-digit percentage revenue decline forecast, in line with the Way Forward plan. The fall is likely to reflect from an intentional pullback in inventory receipts, closing of stores, harmonizing pricing and other quality of sales initiatives. However, the company expects currency to bear minimal effect on fiscal 2017 revenues, based on current exchange rates.
Nonetheless, Ralph Lauren remains on track with its Way Forward Plan that was announced in Jun 2016. In a nutshell, the plan is all about refocusing on the core business, strengthening the brands and returning the company to profitable growth in the long term. Ralph Lauren targets generating annualized cost savings worth $180–$220 million, on the back of its fiscal 2017 restructuring activities.
We remain confident of this Zacks Rank #3 (Hold) company’s solid brand portfolio and healthy financial status, which along with these constant growth initiatives should drive long-term profitability.
Zacks Rank & Key Picks
A better-ranked stocks in the same industry is Lululemon Athletica Inc. (LULU - Free Report) with a Zacks Rank #2 (Buy). Other well ranked stocks in the broader consumer discretionary sector include Rocky Brands, Inc. (RCKY - Free Report) and Francesca's Holdings Corporation , each with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lululemon has an average positive earnings surprise of 3.9% in the trailing four quarters. The stock, with a long-term growth rate of 15.9%, has seen positive estimate revisions in the last 30 days.
Rocky Brands carries a Value Style Score of “A” and shares of the company have gained 5.4% in the last six months.
Francesca's Holdings has a long-term EPS growth rate of 13.8%. Moreover, the company has delivered earnings beat consecutively, in the last four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>