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Why Is Ralph Lauren (RL) Up 12.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Ralph Lauren (RL - Free Report) . Shares have added about 12.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ralph Lauren due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Ralph Lauren’s Q2 Earnings & Revenues Surpass Estimates
Ralph Lauren has posted impressive second-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Results have gained from robust demand and brand strength. The company has been on track with its Next Great Chapter: Accelerate plan.
RL has reported adjusted earnings per share of $2.10 for the fiscal second quarter, surpassing the Zacks Consensus Estimate of $1.92. However, the bottom line fell 5.8% year over year from $2.23 in the year-ago quarter.
Net revenues grew 3% year over year to $1,633 million and beat the Zacks Consensus Estimate of $1,609 million. On a constant-currency (cc) basis, revenues were up 2% from the prior-year quarter. The top line witnessed the positive impacts of 170 basis points (bps) from foreign currency rates. Also, the top line witnessed growth across all regions, driven by brand strength, pricing efforts and continued strategic investments.
Segmental Details
North America: In the fiscal second quarter, the segment’s revenues declined 1% from the year-ago quarter to $718 million and came ahead of our estimate of $688.1 million. Comparable store sales (comps) for North America’s retail channel rose 4% year over year, wherein the same for brick-and-mortar stores moved up 4%, while digital commerce decreased 4%. Revenues from the North America wholesale business decreased 7% year over year.
Europe: The segment’s revenues rose 7% year over year to $527 million, while it remained flat on currency-neutral revenues. The metric lagged our estimate of $542.9 million. Comps for the retail channel in Europe were up 6%, whereas brick-and-mortar stores grew 5% year over year and digital sales witnessed a 14% rise. Revenues for the segment’s wholesale business were flat on a reported basis, while it fell 7% at cc.
Asia: The segment’s revenues increased 10% year over year to $348 million on a reported basis and 13% on a currency-neutral basis. The metric beat our estimate of $335.4 million. Comps in Asia were up 8%, backed by 7% growth in brick-and-mortar stores and a 19% increase in the digital business.
Margins
Ralph Lauren's adjusted gross profit margin expanded 80 bps year over year on a reported basis and on a cc basis to 65.4%. This was mainly driven by solid AUR growth across all regions, a favorable channel and geographic mix, and reduced freight, which more than offset continued pressure from raw material costs.
Adjusted operating expenses rose 11% from the year-ago period to $897 million in the fiscal second quarter, driven by higher compensation, and rent & occupancy costs, and higher digital and marketing investments. Adjusted operating expenses, as a percentage of sales, expanded 370 bps to 54.9% in the reported quarter.
The company’s adjusted operating income was $172 million, down 18.8% year over year. The adjusted operating margin contracted 290 bps year over year to 10.5%.
Financials
Ralph Lauren ended the quarter with cash and short-term investments of $1,466.9 million, a total debt of $1,139.5 million and total shareholders’ equity of $2,369.2 million. Inventory grew 11.6% year over year to $1,195.3 million.
The company repurchased Class A shares for about $125 million in the fiscal second quarter.
As of Sep 30, 2023, capital expenditure was $82.4 million. Management expects a capital expenditure of $250 million for fiscal 2024.
Outlook
For fiscal 2024, RL anticipates year-over-year revenue growth (cc) in the low-single digits. This includes 50 bps of negative impacts of currency. The company is concerned about the wholesale channel. The gross margin is forecast to expand 120-170 bps, up from the prior mentioned 100 bps on a constant-currency basis, driven by solid AUR, a favorable channel and geographic mix, and lower freight costs, which more than offset continued product cost inflation. The metric includes 30 bps of adverse impacts of foreign currency. The operating margin is predicted to expand 30-50 bps to 12.3-12.5% on the back of gross margin expansion, partly offset by adverse currency impacts of 10 bps. The fiscal 2024 tax rate is likely to be 22-23% compared with the previously stated 23-24%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -9.71% due to these changes.
VGM Scores
At this time, Ralph Lauren has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ralph Lauren has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Ralph Lauren belongs to the Zacks Textile - Apparel industry. Another stock from the same industry, Crocs (CROX - Free Report) , has gained 31.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Crocs reported revenues of $1.05 billion in the last reported quarter, representing a year-over-year change of +6.2%. EPS of $3.25 for the same period compares with $2.97 a year ago.
For the current quarter, Crocs is expected to post earnings of $2.29 per share, indicating a change of -13.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.
Crocs has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Ralph Lauren (RL) Up 12.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Ralph Lauren (RL - Free Report) . Shares have added about 12.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ralph Lauren due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Ralph Lauren’s Q2 Earnings & Revenues Surpass Estimates
Ralph Lauren has posted impressive second-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Results have gained from robust demand and brand strength. The company has been on track with its Next Great Chapter: Accelerate plan.
RL has reported adjusted earnings per share of $2.10 for the fiscal second quarter, surpassing the Zacks Consensus Estimate of $1.92. However, the bottom line fell 5.8% year over year from $2.23 in the year-ago quarter.
Net revenues grew 3% year over year to $1,633 million and beat the Zacks Consensus Estimate of $1,609 million. On a constant-currency (cc) basis, revenues were up 2% from the prior-year quarter. The top line witnessed the positive impacts of 170 basis points (bps) from foreign currency rates. Also, the top line witnessed growth across all regions, driven by brand strength, pricing efforts and continued strategic investments.
Segmental Details
North America: In the fiscal second quarter, the segment’s revenues declined 1% from the year-ago quarter to $718 million and came ahead of our estimate of $688.1 million. Comparable store sales (comps) for North America’s retail channel rose 4% year over year, wherein the same for brick-and-mortar stores moved up 4%, while digital commerce decreased 4%. Revenues from the North America wholesale business decreased 7% year over year.
Europe: The segment’s revenues rose 7% year over year to $527 million, while it remained flat on currency-neutral revenues. The metric lagged our estimate of $542.9 million. Comps for the retail channel in Europe were up 6%, whereas brick-and-mortar stores grew 5% year over year and digital sales witnessed a 14% rise. Revenues for the segment’s wholesale business were flat on a reported basis, while it fell 7% at cc.
Asia: The segment’s revenues increased 10% year over year to $348 million on a reported basis and 13% on a currency-neutral basis. The metric beat our estimate of $335.4 million. Comps in Asia were up 8%, backed by 7% growth in brick-and-mortar stores and a 19% increase in the digital business.
Margins
Ralph Lauren's adjusted gross profit margin expanded 80 bps year over year on a reported basis and on a cc basis to 65.4%. This was mainly driven by solid AUR growth across all regions, a favorable channel and geographic mix, and reduced freight, which more than offset continued pressure from raw material costs.
Adjusted operating expenses rose 11% from the year-ago period to $897 million in the fiscal second quarter, driven by higher compensation, and rent & occupancy costs, and higher digital and marketing investments. Adjusted operating expenses, as a percentage of sales, expanded 370 bps to 54.9% in the reported quarter.
The company’s adjusted operating income was $172 million, down 18.8% year over year. The adjusted operating margin contracted 290 bps year over year to 10.5%.
Financials
Ralph Lauren ended the quarter with cash and short-term investments of $1,466.9 million, a total debt of $1,139.5 million and total shareholders’ equity of $2,369.2 million. Inventory grew 11.6% year over year to $1,195.3 million.
The company repurchased Class A shares for about $125 million in the fiscal second quarter.
As of Sep 30, 2023, capital expenditure was $82.4 million. Management expects a capital expenditure of $250 million for fiscal 2024.
Outlook
For fiscal 2024, RL anticipates year-over-year revenue growth (cc) in the low-single digits. This includes 50 bps of negative impacts of currency. The company is concerned about the wholesale channel. The gross margin is forecast to expand 120-170 bps, up from the prior mentioned 100 bps on a constant-currency basis, driven by solid AUR, a favorable channel and geographic mix, and lower freight costs, which more than offset continued product cost inflation. The metric includes 30 bps of adverse impacts of foreign currency. The operating margin is predicted to expand 30-50 bps to 12.3-12.5% on the back of gross margin expansion, partly offset by adverse currency impacts of 10 bps. The fiscal 2024 tax rate is likely to be 22-23% compared with the previously stated 23-24%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -9.71% due to these changes.
VGM Scores
At this time, Ralph Lauren has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ralph Lauren has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Ralph Lauren belongs to the Zacks Textile - Apparel industry. Another stock from the same industry, Crocs (CROX - Free Report) , has gained 31.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Crocs reported revenues of $1.05 billion in the last reported quarter, representing a year-over-year change of +6.2%. EPS of $3.25 for the same period compares with $2.97 a year ago.
For the current quarter, Crocs is expected to post earnings of $2.29 per share, indicating a change of -13.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.
Crocs has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.