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Ralph Lauren (RL) to Report Q4 Earnings: What's in Store?

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Ralph Lauren Corporation (RL - Free Report) is slated to release fourth-quarter fiscal 2019 results on May 14, before the opening bell. The company has an impressive earnings surprise history, having outpaced estimates in the last 16 quarters. Also, it delivered average four-quarter positive earnings surprise of 6.9%.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at 93 cents, reflecting 3.3% growth from the year-ago reported figure. Notably, the consensus mark remained unchanged in the last 30 days.

Ralph Lauren Corporation Price, Consensus and EPS Surprise


Ralph Lauren Corporation Price, Consensus and EPS Surprise | Ralph Lauren Corporation Quote

Let’s see how things are shaping up prior to the earnings announcement.

Factors at Play

Ralph Lauren has been benefiting from initiatives — including a stringent focus on consumer demand, efforts to elevate and energize brands, and balance growth and productivity. These efforts have aided the company in witnessing a robust earnings and sales surprise trend over the past several quarters. Driven by these actions, the company reported higher average unit retail and continued improvement in quality of sales in the last reported quarter, which is likely to sustain in the upcoming quarterly results.

Moreover, significant progress on the Next Great Chapter growth plan has been aiding its earnings performance over the past few quarters. The company expects to execute this growth plan through five priorities — including winning over a new generation of customers; energizing core products and accelerating underdeveloped categories; drive targeted expansion in its regions and channels; lead with digital; and operate with discipline to fuel growth. These efforts should boost top and bottom-line growth in the fiscal fourth quarter.

Ralph Lauren is well on track with the restructuring plan. The company recently outlined a restructuring plan (Fiscal 2019 Restructuring Plan), which is likely to generate savings of roughly $60-$80 million in fiscal 2019. These savings will be incremental to savings of roughly $140 million to be realized in association with the Way Forward Plan. These savings should reflect margin gains in the to-be-reported quarter.

Additionally, the company’s upcoming results will mirror gains from the focus on international and digital expansion.

Despite these positives, the North America Wholesale business continues to suffer due to soft in-store traffic. The company expects continuation of planned reduction of off-price sales to hurt results in the fiscal fourth quarter. Further, it anticipates reducing off-price penetration in broader wholesale channel throughout fiscal 2019, as it aims to reposition off-price back to the original purpose of being used as a platform to clear excess inventory. Meanwhile, full-price wholesale sales continue to be pressured by the company’s planned actions to improve quality of sales and exits from lower quality distribution. For fiscal 2019, it expects low to mid-single-digit decline in underlying wholesale revenues in North America.

Furthermore, currency headwinds are likely to impact revenue growth throughout fiscal 2019. The company estimates foreign currency to negatively impact revenue growth by 80-90 bps (75 bps previously mentioned) and have minimal impact on operating margin in fiscal 2019. For the fiscal fourth quarter, currency headwinds are expected to mar revenue growth by approximately 300 bps and operating margin by 60 bps.

Zacks Model
Our proven model does not conclusively show that Ralph Lauren is likely to beat earnings estimates in the fiscal fourth quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ralph Lauren has an Earnings ESP of +0.00% and Zacks Rank #2. While the positive rank increases the predictive power of earnings, an ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Children's Place Inc. (PLCE - Free Report) has an Earnings ESP of +9.96% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

lululemon athletica inc. (LULU - Free Report) has an Earnings ESP of +0.51% and a Zacks Rank #1.

V.F. Corporation (VFC - Free Report) has an Earnings ESP of +1.64% and a Zacks Rank #2.

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