Opinions
Kash Pashootan
Polo Ralph Lauren Corp.
RL-N
COMMENT
Aug 14, 2015
Stock price when the opinion was issued
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Ralph Lauren Corporation is a global leader in the design, marketing and distribution of premium lifestyle products in five categories: apparel, footwear & accessories, home, fragrances and hospitality. For more than 50 years, Ralph Lauren's reputation and distinctive image have been consistently developed across an expanding number of products, brands and international markets. The Company's brand names, which include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps and Club Monaco, among others, constitute one of the world's most widely recognized families of consumer brands.
RL reported in the last week of May an impressive Q4 earnings and revenue beat. On a constant-currency basis, earnings rose 9% YOY. True, North American revenues slipped 3% while comp store sales declined 4% and e-commerce shed 3%. However, the overall North American wholesale business gained 11%. European revenues were -1% YOY, but the stores advanced 8% and online business rose 6%. Take note of Asia with revenues jumping 13% YOY with 20% growth in traditional stores and 19% in the digital business. Adjusted operating expenses increased 3%. EPS clocked in at $0.90, easily beating the expected the $0.61 forecast.
It is difficult to predict where consumer preferences are going to be in terms of what they buy next year. This company’s focus has been to expand internationally. Right now about 70% of their revenues come from the US. About 13% of their revenue comes from China, and they want to get that up to 20%. They want to grow their accessories line as they feel accessories don’t go out of favour as quickly as clothing. Also, want to beef up their sports apparel line that they are going to roll out in the fall. Have some good growth initiatives on the horizon, but there is going to be a bridging period going from the US globally, and so far they have not been able to execute that.