Opinions
Elliott Fishman
Polo Ralph Lauren Corp.
RL-N
TOP PICK
Feb 19, 2016
Stock price when the opinion was issued
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Premium contentPremium contentPremium contentRalph 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.
Premium contentRL 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.
Is up 32% this year in a tricky year for apparel stocks. The stock has ripped since Taylor Swift announced her engagement (her and fiance were wearing RL). But Wall Street didn't love RL's investor day yesterday, falling 2.7% today. The new financial targets look disappointing, but RL promised steady margin expansion. Their share buyback plan is on schedule. More important is their plan to achieve growth: better marketing and customer retention, focusing on areas like menswear and women's outerwear; focusing on key cities to grow, and Asian strategy (key area of growth). The targets were not stunning, but still impressive and attainable. Trades at only 20x PE, despite a big run this year. RL should be trading a premium vs. the S&P. He remains bullish.
He is looking for a retailer and a fixer-upper, and this one looks awful. It is going to take a little bit of heart to buy here, but it is a name that is great. It has shown resilience and has worked hard at certain levels. The last time it was at $80 was in 2010. It tested it at the market selloff, but in here it is cheap. It is going to take some news to move it higher, and he doesn’t see a lot of downside. Just one half decent quarter and it is getting back up over $100.