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Overview: Ralph Lauren Delivers Earnings Beat, EPS Drops 2.8%

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Snapshot of this series

Fashion giant Ralph Lauren (RL) reported its results for fiscal 1Q17 on Wednesday, August 10, 2016, for the period ended July 2, 2016. The company reported an adjusted profit of $1.06 per share, which was $0.17, or 19%, higher than Wall Street analysts’ consensus of $0.89 per share.

Ralph Lauren’s earnings per share (or EPS) slipped by 2.8% as compared to $1.09 recorded in fiscal 1Q16. However, when compared sequentially with fiscal 4Q16, its earnings increased by almost 20% from $0.88 per share.

The company reported a 4.1% YoY (year over year) decline in revenue to ~$1.6 billion. However, the company’s performance was better than the Wall Street estimates by $26 million.

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About Ralph Lauren

Founded in 1967, Ralph Lauren (RL) is one of the largest branded apparel companies in the US. The company is involved in the design, marketing, and distribution of premium lifestyle products in four categories: apparel, home, accessories, and fragrances.

The company’s well-known brands include:

  • Polo Ralph Lauren
  • Ralph Lauren Purple Label
  • Ralph Lauren Collection
  • Black Label
  • Lauren by Ralph Lauren
  • American Living
  • Chaps
  • Club Monaco

Ralph Lauren (RL) has a strong international presence. It derived more than 35% of its revenues from outside the US in fiscal 2016. The company outsources the manufacturing of its products to 700 different manufacturers worldwide and does not directly operate any production facilities. Ralph Lauren sells its products through its Wholesale, Retail, and Licensing segments.

The First Trust Large Cap Value AlphaDex ETF (FTA) invests 0.76% of its holdings in Ralph Lauren.

Valuations update and stock recommendation

On August 12, 2016, Ralph Lauren was trading at a one-year forward price-to-earnings ratio of 20x, compared to 10.5x, 15.4x, and 19.2x for Michael Kors (KORS), PVH Corp. (PVH), and VF Corp. (VFC), respectively.

The average 12-month price target by 21 analysts covering RL is $105.94, which suggests the stock could lose about 2% of its value over the next one-year period.

Seven of the 21 analysts have recommended a “buy” on the stock and 14 have recommended a “hold.” No analyst has given a “sell” rating.

What does this series cover?

In this series, we’ll provide an earnings overview of Ralph Lauren’s fiscal 1Q17 results. We’ll review the company’s performance in fiscal 1Q17, analyze the key revenue drivers, and look at the company’s stock market performance.

We’ll analyze RL’s valuations while comparing them with other fashion and apparel companies such as VF Corp. (VFC), PVH Corp. (PVH), Hanesbrands (HBI), Coach (COH), and Michael Kors (KORS).

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