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Standpoint Research Downgrades Ralph Lauren to ‘Hold’


Aug. 12 2016, Published 1:36 p.m. ET

Price movement

Ralph Lauren (RL) has a market cap of $9.0 billion. It rose by 5.4% to close at $108.70 per share on August 11, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 15.3%, 10.3%, and -1.4%, respectively, on the same day. RL is trading 11.1% above its 20-day moving average, 14.3% above its 50-day moving average, and 8.5% above its 200-day moving average.

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Related ETF and peers

The First Trust Large Cap Value AlphaDex ETF (FTA) invests 0.73% of its holdings in Ralph Lauren. The ETF tracks an index that selects and weights value stocks from the S&P 500 Value Index using fundamental factors including sales, book value, and cash flows. The YTD price movement of FTA was 10.1% on August 11.

The market caps of Ralph Lauren’s competitors are as follows:

  • VF (VFC) — $26.6 billion
  • HanesBrands (HBI) — $10.4 billion
  • PVH (PVH) — $8.3 billion

Ralph Lauren’s ratings

Standpoint Research has downgraded Ralph Lauren’s rating to “hold” from “buy.”

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Performance of Ralph Lauren in fiscal 1Q17

Ralph Lauren reported fiscal 1Q17 net revenues of $1.55 billion, a fall of 4.1% from the net sales of $1.62 billion in fiscal 1Q16. Revenue from its Wholesale, Retail, and Licensing segments fell by 5.5%, 3.0%, and 7.3%, respectively, between fiscals 1Q16 and 1Q17. The company’s gross profit margin fell by 3.4%.

Its net income and EPS (earnings per share) fell to -$22.0 million and -$0.27, respectively, in fiscal 1Q17, compared with $64.0 million and $0.73, respectively, in fiscal 1Q16. It reported adjusted EPS of $1.06 in fiscal 1Q17.

Ralph Lauren’s cash and cash equivalents and inventories rose by 0.22% and 10.4%, respectively, between fiscals 4Q16 and 1Q17. Its current ratio fell to 2.3x and its debt-to-equity ratio rose to 0.72x in fiscal 1Q17, compared with 2.5x and 0.66x, respectively, in fiscal 4Q16.


Ralph Lauren (RL) has made the following projections for 2Q17 and 2017:

Fiscal 2Q17

  • consolidated net revenues to fall to mid-to-high single digits
  • tax rate of ~29%
  • operating margin to fall ~2.0%–2.5% from fiscal 2Q16

Fiscal 2017

  • consolidated net revenues to fall at a low-double-digit rate, which includes a proactive pullback in inventory receipts, store closures, pricing harmonization and other sale initiatives, and a weak retail and high promotional environment in the United States
  • operating margin of ~10%
  • tax rate of ~29%
  • annualized expense savings of $180 million–$220 million from restructuring activities related to changes in the organizational structure and rightsizing its cost structure and real estate portfolio

In the next part, we’ll take a look at Under Armour.


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