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Here's How Ralph Lauren (RL) Looks Just Ahead of Q4 Earnings

Zacks Equity Research

Ralph Lauren Corporation RL is slated to release fourth-quarter fiscal 2020 results on May 27, before the opening bell. In the last reported quarter, the premium designer of lifestyle products delivered a positive earnings surprise of 16.7%. Moreover, its bottom line beat the Zacks Consensus Estimate by 11.3%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s fiscal fourth-quarter stands at a loss per share of 5 cents, suggesting growth of 104.7% from the year-ago quarter’s reported figure. The consensus mark has declined over the past 30 days from earnings of 13 cents anticipated previously. For fiscal fourth-quarter revenues, the consensus mark is pegged at $1.32 billion, suggesting 12.6% decline from the prior-year quarter’s reported figure.

Ralph Lauren Corporation Price and EPS Surprise

Ralph Lauren Corporation Price and EPS Surprise

Ralph Lauren Corporation price-eps-surprise | Ralph Lauren Corporation Quote

Key Factors to Note

Ralph Lauren’s fourth-quarter fiscal 2020 top and bottom lines are likely to reflect significant impacts of temporary store closures in North America since Mar 18 along with earlier shutdowns in China and Europe due to the coronavirus pandemic. In mid-February, the company temporarily closed nearly two-thirds of its stores in Mainland China in response to the coronavirus outbreak. It then predicted reduced travel and retail traffic across its businesses in China, and parts of Asia to significantly hurt results in fourth-quarter fiscal 2020. It estimated that the situation in China, Japan and Korea will reduce its Asia operation’s fourth-quarter net sales by $55-$70 million and operating income by $35-$45 million.

Driven by the extended store closures, the company has been furloughing staff, reducing salary and lowering compensations to preserve financial stability. Additionally, the company has been burdened with costs of deep cleansing all work stations and implementing staggered schedules in distribution centers. However, the company’s online sites and mobile apps have been functional.

The company is expected to provide a complete update on the financial impacts of the coronavirus outbreak as well as its outlook for the first quarter and fiscal 2021 on its fourth-quarter fiscal 2020 earnings call.

Furthermore, for the fiscal fourth quarter, the company expects currency headwinds to mar revenue growth by 50 bps. Additionally, the company’s results are likely to reflect the impacts of supply chain diversification out of China and tariffs. The company expects majority of this impact to be reflected in the fiscal fourth-quarter results.

Although concerns regarding the estimated impacts of coronavirus outbreak across several countries continue to linger, the company’s fundamentals remain intact. The top and the bottom lines have been benefiting from strength across all businesses, stringent cost discipline and continued investment in brand elevation and other strategic endeavors. Further, its international and digital businesses have been growth drivers.

Zacks Model
Our proven model does not conclusively predict an earnings beat for Ralph Lauren this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ralph Lauren carries a Zacks Rank #5 (Strong Sell) and an Earnings ESP of +122.22%.

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:

Big Lots, Inc. BIG presently has an Earnings ESP of +19.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Kroger Co. KR has an Earnings ESP of +1.70% and a Zacks Rank #2 at present.

Guess, Inc. GES currently has an Earnings ESP of +12.75% and a Zacks Rank #2.

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