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Ralph Lauren (RL) Stock Up on Business Re-organization Plans

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Zacks Equity Research
·4 min read
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Ralph Lauren Corporation RL announced measures to accelerate its “Next Great Chapter plan”, which includes creating a simplified global organizational structure and rolling out improved technological capabilities. Well, the company’s share price increased 5.4% during trading session on Sep 22.

Ralph Lauren unveiled its plans to curtail its global workforce by the end of fiscal 2021 under its “Fiscal 2021 Strategic Realignment Plan”. By reducing its workforce it expects to see gross annualized pre-tax expense savings between $180 million to $200 million. These savings are anticipated to be realized mainly from the start of fiscal 2022. However, management is likely to incur total pre-tax charges in the range of $120-$160 million in this process.

Under the company’s Simplified Organizational Structure initiative, it plans to consolidate its global Marketing and Branding functions. Also, Ralph Lauren will create a Consumer Intelligence and Experience (CIX) platform which will leverage consumer insights and predictive analytics to offer personalized consumer experiences. Apart from these, management expects to re-organizeits Corporate Merchandising teams with an aim to enhance productivity and connectivity. Moreover, the company is on track with integrating Global Citizenship & Sustainability into its business.

Speaking of its Digital Transformation initiative, Ralph Lauren is floating cloud-based human resources and planning system worldwide. Along with this, the company plans to augment its capabilities to better serve its consumers through the Digitizing the Value Chain project. Such initiatives are expected to simplify operations, improve team connect, alongside digitalizing product journey. Moreover, Ralph Lauren is investing in its technological capabilities to support functions like omni-channel shopping, augmented reality, personalization and social commerce.


 

We note that this Zacks Rank #4 (Sell) company has been under pressure due to adverse impacts of the coronavirus pandemic. Nevertheless, Ralph Lauren expects to exceed the top- and bottom-line targets under the “Next Great Chapter” plan that was announced in June 2018. The plan focuses on delivering sustainable long term growth and value creation. The company expects to execute this growth plan through five strategic priorities including – winning over a new generation of customers; energizing core products and accelerating under developed categories; drive targeted expansion in its regions and channels; lead with digital; and operate with discipline to fuel growth.

As part of the abovementioned plan, the company targets delivering low to mid-single digit revenue compounded annual growth rate (CAGR) and mid-teen operating margin by fiscal 2023, in constant currency. Additionally, it anticipates marketing spend to grow nearly 5% of revenue by fiscal 2023, while capital expenditure is expected to represent 4-5% of revenue. Furthermore, the company plans returning 100% free cash flow to shareholders in the next five years, amounting to about $2.5 billion on a cumulative basis through fiscal 2023 in the form of dividends and share repurchases.

Notably, shares of Ralph Lauren have increased 9% in the past six months compared with the industry’s growth of 46%.

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Crocs CROX, which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hanesbrands HBI,which sports a Zacks Rank #1, has a long-term earnings growth rate of 3.3%.

Guess? GES, with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 10.1%, on average.

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Ralph Lauren Corporation (RL) : Free Stock Analysis Report
 
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Crocs, Inc. (CROX) : Free Stock Analysis Report
 
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