Advertisement
U.S. markets open in 1 hour 55 minutes
  • S&P Futures

    5,307.00
    -1.25 (-0.02%)
     
  • Dow Futures

    40,141.00
    -3.00 (-0.01%)
     
  • Nasdaq Futures

    18,498.00
    -5.75 (-0.03%)
     
  • Russell 2000 Futures

    2,139.90
    +1.50 (+0.07%)
     
  • Crude Oil

    82.47
    +1.12 (+1.38%)
     
  • Gold

    2,232.60
    +19.90 (+0.90%)
     
  • Silver

    24.75
    -0.00 (-0.01%)
     
  • EUR/USD

    1.0796
    -0.0034 (-0.31%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • Vix

    13.00
    +0.22 (+1.72%)
     
  • dólar/libra

    1.2622
    -0.0016 (-0.12%)
     
  • USD/JPY

    151.3910
    +0.1450 (+0.10%)
     
  • Bitcoin USD

    70,692.70
    +632.16 (+0.90%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,955.74
    +23.76 (+0.30%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Ralph Lauren (RL) Stock Rises on Q2 Earnings & Revenues Beat

Shares of Ralph Lauren Corporation RL jumped more than 4% before the trading session on Nov 10, following the impressive second-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Results have gained from brand strength, solid demand, and expansion across all channels and regions. The company also announced the next phase of its Next Great Chapter: Accelerate plan.

The Zacks Rank #3 (Hold) company has reported adjusted earnings per share of $2.23 in the fiscal second quarter, surpassing the Zacks Consensus Estimate of $2.09. However, the bottom line declined 14.9% from the prior-year quarter’s $2.62.

Net revenues grew 5% year over year to $1,579.9 million and beat the Zacks Consensus Estimate of $1,560 million. On a constant-currency (cc) basis, revenues were up 13% from the prior-year quarter. The metric gained from solid growth across all regions. This was partly offset by the impacts of 800 basis points (bps) from adverse currency rates.

The company’s global digital ecosystem witnessed year-over-year mid-teens revenue growth.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Shares of RL have lost 8.2% in the past three months but came ahead of the industry’s decline of 13.5%.

Segmental Details

North America: In the fiscal second quarter, the segment’s revenues advanced 3% from the year-ago quarter to $727 million but lagged the consensus mark of $926.3 million. Comparable store sales (comps) for North America’s retail channel remained flat year over year, wherein brick-and-mortar stores remained stable, while digital commerce inched up 1%. Revenues from the North America wholesale business grew 8% year over year.

Europe: The segment’s revenues remained flat year over year to $494 million, with a 15% improvement in currency-neutral revenues. The metric also beat the consensus mark of $436.9 million. Comps for the retail channel in Europe were up 3%, whereas brick-and-mortar stores remained flat year over year and digital sales witnessed a 15% rise. Revenues for the segment’s wholesale business rose 9% on a reported basis and 24% at cc.

Asia: The segment’s revenues increased 17% year over year to $316 million on a reported and 33% on a currency-neutral basis. The metric missed the consensus mark of $354 million. Comps in Asia were up 25%, backed by 25% growth in brick-and-mortar stores and a 22% increase in the digital business.

Margins

Ralph Lauren's adjusted gross profit margin contracted 270 bps year over year on a reported basis and 80 bps on a cc basis to 64.6%. However, the metric expanded 310 bps on a three-year basis on solid AUR growth. Improved pricing and promotions were more than offset by increased product costs, higher freight and global supply-chain delays.

Adjusted operating expenses increased 7% from the year-ago period to $809 million in the fiscal second quarter. The rise was driven by higher marketing investments, and compensation and selling expenses. Adjusted operating expenses, as a percentage of sales, expanded 100 bps to 51.2% in the reported quarter.

The company’s adjusted operating income was $211 million, down 17.6% from $256.6 million in the year-ago quarter. The adjusted operating margin contracted 370 bps year over year to 13.4%.

Financials

Ralph Lauren ended the quarter with cash and short-term investments of $1,416.7 million, a total debt of $1.1 billion, and total shareholders’ equity of $2,255.6 million. Inventory grew 29% year over year to $1,261.4 million. The company repurchased Class A shares for about $170 million in the fiscal second quarter.

For the six months ending on Oct 1, capital expenditure was $83.9 million. Management expects capital expenditure of $250-$275 million for fiscal 2023, down from the aforementioned $290-$310 million.

Store Update

As of Oct 1, 2022, Ralph Lauren had 534 directly operated stores and 712 concession shops globally. The directly operated stores included 192 Ralph Lauren and 342 Polo factory stores. The company operated 118 licensed stores globally as of the same date.

Ralph Lauren Corporation Price, Consensus and EPS Surprise

 

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

Outlook

Management has issued guidance for the third quarter and has updated its fiscal 2023 view based on the ongoing macroeconomic environment, supply-chain condition, inflationary pressures, foreign currency movement, the war in Ukraine, and COVID-19 variants and other COVID-related disruptions.

For fiscal 2023, RL anticipates year-over-year revenue growth (cc) in the high-single digits on a 52-week comparable basis. This includes a 730-bps negative impact of unfavorable currency. On a 53-week comparable basis, the metric is likely to be hurt by an unfavorable currency of 100 bps.

The operating margin is forecast to be at the lower end of the earlier mentioned 14-14.5% (cc), which includes a negative impact of unfavorable currency of 200 bps. Notably, it reported an operating margin of 13.1% on a 52-week comparable basis and 13.4% on a 53-week basis in the last year.

The gross margin is envisioned to expand 30-50 bps at cc on a 52-week comparable basis, driven by solid AUR growth and positive product mix, which is expected to more than offset higher freight and product cost inflation. However, the unfavorable currency is likely to hurt the metric by 170 bps.

For the third quarter of fiscal 2023, the company expects year-over-year revenue growth of low to mid-single digits at cc. This includes a 780-bps impact of unfavorable currency.

The company anticipates an operating margin of 17.3-17.8% at cc, driven by a robust gross margin. The metric is expected to be hurt by 180 bps of unfavorable currency. Unfavorable currency impacts of 170 bps are likely to dent the gross margin.

The effective tax rate for both the third quarter and fiscal 2023 is expected to be 25-26%.

Stocks to Consider

Some better-ranked companies from the Consumer Discretionary sector are lululemon athletica LULU, Boyd Gaming BYD and Crocs CROX.

lululemon presently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 10.4%, on average. LULU has an expected long-term earnings growth rate of 20%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 26.7% and 26.8% from the year-ago period’s reported numbers, respectively.

Boyd Gaming currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 11.2%, on average. BYD has a long-term earnings growth rate of 12.8%.

The Zacks Consensus Estimate for BYD’s current financial year sales and EPS indicates growth of 4.4% and 11.7%, respectively, from the year-ago period’s reported levels.

Crocs currently has a Zacks Rank #2. CROX has a long-term earnings growth rate of 15%. The company has a trailing four-quarter earnings surprise of 18.2%, on average.

The Zacks Consensus Estimate for CROX’s current financial-year sales and earnings suggests growth of 51.5% and 23.7% from the year-ago period’s reported numbers, respectively.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Ralph Lauren Corporation (RL) : Free Stock Analysis Report
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
Boyd Gaming Corporation (BYD) : Free Stock Analysis Report
 
Crocs, Inc. (CROX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Advertisement