Why Ralph Lauren Stock Gained 15% in 2017
What happened
Ralph Lauren (NYSE: RL) stock rose 15% last year, compared to a 19% increase in the broader market, according to data provided by S&P Global Market Intelligence.
Despite that slight underperformance, shareholders are likely happy with the result, as the retailer had been down by more than 25% at one point in the year.
So what
Ralph Lauren's stock price rebound began in early August when it revealed better-than-expected operating metrics in its fiscal first quarter. Revenue declined 13% as management pulled back on price-cutting.
Image source: Getty Images.
The good news is that strategy delivered higher gross margin that, combined with cost cuts, allowed operating income to tick up to 10.2% of sales. These aren't great headline numbers, but they were better than what Wall Street had feared.
Now what
The retailer's early November business update showed continued progress at returning Ralph Lauren to stronger profitability as gross margin jumped 3 full percentage points to 60% of sales. That success gave management confidence in a holiday-season outlook that continues to pair falling revenue with strengthening profits.
Investors are hoping that the company can beat those modest expectations, with help from a rebound in the broader retailing industry. Yet the stock isn't likely to see sustained growth until Ralph Lauren's business stabilizes and it returns to the type of sales gains that show it has reconnected with luxury apparel fans.
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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
