Buy Ralph Lauren: Asian Expansion Will Contribute To Growth

Top Quote Ralph Lauren (RL) beat the Street's estimates for earnings and revenue, as per its Q1 results for the fiscal year 2013. End Quote
  • (1888PressRelease) August 14, 2012 - This was in line with our expectations for RL, as highlighted in our previous article. The stock showed a small decline (1.1%) due to the weaker Q2 revenue outlook. Regarding the pressure on its revenue, the company cited strategic moves regarding its distribution in China and the American living brand, as well as the unfavorable currency exchange rates.

    Overall, the company saw revenue and operating income increase from all segments (i.e. wholesale, retail and licensing operations). Revenue was partially offset by European operations and strategic closing of certain American and Chinese retail operations.

    Ralph Lauren also gave its future outlook for the company. Currency effects from European operations coupled with strategic moves to reduce partner-run stores in China (and replacing them with its own), and distribution for its American Living Brand, will have a -5% effect on the full 2013 fiscal year's (calendar year 2012) revenue growth.

    For the second quarter of FY2013, the company expects net revenue to decline by mid single digits due to a decline in wholesale distribution and the currency conversion issues that have been mentioned above. Strategic investments will cause operating margins to be about 2% less compared with the same period in the last fiscal year. Since our last recommendation, the stock is up 8%.

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