We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Ralph Lauren (RL) is Marching Ahead of the Industry: Here's How
Read MoreHide Full Article
Ralph Lauren (RL - Free Report) has been gaining from brand strength, solid demand, as well as expansion across all channels. Also, a solid online show and strong AUR growth bode well. It has been on track with its Next Great Chapter: Accelerate plan.
This led to a robust surprise trend, which continued in fourth-quarter fiscal 2023. The fiscal fourth quarter marked the 11th and the ninth straight quarter of earnings and revenue beat, respectively.
Adjusted earnings per share of 90 cents for the fiscal fourth quarter advanced 83.7% year over year from 49 cents in the year-ago quarter. Net revenues grew 1% year over year to $1,541 million and beat the Zacks Consensus Estimate of $1,470 million. On a constant-currency (cc) basis, revenues were up 9% from the prior-year quarter.
RL has been expanding digital and omnichannel capabilities through investments in mobile, omnichannel and fulfillment. In fourth-quarter fiscal 2023, digital business continued to be a key growth driver, with accelerated digital sales across all regions. The company’s global digital ecosystem witnessed year-over-year mid-single-digit revenue growth. This includes mid-single-digit growth within Ralph Lauren digital sites.
The company introduced additional digital sites in key markets, including Korea and Australia. A positive mix of products, investments in AI-powered targeting and consumer acquisition bode well. Also, its online search grew year over year and reached 52 million social media followers on a global basis.
Region-wise, digital sales were up 6% in Europe and 19% in Asia. For fiscal 2024, management revealed plans for rich digital content and greater customer personalization. It remains focused on further digital investments to continue the creation of content for all platforms, enhancing digital capabilities to improve the user experience and continuing to leverage AI and data to serve its consumers more efficiently.
Ralph Lauren continues to scale and expand its connected retail capabilities, including virtual selling appointments, “buy online, pick up in store,” endless aisle product availability and more. The company launched its first-ever full catalog Ralph Lauren mobile app last holiday season, efficiently leveraging its connected retail capabilities to deliver the most personalized and content-rich platform.
Average unit retail (AUR) increased in the double-digits in fourth-quarter fiscal 2023, marking the 24th straight AUR rise, driven by product mix elevation and lower air freight, partly offset by peak levels of raw material costs. The company’s strategy of product elevation, acquisition of new full-priced consumers and favorable channel and geographic mix, as well as ramping up its targeting and personalization efforts, is likely to support long-term AUR growth.
Its “Next Great Chapter” plan, which includes creating a simplified global organizational structure and rolling out improved technological capabilities, performed well. The move enabled it to focus on core brands, as part of the Next Great Chapter elevation strategy. Encouragingly, management is on track with the next phase of this plan, namely the Next Great Chapter: Accelerate plan.
Driven by these factors, management issued upbeat guidance for fiscal 2024. For fiscal 2024, RL anticipates year-over-year revenue growth (cc) in the low-single digits, in sync with our estimate of 2.2% growth. This includes 20 basis points (bps) of positive impacts of currency.
The operating margin is forecasted to expand 30-50 bps on a constant-currency basis to 12.3-12.5%, which includes a favorable impact of currency of 10 bps. Notably, the operating margin is envisioned to expand 50-100 bps on a constant-currency basis, driven by solid AUR and lower freight costs, which more than offset continued product cost inflation. Gross margin is likely to gain from lower freight costs, continued AUR growth and favorable product, geographic and channel mix.
For the fiscal first quarter, the company anticipates revenues to be flat to up slightly on a constant-currency basis. The operating margin is predicted to expand 30-50 basis points in constant currency, driven by stronger gross margins. Gross margin expansion is expected to be driven by lower freight costs and continued AUR growth, partly offset by increased product costs.
Image Source: Zacks Investment Research
Consequently, shares of this Zacks Rank #3 (Hold) company have gained 35.4% in the past three months, outpacing the industry’s growth of 7.5%.
However, the company has been reeling under continued product cost inflation and higher compensation. As a result, the fiscal fourth-quarter adjusted gross profit margin contracted 150 bps year over year on a reported basis. Adjusted operating expenses increased 3% from the year-ago period to $908 million in the fiscal fourth quarter.
Also, unfavorable currency impacts remain concerning. For the fiscal first quarter, the company expects adverse currency rates to hurt revenues by 150 bps. Meanwhile, the gross and operating margins are likely to witness 50 bps of adverse currency impacts each.
Bottom Line
Although cost inflation and currency woes remain concerning, we believe that Ralph Lauren is well-placed for long-term growth on the back of brand strength, robust demand, solid online show and strong AUR growth.
Also, a Value Score of B and long-term earnings growth rate of 13.8% raise optimism in the stock. Topping it, earnings estimates for RL’s current financial year have increased 1.8% to $9.42 over the past 30 days.
Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.
Kroger, a renowned grocery retailer, currently carries a Zacks Rank of 2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Kroger’s current financial year’s earnings per share suggests growth of 6.6% from the year-ago reported figure. KR has an expected earnings per share growth rate of 6% for three to five years.
TJX Companies, which operates as an off-price apparel and home fashion retailer, carries a Zacks Rank #2 at present. The expected EPS growth rate for three to five years is 10.5%.
The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings suggests growth of 6.4% and 14.5%, respectively, from the year-ago period. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Ralph Lauren (RL) is Marching Ahead of the Industry: Here's How
Ralph Lauren (RL - Free Report) has been gaining from brand strength, solid demand, as well as expansion across all channels. Also, a solid online show and strong AUR growth bode well. It has been on track with its Next Great Chapter: Accelerate plan.
This led to a robust surprise trend, which continued in fourth-quarter fiscal 2023. The fiscal fourth quarter marked the 11th and the ninth straight quarter of earnings and revenue beat, respectively.
Adjusted earnings per share of 90 cents for the fiscal fourth quarter advanced 83.7% year over year from 49 cents in the year-ago quarter. Net revenues grew 1% year over year to $1,541 million and beat the Zacks Consensus Estimate of $1,470 million. On a constant-currency (cc) basis, revenues were up 9% from the prior-year quarter.
RL has been expanding digital and omnichannel capabilities through investments in mobile, omnichannel and fulfillment. In fourth-quarter fiscal 2023, digital business continued to be a key growth driver, with accelerated digital sales across all regions. The company’s global digital ecosystem witnessed year-over-year mid-single-digit revenue growth. This includes mid-single-digit growth within Ralph Lauren digital sites.
The company introduced additional digital sites in key markets, including Korea and Australia. A positive mix of products, investments in AI-powered targeting and consumer acquisition bode well. Also, its online search grew year over year and reached 52 million social media followers on a global basis.
Region-wise, digital sales were up 6% in Europe and 19% in Asia. For fiscal 2024, management revealed plans for rich digital content and greater customer personalization. It remains focused on further digital investments to continue the creation of content for all platforms, enhancing digital capabilities to improve the user experience and continuing to leverage AI and data to serve its consumers more efficiently.
Ralph Lauren continues to scale and expand its connected retail capabilities, including virtual selling appointments, “buy online, pick up in store,” endless aisle product availability and more. The company launched its first-ever full catalog Ralph Lauren mobile app last holiday season, efficiently leveraging its connected retail capabilities to deliver the most personalized and content-rich platform.
Average unit retail (AUR) increased in the double-digits in fourth-quarter fiscal 2023, marking the 24th straight AUR rise, driven by product mix elevation and lower air freight, partly offset by peak levels of raw material costs. The company’s strategy of product elevation, acquisition of new full-priced consumers and favorable channel and geographic mix, as well as ramping up its targeting and personalization efforts, is likely to support long-term AUR growth.
Its “Next Great Chapter” plan, which includes creating a simplified global organizational structure and rolling out improved technological capabilities, performed well. The move enabled it to focus on core brands, as part of the Next Great Chapter elevation strategy. Encouragingly, management is on track with the next phase of this plan, namely the Next Great Chapter: Accelerate plan.
Driven by these factors, management issued upbeat guidance for fiscal 2024. For fiscal 2024, RL anticipates year-over-year revenue growth (cc) in the low-single digits, in sync with our estimate of 2.2% growth. This includes 20 basis points (bps) of positive impacts of currency.
The operating margin is forecasted to expand 30-50 bps on a constant-currency basis to 12.3-12.5%, which includes a favorable impact of currency of 10 bps. Notably, the operating margin is envisioned to expand 50-100 bps on a constant-currency basis, driven by solid AUR and lower freight costs, which more than offset continued product cost inflation. Gross margin is likely to gain from lower freight costs, continued AUR growth and favorable product, geographic and channel mix.
For the fiscal first quarter, the company anticipates revenues to be flat to up slightly on a constant-currency basis. The operating margin is predicted to expand 30-50 basis points in constant currency, driven by stronger gross margins. Gross margin expansion is expected to be driven by lower freight costs and continued AUR growth, partly offset by increased product costs.
Image Source: Zacks Investment Research
Consequently, shares of this Zacks Rank #3 (Hold) company have gained 35.4% in the past three months, outpacing the industry’s growth of 7.5%.
However, the company has been reeling under continued product cost inflation and higher compensation. As a result, the fiscal fourth-quarter adjusted gross profit margin contracted 150 bps year over year on a reported basis. Adjusted operating expenses increased 3% from the year-ago period to $908 million in the fiscal fourth quarter.
Also, unfavorable currency impacts remain concerning. For the fiscal first quarter, the company expects adverse currency rates to hurt revenues by 150 bps. Meanwhile, the gross and operating margins are likely to witness 50 bps of adverse currency impacts each.
Bottom Line
Although cost inflation and currency woes remain concerning, we believe that Ralph Lauren is well-placed for long-term growth on the back of brand strength, robust demand, solid online show and strong AUR growth.
Also, a Value Score of B and long-term earnings growth rate of 13.8% raise optimism in the stock. Topping it, earnings estimates for RL’s current financial year have increased 1.8% to $9.42 over the past 30 days.
Stocks to Consider
Some better-ranked stocks that investors may consider are Tecnoglass (TGLS - Free Report) , Kroger (KR - Free Report) and TJX Companies (TJX - Free Report) .
Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.
Kroger, a renowned grocery retailer, currently carries a Zacks Rank of 2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Kroger’s current financial year’s earnings per share suggests growth of 6.6% from the year-ago reported figure. KR has an expected earnings per share growth rate of 6% for three to five years.
TJX Companies, which operates as an off-price apparel and home fashion retailer, carries a Zacks Rank #2 at present. The expected EPS growth rate for three to five years is 10.5%.
The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings suggests growth of 6.4% and 14.5%, respectively, from the year-ago period. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.