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Why Is Ralph Lauren (RL) Up 7.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Ralph Lauren (RL - Free Report) . Shares have added about 7.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ralph Lauren due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ralph Lauren’s Q1 Earnings Beat, Higher Comps Aid Revenues
Ralph Lauren has posted impressive first-quarter fiscal 2025 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. Results have gained from robust demand and brand strength.
RL has reported adjusted earnings per share of $2.70, which surpassed the consensus estimate of $2.45. Also, the bottom line increased from earnings of $2.34 per share in the year-earlier quarter.
Net revenues grew 1% year over year to $1,512.2 million and beat the Zacks Consensus Estimate of $1,488 million. On a constant-currency (cc) basis, revenues were up 3% from the year-ago quarter. The top line witnessed growth across all regions except for North America, driven by brand strength, pricing efforts and continued strategic investments.
Global direct-to-consumer comparable store sales jumped 5%, backed by continued brand elevation, double-digit increases in average unit retail ("AUR") and positive retail comps at all regions. However, the top line witnessed the negative impacts of 170 basis points (bps) from foreign currency rates.
Segmental Details
North America: The segment’s revenues were down 4% year over year to $608 million, lower than our estimate of $624.8 million. Comparable store sales (comps) for North America’s retail channel rose 1% year over year wherein the same for brick-and-mortar stores moved up 3%. Digital commerce fell 4%. Revenues from the North America wholesale business declined 13% year over year.
Europe: The segment’s revenues rose 6% year over year to $479 million while the metric was up 7% on a currency-neutral basis. The figure beat our estimate of $450 million. Comps for the retail channel in Europe were up 8% whereas brick-and-mortar stores grew 7% year over year. Digital sales witnessed a 14% rise. Revenues for the segment’s wholesale business were up 5% on both reported basis and a cc basis.
Asia: The segment’s revenues increased 4% year over year to $391 million on a reported basis and 9% on a currency-neutral basis. The metric beat our estimate of $386.2 million. Comps in Asia were up 9%, backed by 7% growth in brick-and-mortar stores and a 21% increase in the digital business.
Margins
Ralph Lauren's adjusted gross profit margin expanded 170 bps year over year to 70.5%. This was mainly driven by lower cotton costs, positive product, channel and geographic mix shifts, and AUR growth in all regions. We expected an adjusted gross profit margin of 69.8%, up 100 bps year over year.
Adjusted operating expenses rose 2% from the year-ago period to $849.9 million. Adjusted operating expenses, as a percentage of sales, expanded 70 bps to 56.2%, thanks to increased marketing investments owing to the planned timing of key campaigns. Excluding marketing expenses, the adjusted operating expense rate fell 30 bps year over year.
The company’s adjusted operating income was $215.9 million, up 7.9% from $200.1 million in the year-earlier quarter. The adjusted operating margin increased 90 bps year over year to 14.3%.
Financials
Ralph Lauren ended the quarter with cash and short-term investments of $1.8 billion, a total debt of $1.1 billion and total shareholders’ equity of $2.4 billion. Inventory fell 13% year over year to $1 billion.
The company repurchased Class A shares for about $176 million and paid a regular quarterly cash dividend of 82.50 cents per share in the fiscal first quarter. It returned nearly $225 million to shareholders via dividends and share repurchases.
The company incurred $33.4 million in capital expenditures compared with $39.6 million in the year-ago period. Management still expects capital expenditure to be in the range of $300-$325 million for fiscal 2025.
Outlook
For fiscal 2025, RL continues to anticipate year-over-year revenue growth (at cc) in the low-single digits, revolving around 2-3%. This includes 150 bps of adverse impacts of currency. Management still expects the operating margin to grow in the range of 100-120 bps at cc on higher gross margin and operating cost leverage. The gross margin is likely to increase in the band of 50-100 bps in cc. Foreign currency is anticipated to hurt gross and operating margins by about 40 bps. The fiscal tax rate is likely to be in the range of 23-24%.
For the fiscal second quarter, the company anticipates revenues to grow nearly low-to-mid single digits on a cc basis, in the band of 3-4%. This includes nearly 160 bps of negative foreign currency impacts.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Ralph Lauren has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ralph Lauren has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Ralph Lauren is part of the Zacks Textile - Apparel industry. Over the past month, Crocs (CROX - Free Report) , a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended June 2024 more than a month ago.
Crocs reported revenues of $1.11 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $4.01 for the same period compares with $3.59 a year ago.
For the current quarter, Crocs is expected to post earnings of $3.11 per share, indicating a change of -4.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Crocs. Also, the stock has a VGM Score of A.
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Why Is Ralph Lauren (RL) Up 7.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Ralph Lauren (RL - Free Report) . Shares have added about 7.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ralph Lauren due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ralph Lauren’s Q1 Earnings Beat, Higher Comps Aid Revenues
Ralph Lauren has posted impressive first-quarter fiscal 2025 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. Results have gained from robust demand and brand strength.
RL has reported adjusted earnings per share of $2.70, which surpassed the consensus estimate of $2.45. Also, the bottom line increased from earnings of $2.34 per share in the year-earlier quarter.
Net revenues grew 1% year over year to $1,512.2 million and beat the Zacks Consensus Estimate of $1,488 million. On a constant-currency (cc) basis, revenues were up 3% from the year-ago quarter. The top line witnessed growth across all regions except for North America, driven by brand strength, pricing efforts and continued strategic investments.
Global direct-to-consumer comparable store sales jumped 5%, backed by continued brand elevation, double-digit increases in average unit retail ("AUR") and positive retail comps at all regions. However, the top line witnessed the negative impacts of 170 basis points (bps) from foreign currency rates.
Segmental Details
North America: The segment’s revenues were down 4% year over year to $608 million, lower than our estimate of $624.8 million. Comparable store sales (comps) for North America’s retail channel rose 1% year over year wherein the same for brick-and-mortar stores moved up 3%. Digital commerce fell 4%. Revenues from the North America wholesale business declined 13% year over year.
Europe: The segment’s revenues rose 6% year over year to $479 million while the metric was up 7% on a currency-neutral basis. The figure beat our estimate of $450 million. Comps for the retail channel in Europe were up 8% whereas brick-and-mortar stores grew 7% year over year. Digital sales witnessed a 14% rise. Revenues for the segment’s wholesale business were up 5% on both reported basis and a cc basis.
Asia: The segment’s revenues increased 4% year over year to $391 million on a reported basis and 9% on a currency-neutral basis. The metric beat our estimate of $386.2 million. Comps in Asia were up 9%, backed by 7% growth in brick-and-mortar stores and a 21% increase in the digital business.
Margins
Ralph Lauren's adjusted gross profit margin expanded 170 bps year over year to 70.5%. This was mainly driven by lower cotton costs, positive product, channel and geographic mix shifts, and AUR growth in all regions. We expected an adjusted gross profit margin of 69.8%, up 100 bps year over year.
Adjusted operating expenses rose 2% from the year-ago period to $849.9 million. Adjusted operating expenses, as a percentage of sales, expanded 70 bps to 56.2%, thanks to increased marketing investments owing to the planned timing of key campaigns. Excluding marketing expenses, the adjusted operating expense rate fell 30 bps year over year.
The company’s adjusted operating income was $215.9 million, up 7.9% from $200.1 million in the year-earlier quarter. The adjusted operating margin increased 90 bps year over year to 14.3%.
Financials
Ralph Lauren ended the quarter with cash and short-term investments of $1.8 billion, a total debt of $1.1 billion and total shareholders’ equity of $2.4 billion. Inventory fell 13% year over year to $1 billion.
The company repurchased Class A shares for about $176 million and paid a regular quarterly cash dividend of 82.50 cents per share in the fiscal first quarter. It returned nearly $225 million to shareholders via dividends and share repurchases.
The company incurred $33.4 million in capital expenditures compared with $39.6 million in the year-ago period. Management still expects capital expenditure to be in the range of $300-$325 million for fiscal 2025.
Outlook
For fiscal 2025, RL continues to anticipate year-over-year revenue growth (at cc) in the low-single digits, revolving around 2-3%. This includes 150 bps of adverse impacts of currency. Management still expects the operating margin to grow in the range of 100-120 bps at cc on higher gross margin and operating cost leverage. The gross margin is likely to increase in the band of 50-100 bps in cc. Foreign currency is anticipated to hurt gross and operating margins by about 40 bps. The fiscal tax rate is likely to be in the range of 23-24%.
For the fiscal second quarter, the company anticipates revenues to grow nearly low-to-mid single digits on a cc basis, in the band of 3-4%. This includes nearly 160 bps of negative foreign currency impacts.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Ralph Lauren has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ralph Lauren has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Ralph Lauren is part of the Zacks Textile - Apparel industry. Over the past month, Crocs (CROX - Free Report) , a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended June 2024 more than a month ago.
Crocs reported revenues of $1.11 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $4.01 for the same period compares with $3.59 a year ago.
For the current quarter, Crocs is expected to post earnings of $3.11 per share, indicating a change of -4.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Crocs. Also, the stock has a VGM Score of A.