Ralph Lauren Corporation (NYSE:RL) , a designer, marketer and distributor of lifestyle products, released first-quarter fiscal 2017 results, wherein adjusted earnings of $1.06 came substantially ahead of the Zacks Consensus Estimate of 89 cents, while it declined 2.8% from $1.09 earned in the year-ago quarter.
Earnings Estimate Revision: The Zacks Consensus Estimate for 2017 has been unchanged in the last 30 days. However, Ralph Lauren’s performance over the trailing four quarters, including the quarter under review, remains encouraging with an average beat of 10.1%.
RALPH LAUREN CP Price and EPS Surprise
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Revenues: Ralph Lauren’s net revenues dropped 4.1% (on a currency neutral basis as well) to $1,552 million, while it surpassed the Zacks Consensus Estimate of $1,528 million. The increase in international revenues was more than offset by soft North American revenues.
Management anticipates consolidated net revenues to fall at a low-double digit rate in fiscal 2017. For the second quarter, the company expects the same to dip in mid-to-high single digits. Currency headwinds are expected to have minimum impact on the net revenues for both the periods, given the current spot rates.
Key Events: During the quarter, Ralph Lauren repurchased shares worth $100 million, leaving it with $200 million remaining for share buybacks, at the end of the quarter. Management expects to generate annualized cost savings worth $180-$220 million, on the back of its fiscal 2017 restructuring activities. These savings are incremental to the savings of $125 million related to similar activities undertaken in fiscal 2016.
Such restructuring activities include rightsizing the portfolio and cost-structure, alongside streamlining the structure of the organization. The company also expects to incur $400 million and $150 million by the end of fiscal 2017, on account of these restructuring charges and inventory charge associated with the company’s Way Forward Plan, respectively.
Zacks Rank: Currently, Ralph Lauren carries a Zacks Rank #4 (Sell) which is subject to change following the earnings announcement.
Stock Movement: Ralph Lauren’s shares jumped nearly 6% during pre-market trading hours following the earnings release. Investors developed a positive sentiment based on the better-than-expected results.
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