The news of resignation of Ralph Lauren (NYSE:RL) CEO Stefan Larsson has affected the company’s stock on Thursday’s session. In addition, RL Q3 fiscal 2017 results posted dismal revenue reports but were able to beat analyst estimates.
Ralph Lauren Corp issued a news release on Thursday stating that its CEO Stefan Larsson has resigned from his position after taking over as the chief executive last November 2015. Larsson is set to for departure by May 1st.
Following the news, the clothing company’s shares suffered from the news of Larsson’s departure from Ralph Lauren, as investors became uncertain of the company’s governance and future performance with the idea of yet another management.
On Thursday, the retail company also released its third quarter fiscal 2017 financial results.
RL’s Stock Plummets
Upon the announcement of Larsson’s departure, Ralph Lauren’s shares in NYSE plunged 12.31%, closing at $76.61, losing $10.76 from its Wednesday close. Its market cap is currently at $6.3 billion.
RL’s Relative Strength Index is below the level 30 at 20.0763. Since the start of the year, the company’s stock hasn’t touched level 70 on the index yet, indicating weak performance and overstay in the bear market.
Meanwhile, even though the stock has started expanding on the Bollinger Bands® after a 2-week squeeze, its direction is heading downwards and has moved past the bottom band. Analysts and Zacks Investment Research advised to steer clear from the RL stock for the mean time, especially as the stock had already declined 3.6% in the past four weeks while showing no signs of possible rally based on its previous movement in the market. It currently has a #4 Sell rating from the research company.
Earnings Report
Ralph Lauren posted third quarter results for fiscal 2017 the same day as the announcement of Larsson’s resignation. Its adjusted earnings per share was $1.86, while the earnings per share was $0.98, although the adjusted EPS came out better than the Zacks forecast, it was still 18.1% below from the $2.27 report from the same period a year ago.
Revenues came in at $1.7 billion, and were down 12% YoY. International net revenue declined 6% during the quarter, North America revenue plunged 15% YoY. Ralph Lauren’s Wholesale Revenue also declined 26% to $582 million. Retail revenue decreased 2% on both a reported and constant currency basis to $1.1 billion due to comparable store sales. Its licensing revenue was down 4% at $44 million.
According to the company, the decline in wholesale revenue was driven by reduced shipments in North America in order to align with the underlying demand and to reduce excess inventory as well as improve the quality of the company’s sales in line with Larsson's Way Forward plan.
RL profits reached $983 million, including $14 million in non-cash inventory-related charges. The company stated that they are maintaining their guidance for fiscal 2017.
Lauren and Larsson Differences
Ralph Lauren, Executive Chairman and Chief Creative Officer stated:
Stefan and I share a love and respect for the DNA of this great brand, and we both recognize the need to evolve. However, we have found that we have different views on how to evolve the creative and consumer-facing parts of the business. I am grateful for what Stefan has contributed during his time with us, setting us in the right direction with the Way Forward Plan.
Larsson decided to leave the company as his vision to revive the 50-year-old company was not well-received by Lauren, resulting in creative differences for the company’s future.
Larsson was the previous global president of Old Navy and took over as chief executive for the high-end clothing company last November 2015. Ralph Lauren took in Larsson in the hopes of improving the company’s declining performance.
According to reports, Larsson will receive $10 million in cash as severance and health benefits over the next two years.
Jane Nielsen, Ralph Lauren Chief Financial Officer, will lead the continuation of Larsson Way Forward Plan announced in June 2016 until a new CEO joins the company.