Factors You Must Know Ahead of Ralph Lauren (RL) Q1 Earnings

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Ralph Lauren Corporation RL is slated to release first-quarter fiscal 2019 results on Jul 31, before the opening bell. The company has a robust earnings surprise history, having surpassed estimates for the last 13 quarters. It delivered an average earnings beat of 8.4% in the trailing four quarters.

The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.39, which reflects  growth of nearly 25% year over year. Estimates have been stable in the last 30 days.

Ralph Lauren Corporation Price, Consensus and EPS Surprise

Ralph Lauren Corporation Price, Consensus and EPS Surprise | Ralph Lauren Corporation Quote

Moreover, the consensus estimate for revenues is $1.36 billion, up 1.3% from the year-ago figure. However, management expects fiscal first-quarter revenues in the range of flat to down slightly, excluding currency impact. Foreign currency is expected to boost revenue growth by nearly 20-40 basis points.

Ralph Lauren's Strategies to Drive 1Q19

Ralph Lauren's Way Forward Plan that focuses on core business, strengthening brands, reviving operating structure, supply-chain functions and global expansion is commendable. Further, management is making efforts to reduce its supply chain leading to improve sales quality and curb markdowns. The company is also concentrating on lowering inventories to keep it at par with demand.

Additionally, the company's Fiscal 2019 Restructuring Plan to boost sustainable growth looks promising. Under the plan, Ralph Lauren is anticipated to incur restructuring charges of $100-$150 million. The plan is likely to generate roughly $60-$80 million of total annualized expense savings. These restructuring activities include rightsizing the portfolio and cost-structure alongside streamlining the organizational structure.

Ralph Lauren is also bolstering its international presence by continually broadening its base in the underpenetrated markets with new and highly productive small-format stores. Further, expansion of digital platforms remains a major component of Ralph Lauren's global growth strategy. In first-quarter fiscal 2019, the company targets upgrading technology platforms for the directly-operated European e-commerce business. This transition will eventually enhance shopping experience at its website with enhanced search, navigation and checkout process. Meanwhile, its digital wholesale business has been performing well.

All these growth strategies make us optimistic about Ralph Lauren's first-quarter fiscal 2019 earnings. In fact, these strategies have helped the stock to surge a whopping 82.2% in a year's time, outperforming the industry 's 44.6% rally. Further, the company's growth of 3.6% in the past month reflects increased optimism on the stock ahead of earnings.

However, the company's North America business continues to suffer due to distribution and brand exits, a planned reduction in shipments and promotions to enhance the quality of sales, and lower customer demand. This, in turn, has been hurting the company's overall top line. Notably, the company has reported sales miss in three of the trailing five quarters.

Nevertheless, we expect the afore-mentioned strategies to drive the upcoming quarterly results. Also, management is making efforts to revive its North America business. Ralph Lauren expects digital growth to accelerate in fiscal 2019 and beyond as it has almost completed the development of its directly-operated North America e-commerce business.

A Look at Zacks Model

Our proven model does not conclusively show that Ralph Lauren is likely to beat earnings estimates in the fiscal first quarter. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Ralph Lauren has a Zacks Rank #3, which increases the predictive power of an earnings beat. However, the company's Earnings ESP of -1.66% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Columbia Sportswear Company COLM has an Earnings ESP of +19.90% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

lululemon athletica inc. LULU has an Earnings ESP of +1.91% and a Zacks Rank of 1.

PVH Corp. PVH has an Earnings ESP of +0.08% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: LULU , COLM , RL , PVH

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