Major specialty retailer, Ralph Lauren Corporation 's RL stellar portfolio of globally recognized brands has helped the company consolidate its market position, by providing it an edge over its peers.
Further, the company recently introduced a global reorganization plan aimed at creating a brand-based operating structure to contain costs and improve operational efficiencies. The company expects these cost savings, along with efficient pricing actions and restructuring initiatives, to drive greater profitability and sales in the second half of fiscal 2016.
Ralph Lauren also remains focused on implementing a mix shift toward retail and international, with the vision of improving profitability in these sections compared to the wholesale and domestic businesses. In this regard, the company continues to invest in its retail stores along with growing its eCommerce and omni-channel presence. We believe that with its extensive store network and aim of concentrating on profitable areas, the company's initiatives are likely to boost performance.
Taking a look at its financials, we note that Ralph Lauren flaunts a solid earnings history, having posted positive earnings surprises in 15 out of the past 17 quarters. The company has delivered a positive average surprise of 5.3% over the trailing four quarters. In first-quarter fiscal 2016, Ralph Lauren reported better-than-expected top and bottom-line results, backed by the effective implementation of its core strategic initiatives.
Also, the company boasts a strong balance sheet. Further, its ability to generate a robust operating cash flow has aided the execution of its long-term strategies such as expanding globally, enhancing product and brand offerings, and building operational infrastructure. Moreover, the company's commitment to shareholders is evident from its practice of returning excess cash to them via share buybacks and dividend payments.
All these factors make us confident of this Zacks Rank #2 (Buy) company's prospects, as these are likely to enable it to deliver growth and achieve operational efficiency.
However, we remain somewhat cautious as the company has been facing adverse currency fluctuations which are expected to persist going forward, as is reflected by management's outlook for fiscal 2016.
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