Premium lifestyle retailer, Ralph Lauren Corp.RL has been putting up a good show of late with respect to upsurge in stock price as well as positive estimate revisions. The company's progress on its Way Forward Plan and other Restructuring initiatives are primarily behind this feat. Driven by these attributes, the company has delivered a robust earnings surprise history and solid stock movement.
Splendid Stock Performance
Shares of Ralph Lauren have climbed 22.4% in the last three months, outperforming the industry 's upside of just 4.7%. Additionally, the stock has witnessed a solid growth of 11.6% after reporting better-than-expected results on Aug 8.
The company's first-quarter fiscal 2018 performance was a testimony to its progress on the Way Forward Plan and Restructuring initiatives that was announced in June 2016. Notably, first-quarter fiscal 2018 marked its 10th consecutive earnings beat. Further, the company has delivered positive earnings surprises in 15 out of the last 16 quarters.
Positive Estimate Revisions Drive Optimism
Management remains confident of Ralph Lauren's performance based on its efforts related to global brand reorganization, constant infrastructural investments and e-commerce enhancements. Further, the company's efforts to evolve product and marketing bode well. Additionally, management lowered effective tax rate forecast for fiscal 2018, which we believe should benefit the bottom line.
Consequently, the Zacks Consensus Estimate witnessed an uptrend following the earnings. Further, we note that the upward estimate revision trend continues even two months after the results. The Zacks Consensus Estimate has witnessed an uptrend in the last 30 days. Notably, estimates for fiscal 2018 and fiscal 2019 rose 1.9% and 0.4%, respectively, to $5.34 per share and $5.20 per share.
Ralph Lauren Corporation Price, Consensus and EPS Surprise
Apart from a strong fiscal first quarter, the company is gaining from a significant progress on strategic initiatives. So, here is a sneak peek into the company's initiatives that are driving growth.
Way Forward Plan On Track
Ralph Lauren remains on track to deliver goals under its Way Forward Plan. Divided in two parts, the first part focuses on evolving the company's core business relating its product, marketing and customer experience. The second part centers around reviving its operating structure by developing a systematic way of building stronger assortments, a demand-driven supply chain, an excellent sourcing capability and a multi-channel global expansion strategy. In short, the plan is all about refocusing on the core, strengthening the brands and returning the company to profitable growth in the long term.
As part of the progress made under the plan, the company enhanced quality of sales by reducing promotions and markdowns, alongside reducing Stock Keeping Units (SKUs) count to drive productivity during the fiscal first quarter. Further, it improved inventory turns by curtailing inventory levels by 31% year over year and also achieved cost savings by lowering operating costs. Additionally, the company is keen on optimizing its wholesale distribution by shutting down underperforming points of distribution.
While we expect the momentum in Ralph Lauren stock to persist, concerns regarding soft sales trend on account of weak demand, brand exits and efforts to drive quality of sales cannot be ignored. Additionally, foreign currency continues to adversely impact Ralph Lauren's top-line and margins.
However, we commend its progress on strategic plans, which should bear fruit in the long term. Moreover, the company's robust earnings trend and positive estimate revisions instill confidence. Aptly, Ralph Lauren currently carries a Zacks Rank #2 (Buy).
Want More of the Industry? Buy these Trending Stocks
Some other top-ranked stocks in the same industry include Crocs Inc. CROX , G-III Apparel Group, LTD. GIII and Michael Kors Holdings Limited KORS , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Crocs has a long-term EPS growth rate of 15%. Further, the stock has returned a solid 32% in three months.
G-III Apparel has gained 24.3% in three months. Moreover, it has a long-term earnings growth rate of 15%.
Michael Kors has improved 42.9% in three months. Further, the company has delivered an average positive earnings surprise of 11.5% in the trailing four quarters.
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