Should You Buy RL shares?

Ralph Lauren Corp. reported its fiscal first-quarter financial results on Wednesday before the markets opened. RL had $1.09 in earnings per share on $1.6 billion in revenue, versus consensus estimates from Thomson Reuters that called for $0.99 in EPS on $1.61 billion in revenue. In the same period of the previous year the company posted EPS of $1.80 and $1.71 billion in revenue.

The company also gave guidance for the second quarter. Ralph Lauren expects consolidated net revenues to be up 3% to 5% on constant currency basis, and operating margin to be roughly 275 to 325 basis points below the same period of the previous year. The consensus estimates are $1.87 in EPS on $1.98 billion in revenue.

In terms of its segments, Ralph Lauren reported revenues as follows: Wholesale sales declined 9% to $642 million, retail sales declined 3% to $935 million and licensing increased slightly to $41 million. At the end of the first quarter, the company had 467 directly operated stores, comprised of 140 Ralph Lauren stores, 65 Club Monaco stores and 262 Polo factory stores. Ralph Lauren also operated 558 concession shop locations worldwide at the end of the first quarter. The New York-based company is in the midst of reorganizing its business to cut $100 million in annual expenses to combat weaker sales and the stronger U.S. dollar.

Ralph Lauren, chairman and CEO, said in a statement: «We are making the right strategic decisions and investments to support the future growth of the Company. I am confident that our new organizational structure will allow us to make our already powerful brands even stronger, and the investments we are making today will create significant value for shareholders over the long term». Zacks Rank, currently, Ralph Lauren carries a Zacks Rank #3 (Hold) which is subject to change following the earnings announcement.

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