Retail Stock Under Pressure: Ralph Lauren Corp (NYSE: RL)

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Ralph Lauren Corp (NYSE: RL) stock fell over 1.2% on 21st May, 2021 (as of 12:02:09 UTC-4 · USD; Source: Google finance) after the company forecast full-year sales below analysts’ estimates, expecting a further hit from store closures in parts of Europe and Japan due to Covid-19 curbs, even as demand rebounds in China and the United States. The company reported a net loss of $74.1 million, or $1.01 per share, compared to a loss of $249.0 million, or $3.38 per share, a year earlier. The company had reported the adjusted revenue growth of 1 percent to $1.29 billion in the fourth quarter of FY 21, beating the analysts’ estimates for revenue of $1.21 billion, according to Refinitiv IBES data. This is compared to an 18% fall in the third quarter. All regions have improved sequentially with positive growth in Asia and Europe on a reported basis, despite continued COVID-related disruptions. North America also returned to positive comps this quarter, due to significant digital acceleration. Global wholesale revenues grew 1% and direct-to-consumer revenues were up 4%.

Moreover, the total digital ecosystem sales grew to more than 60% with double-digit growth in every region, up from mid-single-digits in the first nine months of the year. The company has delivered digital margins that were accretive within every region, and to the total Company rate, expanding more than a 1,000 basis points in the fourth quarter and full year. The total Company adjusted gross margin was 62.9% in the fourth quarter, up 380 basis points to last year. Gross margin expansion was mainly driven by strong AUR growth, along with favorable geographic and channel mix shifts. Product costs were also lower as the company lapped last year’s tariff impacts in North America, partially offset by higher freight costs this year. The Adjusted operating margins for the fourth quarter was 3.4%, up 680 basis points to last year.

Further, North America fourth quarter revenue declined 10% to last year, but continued to improve on a sequential basis, including an earlier-than-expected return to positive retail comps, up 3%. Europe fourth quarter revenue grew 5% on a reported basis, and was down 4% in constant currency. Asia’s revenue increased 35% on a reported basis. The company ended the year with $2.8 billion in cash and investments, and $1.6 billion in total debt, which compares to $2.1 billion in cash and investments and $1.2 billion in total debt last year.

The retailer, popular for its Polo shirts, expects fiscal 2022 revenue on a constant currency basis to increase about 20 percent to 25 percent. The analysts were expecting a 31.1 percent rise.


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