Praise for Ralph Lauren’s Restructuring Plan

In recent weeks, Ralph Lauren has published better-than-expected quarterly results, a particularly remarkable trend in an environment of falling sales. This encouraged the company management to put in place a plan to buyback shares for $500 million, slightly less than 5% of capital.

Since then, several firms have issued reports, which have in common an improvement in the group’s expectations. JP Morgan is perhaps the most neutral, as it decided to maintain its «neutral» recommendation. On the other side, both Credit Suisse and Goldman Sachs have highlighted the improvement of the company, supported by the restructuring plan. Goldman Sachs upgraded its rating to «buy» from «neutral» and raised its price target to $154 per share (from $138). Meanwhile, Credit Suisse reiterated its «overweight» recommendation.

These experts say that the company has done significant advances to streamline its organization. It has changed the previous regional structure for a global one to generate long-term benefits. It has also launched new business lines and is trying to end the policy of strong discounts in the United States, which it was undermining profitability. On the other hand, it is trying to fight the impact of the strong dollar by raising prices and negotiating cuts in costs of raw materials. This has led Credit Suisse to show its belief that profit margins will improve from fiscal 2017.

All these positive comments have caused an increase in the stock price close to 10% since the end of May, which has stopped the bleeding in market value since early this year, when trading at record highs. Even though this rebound of the price, Ralph Lauren loses 25% in the stock market so far this year, well worse the industry average.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.