Please ensure Javascript is enabled for purposes of website accessibility

Why Ralph Lauren Stock Jumped Today

By Jeremy Bowman – Feb 4, 2020 at 3:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A better-than-expected earnings report sent the apparel retailer higher.

What happened

Shares of Ralph Lauren (RL -0.52%) were gaining after the preppy apparel brand posted better-than-expected results in its third-quarter earnings report. Though revenue growth was sluggish, the company saw solid comparable-sales momentum and strong growth on the bottom line.

As of 2:35 p.m. EST, the stock was up 10.1%. 

Women shopping in a mall, shown from the chest down.

Image source: Getty Images.

So what

Ralph Lauren has struggled with many of the same challenges as other retailers in recent years as key distribution partners like department stores have lost market share and shuttered locations, but its third-quarter earnings report showed its recent efforts to refresh its brand were paying off.  

Overall revenue rose 1.5% (2% in constant currency) to $1.75 billion, which topped estimates of $1.72 billion. Overall, comparable sales were up 2%, while they grew 4% in North America, the company's biggest market, a sign that the brand is resonating with customers as its investments in marketing and updating its product line delivered results. 

The comparable sales growth helped deliver margin expansion, and adjusted earnings per share jumped from $2.32 to $2.86 with the help of aggressive share buybacks. That was better than estimates of $2.45.

"We continue to make strong progress on our Next Great Chapter plan amid a volatile backdrop, with third quarter results ahead of our overall expectations, including better than expected revenues, operating margin, and double-digit EPS growth," CEO Patrice Louvet said. 

Now what

The retailer is facing some challenges in Asia due to the recent protests in Hong Kong and now the coronavirus outbreak, which has forced the closure of half of its stores in China. However, management raised its full-year outlook, saying it expected revenue growth of 2% to 3% after previously guiding toward the low end of that range, though that does not include any impact from the coronavirus outbreak. The company didn't give earnings-per-share guidance, but it did say it expected operating margin to rise slightly for the full year. 

While wholesale revenue continues to decline, investors should be encouraged by the comparable sales growth during the key holiday season. It's not a surprise to see shares rising today.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ralph Lauren Corp Stock Quote
Ralph Lauren Corp
RL
$93.53 (-0.52%) $0.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.