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Why Shares of Ralph Lauren Are Rising Today

By John Rosevear - Mar 26, 2020 at 11:56AM

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An analyst's note pointed out that the company has solid cash reserves.

What happened

Shares of Ralph Lauren (RL 1.17%) were rising on Thursday after analysts at UBS said that the company appears to have the financial flexibility to weather a significant sales decline in 2020. 

As of 11:30 a.m. EDT, Ralph Lauren's shares were up about 8.8% from Wednesday's closing price.

So what

In a new note on Thursday morning in which analysts at UBS looked at prospects for several retail stocks, the analysts noted that Ralph Lauren has about $2.4 billion in liquidity. That should be ample to "absorb" a 20% sales decline for the 2020 calendar year, roughly the decline similar companies experienced in the 2008-2009 financial crisis, they wrote. 

The exterior of a Ralph Lauren Store in Paris

Image source: Ralph Lauren.

Ralph Lauren had net sales of $6.31 billion in the fiscal year that ended on March 31, 2019. The $2.4 figure is about 38% of the company's fiscal 2019 sales. 

Separately, Ralph Lauren said on Thursday that its corporate foundation will donate $10 million to organizations providing assistance during the coronavirus pandemic. The company is also beginning U.S. production of 250,000 masks and 25,000 isolation gowns that it will donate to healthcare facilities in need.

Now what

While Ralph Lauren appears to have ample cash to get through the next few months, it has yet to update investors on the state of its balance sheet and any moves it might be making to reduce spending or fortify its cash position. 

The company is expected to report earnings in May, but I expect -- and hope -- that it provides an update on its condition before then.

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