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Why Ralph Lauren Shares Jumped Higher Today

By Brian D. Pacampara, CFA - Sep 30, 2015 at 3:31PM

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Fashion icon Ralph Lauren steps down as CEO. And the market likes it.

What: Shares of Ralph Lauren (RL 1.25%) climbed as much as 14.5% on Wednesday after fashion icon Ralph Lauren announced that he is stepping aside as the company's CEO.

So what: Ralph Lauren shares have slumped sharply over the past few years amid intense competition, but the appointment of Gap executive Stefan Larsson, who directly oversaw three straight years of profitable growth at Old Navy, reignites optimism over its turnaround prospects going forward. Additionally, the announcement removes a cloud of uncertainty over the shares by adding some clarity to Lauren's succession plans.

Now what: Larsson, whose appointment will become effective in November, will continue to report to Ralph Lauren, who will continue to act as the company's executive chairman and chief creative officer. "I am thrilled to have the opportunity to work directly and collaboratively with a fashion giant like Ralph Lauren," said Larsson. "His creativity and singular vision have made Ralph Lauren one of the world's most influential global brands, and I share his dreams for the future. I believe the company has tremendous potential to continue expanding in the global marketplace as it broadens its appeal to all consumers." When you couple Ralph Lauren's "fresh" perspective with its still-cheapish stock price -- off about 40% from its 52-week highs and trading at a forward P/E of 14 -- today's pop might just be the start of a long-term rally. 

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