Here's How Ralph Lauren (RL) Looks Just Ahead of Q4 Earnings

Ralph Lauren Corporation RL is expected to register top-line growth when it reports fourth-quarter fiscal 2022 numbers on May 24, before the opening bell. The Zacks Consensus Estimate for fourth-quarter fiscal 2022 revenues is pegged at $1.45 billion, which indicates growth of 12.8% from the year-ago quarter’s reported figure.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at 27 cents per share, which suggests a decline of 29% from the year-ago quarter’s reported figure. The consensus mark for earnings has moved down by a penny in the past seven days.
 
The Zacks Consensus Estimate for fiscal 2022 revenues is pegged at $6.15 billion, which indicates growth of 39.7% from the year-ago quarter’s reported figure. The consensus estimate for fiscal 2022 earnings is pegged at $8.13 per share, which suggests growth of 378.2% from the year-ago quarter’s reported figure.

The apparel and lifestyle products company’s earnings beat the Zacks Consensus Estimate by 35.5% in the last reported quarter. Its earnings outpaced the Zacks Consensus Estimate by 94.1%, on average, in the trailing four quarters.

Ralph Lauren Corporation Price and EPS Surprise

 

Ralph Lauren Corporation Price and EPS Surprise

Ralph Lauren Corporation price-eps-surprise | Ralph Lauren Corporation Quote

Factors to Note

Ralph Lauren’s fiscal fourth-quarter performance is expected to have benefited from the momentum across all regions, along with digital growth. The company is likely to have retained its strong performance on consistent brand-elevation efforts and robust full-priced selling trends, which have been aiding average unit retail (AUR) growth. Robust AUR growth, along with improved pricing and promotions, and a better product mix have been boosting the gross margin.

RL’s focus on expanding digital and omni-channel capabilities through investments in the mobile app, omni-channel and fulfillment bodes well. The investments have been accretive to the company’s top line and margins in the past few quarters. The digital business is likely to have continued to be a key growth driver, with accelerated digital sales across all regions in the to-be-reported quarter.

On the last reported quarter’s earnings call, management predicted year-over-year revenue growth of 17-18% at constant currency for fourth-quarter fiscal 2022. The operating margin is anticipated to be 4.2% in constant currency, as the gross margin expansion is likely to offset increased investments.

For fiscal 2022, Ralph Lauren expects constant-currency revenues to grow 39-41%. The operating margin is anticipated to be 13% (on both reported and constant-currency basis). The gross margin is envisioned to expand 70-90 bps. Gross margin growth is likely to be driven by stronger average unit retail and a positive product mix, more than offsetting higher freight and raw material costs.

Although Ralph Lauren provided a robust margin view for fiscal 2022, it expects margins to be offset by the persistence of certain costs, including global supply-chain pressures, higher freight costs, raw material cost inflation and marketing investments. The company also expects the highly volatile and inflationary input cost environment to continue in fiscal 2022.

Ralph Lauren is likely to have witnessed elevated marketing expenses in fourth-quarter fiscal 2022 to support various initiatives, digital expansion into new markets and categories, and consumer acquisition. The company previously announced that it shifted a significant portion of its marketing investments from the first half of fiscal 2022 to the second half to accelerate brand momentum and direct-to-consumer expansion.

For the fourth quarter of fiscal 2022, RL anticipates marketing expenses to be similar to the third quarter to support its Spring '22, Lunar New Year and digital campaigns, including the new Ralph Lauren mobile app and digital home shop. Additionally, the Beijing Winter Olympics, the Australian Open and the company’s focus on consumer acquisitions are likely to attract higher marketing investments in the fiscal fourth quarter. Driven by the confidence in its demand creation activities, Ralph Lauren anticipates marketing expenses to be 7-7.5% of net sales for fiscal 2022.

On the last reported quarter’s earnings call, the company predicted higher freight costs for the second half of fiscal 2022 and normalizing of the channel mix shift compared with the last year's COVID-19 disruptions. Ralph Lauren expected the highly volatile and inflationary input cost environment to continue throughout fiscal 2022. The company’s guidance indicates that pressures from higher costs will weigh on fourth-quarter fiscal 2022 results.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Ralph Lauren this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ralph Lauren has a Zacks Rank #3 and an Earnings ESP of 0.00%.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this reporting cycle.

lululemon athletica LULU currently has an Earnings ESP of +0.28% and a Zacks Rank of 3. The company is expected to register top and bottom-line growth when it reports first-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for LULU’s quarterly revenues is pegged at $1.55 billion, which suggests growth of 26.1% from the prior-year quarter’s reported figure.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for lululemon’s quarterly earnings has moved up by 2.1% in the past 30 days to $.43 per share, suggesting 23.3% growth from the year-ago reported number. LULU has delivered an earnings beat of 20.9%, on average, in the trailing four quarters.

PVH Corp. PVH currently has an Earnings ESP of +2.29% and a Zacks Rank #3. PVH is likely to register top and bottom-line declines when it reports first-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.08 billion, which suggests a decline of 0.03% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for PVH Corp’s quarterly earnings has been unchanged in the past 30 days at $1.58 per share. The consensus estimate suggests a decline of 17.7%% from the year-ago quarter’s reported number. PVH has delivered an earnings beat of 83.8%, on average, in the trailing four quarters.

Vail Resorts MTN currently has an Earnings ESP of +1.00% and a Zacks Rank #3. MTN is anticipated to register top and bottom-line growth when it reports the third-quarter fiscal 2022 results. The Zacks Consensus Estimate for Vail Resorts’ quarterly revenues is pegged at $1.15 billion, indicating an improvement of 29.7% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Vail Resorts’ bottom line has moved up 0.3% in the past 30 days to $9.13 per share. The consensus estimate suggests growth of 35.9% from the prior-year quarter. MTN has delivered an earnings beat of 1.7%, on average, in the trailing four quarters.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Ralph Lauren Corporation (RL) : Free Stock Analysis Report
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
PVH Corp. (PVH) : Free Stock Analysis Report
 
Vail Resorts, Inc. (MTN) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research