Ahead Of Ralph Lauren's Q1 Results, A Hold Rating Fits Deutsche Bank Comfortably

Deutsche Bank retained its Hold rating on the shares of Ralph Lauren Corp (NYSE: RL) ahead of the company's first-quarter results on August 10.

For the first quarter, Deutsche Bank expects $0.91 EPS on $1.536 billion in revenue (-5.0 percent year-over-year), while consensus forecast calls for an EPS of $0.89 on revenue of $1.53 billion. The brokerage also expects 59.4 percent gross margin (-50 bp year-over-year), and 7.4 percent operating margin (-130 bp year-over-year).

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Investors would be mainly focusing on the additional details of the multi-year "Way Forward" plan, which the company announced on June investor day. Although the management provided a timeline for revenue and operating margin through FY20, it provided minimum information on how it will implement its plan.

"While this plan includes many of the steps needed to reinvigorate the brand, such as rightsizing distribution and reducing lead times, the short-/mid-term pain, including sharp revenue & OM decline forecasts, will be evident in this quarter and beyond," analyst Dave Weiner wrote in a note.

Further, Weiner said it remains unclear what the company plans to do with its numerous ancillary brands and potentially with some subcategories as well.

The analyst will also look for any indication whether the company saw any respite from the tourism headwind that hurt its fourth-1uarter results.

"With the P&L potentially not inflecting meaningfully until FY19, the luxury/apparel sectors out of favor, and RL trading at 18x FY17 EPS, we are comfortable at HOLD," Weiner added.

The analyst has a price target of $85 on the stock.

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