Ralph Lauren Stock Slides After Q2 Results, Plans Resuming Stock Buyback

Ralph Lauren Corp RL reported second-quarter FY22 sales growth of 26% year-on-year, to $1.50 billion, beating the analyst consensus of $1.47 billion.
Global Digital Ecosystem revenue increased about 45%, including owned digital commerce growth of 35%.
Ralph Lauren noted Average Unit Retail increased 14% Y/Y driven by continued brand elevation and strong full-priced selling trends.
Revenues from North America increased 30% Y/Y to $703 million, Europe rose 38% to $496 million, and Asia grew 14% to $270 million.
In retail, comparable store sales in North America were up 31%, Europe up 27%, and Asia increased 7%, resulting in 23% growth for total Ralph Lauren.
Gross profit improved to $1.02 billion, and gross margin was 67.5%. Adjusted gross margin expanded 80 basis points to 67.3% on a reported basis and up 50 basis points in constant currency.
Adjusted operating expenses were $755 million, up 17% Y/Y.
The operating margin was 16.7%, and operating income for the quarter was $252 million. Adjusted operating income was $257 million, and operating margin expanded 450 basis points to 17.1%.
Inventories rose 5% Y/Y to $928 million.
Ralph Lauren held $3.1 billion in cash and equivalents as of September 25, 2021.
EPS of $2.62 beat the analyst consensus of $1.99.
Ralph Lauren expects to resume its share repurchase program starting in 2H of FY22, with $580 million remaining under its current authorization.
Outlook: Ralph Lauren sees Q3 revenues to increase about 14% - 16% in constant currency.
It sees an operating margin for Q3 of 13.0% - 13.5%, roughly in-line with last year, with modest gross margin expansion.
For FY22, it sees constant currency revenue growth of 34% - 36% (prior view 25% - 30%)
Ralph Lauren continues to expect an operating margin of 12.0%-12.5% and expects gross margin to increase at the high end of previous guidance of 50 to 70 basis points to last year.
Price Action: RL shares are trading lower by 5.51% at $122.6 on the last check Tuesday.

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