Eye on RL Promos

You don’t need to be a rocket scientist to know that Ralph Lauren’s business is suffering – i.e. Coach, Tiffany, Burberry, Guess!, Nordstrom, Sacks, etc… But I was pretty shocked to see that the online discount activity has changed very little versus this time last year. Better inventory management? Better control over .com business after year 1 of repo from GE? Or simply lack of read through in velocity of sales through discounted price points represented in this advertised sample?? Maybe all of the above.

We’re not making a bull call on RL’s business, but when I stress test the model in the worst way imaginable, I can’t get below $3.50ps. Realistically, I still think that a $4.00 number or better is in the cards. This is something to consider with the stock under 5x EBITDA.