• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Takeaway: The new CFO of $RL is ready to play ball, but can he smoothly transition from one industry to the next without a hiccup?

Ralph Lauren (RL) has just announced it has hired Chris Peterson, formerly of Procter & Gamble, as the company’s new CFO. Analysts on the Street see the hire as a positive for RL as does Hedgeye Retail Sector Head Brian McGough. Peterson winning the top finance position over a pool of thousands of prospects is a big deal considering that RL President Roger Farah runs an extremely tight ship. Consider it a vote of confidence.

Though the outlook for Peterson is bright, one concern we’d like to point out is the track record of executives moving from one industry to another – in this case, packaged goods to fashion. The businesses are fundamentally different as is capital allocation and meeting/beating Street expectations on various metrics. Here are three examples of other executives making the switch worth noting:

A)      Glenn Murphy: From Shoppers Drug Mart to Gap. Lately credited with the stock’s rebound. But financial engineering has been the main driver, until JCP ceded share six months ago at a time when, by chance, GPS got colors right.

B)      Ron Johnson: JCP from Apple. ‘Nuff said

C)      Paul Charron: Everyone loved the guy (Campell Soup), but in reality he destroyed LIZ.

We believe Peterson can buck the negative trend but will have to put in solid work. He has many challenges that lie ahead and if he can cut the mustard, Ralph Lauren will have a valuable executive on its hands that can help the company grow and move forward.