Board event at is bullish for the stock, until it’s bearish for earnings.
- Whether the Board growing to 13 from 10 seats has any impact, the fact is that that people will grasp on to some degree of hope that this model can be saved.
- That’s particularly the case bc one of the Board Members Jana put in place is Roger Farah. Even though I think Roger got more credit for turning around Ralph than he probably deserved, the fact is that Wall Street gifted Farrah a tremendous halo as it relates to operationalizing any retail operation. That's why he's co-CEO with Tory Burch (left and right brain).
- But TIF does not have an operational problem. It has a Brand problem. A very big one, I’d argue. Farrah can’t fix that, and like it or not, he definitely contributed to RL’s current Brand problem.
- All he can do -- ater actually hiring a CEO (keeping in mind that the most senior person at this Lux brand recently came on from CP Railway) is give Reed Krakoff (new creative guru – ex Coach – they’re oil and water) a meaningful capital budget to fix a Brand.
- It takes no fewer than 5-years to fix a brand problem. RL is about 3-years into its problem – presuming it ever fixes it (undermanaged companies have a Brand problem forever). TIF is Zero years in. This will be a long long grind for TIF.
- Though this news concerns me as it relates to our TIF short, the reality is that any bounce will be a multiple event (though not sure there’s much room there), not an earnings event. In fact, the likelihood of earnings coming down materially just went up materially. I’m not talking about a simple ‘reset to game the Street’, but rather a significant investment in PP&E, and SG&A (branding/people) to regain footing with someone that wants to spend $30,000 on a watch.
