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Ralph Lauren Shares Drop; Forex Is Seen Hurting Revenue

Foreign currency is expected to hurt revenue growth by some 0.2 percentage point for fiscal 2022, Ralph Lauren says.
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Ralph Lauren  (RL) - Get Ralph Lauren Corporation Class A Report shares dropped on Tuesday after the fashion house forecast that currency movements will hurt revenue.

“For fiscal 2022 [ending around March 25, 2022], the company now expects constant currency revenues to increase approximately 34% to 36% [over] last year,” Lauren said.

“Foreign currency is expected to negatively impact revenue growth by" about 0.2 percentage point.

The New York company's stock closed at $117.13, down 9.7%. It’s still up 3.7% over the past month amid strong consumer demand as the pandemic eases.

The company reported revenue of $1.5 billion for the second quarter ended Sept. 25, up 26% from $1.19 billion in the year-earlier quarter and above the FactSet analyst consensus of $1.47 billion.

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Net income registered $193.3 million, or $2.57 a share, swinging from a pandemic-induced loss of $39.1 million, or 53 cents a share, a year earlier. Adjusted earnings hit $2.62 a share, topping analysts’ forecast of $2.

The company expects to resume stock buybacks in the second half of fiscal 2022. It has $580 million left in its buyback authorization.

Morningstar analyst David Swartz likes the stock, assigning it a narrow moat but putting fair value at $108 prior to the earnings report.

“Lauren's restructuring over the past few years puts it on solid footing as it navigates the extraordinary challenge of the Covid-19 pandemic,” he wrote in an August commentary.

“In response to poor inventory control and heavy discounting in years past, Ralph Lauren has closed more than 75 stores, reduced exposure to U.S. department store and off-price channels, and cut product lead times.”