NEW YORK (TheStreet) -- Ralph Lauren Corp. (RL) - Get Ralph Lauren Corporation Report shares are sliding 2.93% to $109.14 on Thursday after analysts at Barclays downgraded the luxury clothing company to "equal weight" from "overweight" and cut its price target to $130 from $150.
"In the context of a preference for companies that are ready and willing to consolidate (internally or externally), we believe Ralph Lauren has already completed internalization of categories and regions," analysts said.
Going forward, the company needs to work more on its infrastructure, the firm noted.
However, new changes to the management could be advantageous for Ralph Lauren, according to the analyst note.
At the end of September, Gap (GPS) executive Stefan Larsson was appointed as CEO to replace founder Ralph Lauren.
Ralph Lauren will release its second quarter fiscal year 2016 results for the period ended September 26 on November 5.
Separately, TheStreet Ratings team rates RALPH LAUREN CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate RALPH LAUREN CORP (RL) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RL's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.40, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for RALPH LAUREN CORP is rather high; currently it is at 59.70%. Regardless of RL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.95% trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 60.5% when compared to the same quarter one year ago, falling from $162.00 million to $64.00 million.
- Net operating cash flow has decreased to $332.00 million or 20.00% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, RALPH LAUREN CORP has marginally lower results.
- You can view the full analysis from the report here: RL