NEW YORK (TheStreet) -- Ralph Lauren Corp. (RL - Get Report) stock is advancing by 12.55% to $117.11 in mid-morning trading on Wednesday, after the company appointed Gap (GPS - Get Report) executive Stefan Larson as CEO to replace founder Ralph Lauren.
Lauren will continue in his roles as executive chairman and chief creative officer at the lifestyle and apparel company.
"Now, all the pieces are in place to position our business for continued growth," Lauren said in a statement. "We have been a leader in our industry for nearly 50 years, and this is just the beginning."
Larsson will also join the Ralph Lauren board and report to Lauren.
Larsson was global president of Gap's Old Navy, where he led the brand through three years of profitable growth, and previously spent 15 years at H&M (HNNMY) as part of the team that expanded the Swedish retailer's operations.
TheStreet's Jim Cramer, portfolio manager of the Action Alerts PLUS charitable trust portfolio, has this to say about the executive change: "The company has been undermanaged and this is a terrific idea to get a young person, Stefan Larsson, in who did so much good work at Old Navy and H&M it is a coup!"
"Meanwhile, I think the fact that Ralph is willing to step aside at a time when the company has been drifting and its stock been terrible is a very hopeful sign," he added.
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 disappointing return on equity.
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.
- RALPH LAUREN CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, RALPH LAUREN CORP reported lower earnings of $7.87 versus $8.42 in the prior year. For the next year, the market is expecting a contraction of 12.3% in earnings ($6.90 versus $7.87).
- 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.
- You can view the full analysis from the report here: RL