Ralph Lauren was looking good earlier in the week after positive comments from Credit Suisse and the announcement of a $250 million stock buyback plan. In addition, Credit Suisse added Polo Ralph Lauren to its U.S. Focus List.
Credit Suisse views the recent sell-off in the stock as a unique chance to buy shares in one of the best branded lifestyle companies in the world at a reasonable valuation. While many investors are frightened of the consumer segment in this uncertain environment, Credit Suisse believes Ralph Lauren is uniquely positioned relative to most U.S. retail stocks: 30% of its business is international, and the brand is well tiered across price points (from Black Label at the ultra high-end down to Chaps in Kohlâ€™s), positioning it well in both a up and down spending environments.
According to Credit Suisse, while the stock is attractive based on the existing business, the brokerage believes Ralph Lauren has a possible $50/share worth of free call options on several multi-billion dollar opportunities: Handbags (the license for which comes back to Ralph Lauren in December); Asia (which is just starting to be brought back in house); Europe (starting to demonstrate strong growth after being bought back a few years ago); and own retail (which is becoming increasingly profitable and will accelerate new store openings later this year and beyond).
In addition, after the bell last Friday, the board moved to further increase shareholder value having approved a new $250 million stock buyback program. The company continues to be authorized to buy back up to $198 million in shares of common stock under an existing stock repurchase plan.
In order to further evaluate the potential of this company…let’s ask ourselves a few questions.
Do you think that Ralph Lauren is a stock worth looking at as a defensive move to a down-trending market?
With further disparity between the rich and poor, is Ralph Lauren positioned to take advantage of both ends of the spectrum?
How long will it take for new store openings to enhance returns to the company’s bottom line?
Furthermore, would you prefer Ralph Lauren to increase buybacks or pay heavier dividends?
Fat Pitch Financials had a great poll asking readers if they preferred Buybacks or Dividends…Here’s what they found out!Â The results are interesting, but the comments are very enlightening.