Analyst: Ralph Lauren Corp. Sell-Off 'Not An Over-Reaction'

Ralph Lauren Corp.

traded near a 52-week low Thursday after the company missed fiscal third-quarter expectations and cut its outlook. The New York-based apparel wholesaler and retailer changed hands recently at $136.98, off $2.73. The shares are down more than 18 percent since reporting earnings late Wednesday. The stock's sharp decline "isn't an over-reaction," according to Morgan Stanley's Jay Sole, who maintained a Hold rating. The sell-off "represents an accurate reflection of the company's diminished long-term growth outlook," Sole said. Ralph Lauren, with a current market cap of $14.7 billion, cut its 2015 sales growth outlook Wednesday to 4 percent, from a previous range of 5 percent to 7 percent. Sales during the previous five years grew 50 percent to $7.45 billion in fiscal 2014, from $4.98 billion in the year ended April 2010. Citi's Kate McShane said Wednesday that Ralph Lauren's newly lower share price "represents fair value" and downgraded the company to Neutral, from Buy. McShane also cut her price target more than 25 percent to $145, and said earnings growth will be "pushed out further than we thought." Likewise, Deutsche Bank's David Weiner downgraded the company Thursday to Hold, from Buy, citing foreign exchange pressure and a flat outlook for operating margin. Weiner also lowered his price target more than 28 percent to $136. Ralph Lauren Corp., namesake of its 74-year-old controlling shareholder and chief executive, last year got nearly 40 percent of its revenue from international sales. Its retail business accounted for more than half of total sales last year, with wholesale amounting to 47 percent and the remainder stemming from trademark licensing. Ralph Lauren on Wednesday posted third-quarter profit of $2.41 a share on sales of $2.03 billion. Wall Street expected earnings of $2.50 a share on $2.1 billion of sales.