EARNING UPDATE $RL Ralph Lauren Corporation for quarter ending q_Jun18 – Revenue fell but Margins expanded

[s2If !current_user_can(access_s2member_level0)]Please login to read the earning update on RL [lwa][/s2If][s2If current_user_can(access_s2member_level0)]Ralph Lauren Corporation reported earnings (EPS) of 1.31 per share for the quarter ending q_Jun18. This is vis-vis 0.50 per share for the previous quarter ending q_Mar18, a growth of 162 %. Compared to last year same quarter (q_Jun17), earnings…

EARNING UPDATE $RL Ralph Lauren Corporation for quarter ending q_Jun18 – Revenue grew, Margins expanded

[s2If !current_user_can(access_s2member_level0)]Please login to read the earning update on RL [lwa][/s2If][s2If current_user_can(access_s2member_level0)]Ralph Lauren Corporation reported earnings (EPS) of 1.31 per share for the quarter ending q_Jun18. This is vis-vis 0.50 per share for the previous quarter ending q_Mar18, a growth of 162 %. Compared to last year same quarter (q_Jun17), earnings…

$RL 2018-08-02 : Transcripts- RL Edited Transcript of RL earnings conference call

[s2If !current_user_can(access_s2member_level0)] Please login to read the transcript. [lwa] [/s2If][s2If current_user_can(access_s2member_level0)]”

Q1 2019 Ralph Lauren Corp Earnings Call

New York Aug 3, 2018 (Thomson StreetEvents) — Edited Transcript of Ralph Lauren Corp earnings conference call or presentation Tuesday, July 31, 2018 at 1:00:00pm GMT

TEXT version of Transcript

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On my blog for Yahoo Finance Contributor, The Trading Coach, there is an Ask Anything option.  One reader asked:

What are the advantages of trading prop?

We are a proprietary trading desk in NYC, trading stocks, options, futures, and automated trading.  The firm, powered by Kershner Trading Group, provides capital, training, coaching and mentoring, technology and assumes all risk.  The reader was a retail trader, trading his own account.

Here are some reasons to trade prop:

1. Capital

It is common for our better 20-something traders to trade a 10-20m account.  Traders can make more when the best opportunities visit.  A recent example was August 24, 2015.  Products were severely mispriced on the open.  One firm trader who made north of 15m on that day elucidated, “How much of (X) would you buy if it was selling 30 percent below what it was worth?”  Answer: you would want to buy as much as you could.  More buying power, a bigger trading account, allows you to capture those best opportunities and make more.

2. Technology

Our firm uses proprietary technology.  You cannot use our trading platform unless you are a firm trader.  The platform allows traders to play more offense with their favorite setups.  Our connectivity to markets is world class.  Custom filtering technology allows traders to build alerts to their favorite setups.  Also, we have world class execution routes to dark pools and the market that retail traders do not.

3. Training

On our desk, there are three parts to our training program: SMB Foundation, Trader Development and Team Trading.  The training is intensive.  Three daily mentoring sessions help new traders learn.  Technical analysis, Reading the Tape, stock selection, trade review, morning prep, risk management, trades with edge, trader psychology, sizing, trade execution, building a PlayBook, the principles of One Good Trade are just some of what is taught during SMB Foundation.

In Trader Development, a daily routine for improvement, PlayBook best for trader, automated trading, best practices turned into habits, niche with edge emphasizing a trader’s talents are the focus.

Team trading is earned by the trainee through an interview with the top traders on the desk.  Traders are matched with like-minded senior traders, who then become their daily coaches.

4. Automated trading

On our desk, traders have access to software that allows them to build models from their desktop.  Traders can develop a trading idea, backtest, forward test and then run the strategy live from their desktop.  A trader’s career path is not just solely as a discretionary trader, but also as a quant trader or a hybrid discretionary/quant.  And all the infrastructure that goes into automated trading makes connectivity, alerting software, and trade execution better for discretionary trading.

5. Deeper Pockets

Additional capital is only part of how traders can make more.  A firm can withstand your draw-downs much better than you can as individual.  One top senior trader lost 400k in one trade, on one day at the end of 2015.  The firm absorbed that temporary loss and allowed the trader to use that hit as a learning opportunity.  That trader has gone on to become a much better trader as a result of that trading loss/experience.  To advance as a trader you must trade big.  And when you trade big, large losses are inevitable.  You can risk more and trade bigger with a firm behind you.

6. Coaching and Mentoring

All of our traders work with Steve, our Floor Manager and me.  I have written two books on trading so I hope I am a pretty good resource.  But at our firm there is more.  Our top traders get to work with an outside coach, the best trading coach in the world.  This helps them receive feedback on how to improve at the highest level.  One of our traders just had his best month-to-date, while already achieving seven-figure status.  That is impressive progress for someone at that skill level, but also partly the result of high level coaching.

7. Team Trading

Junior traders join the teams of senior traders in-time.  They get to learn the setups from Senior traders.  They are coached by these top traders in real-time.

Things heard on the desk from Senior traders:

Why aren’t you bigger in that trade?

That is a bad trade!

Nice trade.  That is how you do it.

Recently, a Senior trader asked his junior traders to build some filters for his trading.  3 months later that Senior trader excitedly shared he made 50k more because of those alerts built by his junior guys.

One of most memorable scenes on our desk of late was a team holding their weekly technology meeting.  New models to build were discussed.  Filters to be shared were highlighted.  New filters to build and who would do that work was outlined.  Together these traders were making more.

All of this makes you better.

8. Environment

One trade idea shared by a trader on the desk can make your week.  Seeing others make six figures in a month gives new and developing traders the inspiration to do better.  A senior trader at our firm recently noted a major benefit to trading at the firm is the new blood that arrives and pushes him to do better.

9. Access to more products

A prop firm can gain access to more products that you might as an individual retail trader.  On our desk, we can trade options, stocks, futures, automated trading, international names, and more.  Traders with edge can find more ways to express their edges with more products and make more.

Related posts

5 lessons from the prop desk

A trading strategy newly stressed on the prop desk

Jeff Macke literally grew up in Target stores. Retail flows through his veins like bourbon over ice. Discounting and buybacks are his kryptonite. When he speaks, we listen.  

That’s exactly what happened when we discussed the bullish case for lululemon heading into yesterday’s earnings call.  Macke was adorned in the finest lulu lemon men’s apparel, which he sees as an untapped market. 

Here’s what happened-- Macke sees enormous opportunity for the specialty retailer and multiple signs that they are executing very well.  LikeFolio’s social data shows strong purchase intent and consumer sentiment.  Everyone agrees BULLISH, and the next day the stock opens up 20% higher than the price at time of publication.  

Summary:  You should be a listener.

Digging in-- what gave away LULU’s huge quarter?

MACKE:  “When I see specialty retailers commanding 50% margins and NOT being promotional on black Friday that tells me the company has a lot of confidence in the goods they’re carrying and that their margins are going to be solid.”

Result?  Revenues up 13.5%, gross margins at a blistering 51.1%

SWAN: “LuLu mentions are at levels where they were when the stock was at $70 rather than the under $60 we’re at today....with the stock trading at that big of a discount to what we’re seeing, this could be a good time to get some value.”

LikeFolio data showed consumer mentions of lululemon near all time highs

Result?  Stock moves from $58 to $70 in a few trading hours on a phenomenal earnings report and call.

MACKE:  “We’re finally at the point where this omni-channel thing cannot be ignored. The winners online have a chance to gain market share in the US for the first time in a generation.  It’s a lot easier for retailers like Target and Wal-Mart to add backend software and automation than it is for Amazon to add those kind of distribution centers.”

Result?  LULU posts in-store gains of 4% and direct/online gains of a massive 16%. 

I know what you’re thinking... “wow, those guys nailed it... but what good does that do me now?”

And you’re right....so...

Two NEW retail ideas

TJ Maxx ($TJX) -- Bullish

TJ Maxx, whose primary brands are T.J. Maxx and Marshalls, has seen a steady uptrend all year in consumers talking about shopping at their stores. They reported positive earnings in November, and we remain bullish on TJX.

Ralph Lauren ($RL) -- Bearish

Ralph Lauren is showing a steady decline in purchase intent mentions, while at the same time an increase in the % of customers who are happy. 

Diving deeper, we see that the number of happy customers remains steady while the unhappy ones are leaving. This consolidation combined with decreased mentions of spending money on their brands leads us to lean bearish on the company.

We asked Macke for comment on the two companies, and here is what he replied with:

“I like the low expectations on Ralph. TJX is a monster. If KSS is healthy it usually means TJ Maxx is ready for an ultra marathon. RL might be a flier but you need to see management earn it. TJX already deserves the benefit of the doubt.” -- Jeff Macke

Bottom line-- retail is a fickle game. Great companies make great products, and consumers...not Wall Street analysts... determine their fate. A data-driven understanding of the consumer combined with expertise in the sector is a winning -- and very profitable -- formula.

Macy’s (M): Department store retailers rebounded in the second quarter after years of weak consumer spending and dwindling market share to rising ecommerce brands like Amazon. The resurgence started with Macy’s after the retailer beat earnings and revenue estimates by a wide margin. Continued efforts to optimize price, maintain efficient inventory levels, and expand private label offerings are expected to help Macy’s build on its Q2 gains. Additional developments in its ecommerce platform, off price brand and building out its cosmetics brand, Bluemercury, will have the biggest impact on the top line growth. Nonetheless, the second quarter may have been an anomaly and Macy’s could just as easily fall back into its old ways. A competitive landscape particularly from the online retailers are redirecting traffic away from department stores and thereby denting sales. As a result analysts’ expectations have been muted despite the positive traction generated in the second quarter.

Nordstrom’s (JWN): Nordstroms along with Macy’s and the rest of the names mentioned on this list was the beneficiary of better than expected earnings last quarter. The upscale department store was hit hardest from the changes in the retail environment that witnessed a shift away from luxury brands towards value channels. Shares are down 23% in the past 12 months but have since recovered to flat in 2016. Nordstrom’s investments to expand its omnichannel capabilities along with efficient cost controls and store expansions remain driving factors for top line growth. Needless to say the overall rebound in the retail sector is well off its peaks with overall growth running negative.

Kohls (KSS): Exceedingly low expectations made it easier for Kohl’s to top its quarterly results in the second quarter. Despite topping expectations, the Q2 results included a 1.8% decline in comparable store sales on a 2% decline in total revenue. Sluggish comps could see a boost in the third quarter that includes the pivotal back to school season and tend to drive traffic trends. Continued efforts to improve its base business and maintains its strategic initiatives, Greatness Agenda, should help drive growth through the holiday season. Kohls along with its peers should remain cautious about the weak spending environment and continued adoption of ecommerce platforms.

Ralph Lauren (RL): Luxury brands have been amongst the worst performers in the broader retail sector as consumers shift their spending towards value channels. Ralph Lauren, in particular, has seen shares drop 28% in the past 12 months on sluggish comparisons, challenging retail trends and numerous store closures. Margins have been hurt from frequent discounting to compete with the value oriented retailers, negative currency translation and heavy infrastructure investments. Efficient cost controls  may offset some of the losses while a recently applied restructuring strategy will help long term performance.  

Michael Kors (KORS): After weak revenue results from Kate Spade and Coach already this season, luxury brands appear to be unraveling. This doesn’t bode well for Michael Kors who reports its third quarter results on Thursday. With a large exposure to volatile international markets and currency headwinds, both earnings and revenue could see their first downturn in over a year, after just getting by with flat growth in Q2. Estimates are seeing downward revisions activity ahead of its report, typically a sign of a miss on the horizon.

The main focus for KORS will be comps which in the past were driven by new store openings, expanding existing outlets and building out its omnichannel capabilities. But the retail environment is more challenging these days. Luxury brands and longtime status symbols are simply not resonating with consumers like they have in the past. As a result we have seen a great deal of discounting from key brands including Michael Kors. Discounting may very well drive sales but it also puts pressure on margins.

Coach, Michael Kors, and other "aspirational" goods sellers have been forced to adjust their strategies in an increasingly difficult operating environment.

Want to read more of Valuentum’s research and analysis? Please consider becoming a member at www.valuentum.com. Or subscribe here.

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By Kris Rosemann

Coach (COH), Michael Kors (KORS), Fossil (FOSL), and Ralph Lauren (RL) all beat consensus estimates in the calendar second quarter of 2016, but the way the market reacted to the beats varied drastically despite none of the above firms necessarily issuing outright optimistic expectations. The weak outlooks have weighed on shares of Coach and Michael Kors, but shares of Fossil and Ralph Lauren have received an updraft in hopes of turnaround strategies and sales-decline stemming plans beginning to take hold.

Ongoing weakness in retail traffic across the US, and a decrease in tourism in major domestic cities have played an important role in the growing issues for luxury brands. In an attempt to combat traffic pressures, many department stores have been offering significant discounts on many luxury goods, which has forced Coach, Michael Kors, and Ralph Lauren to reconsider their strategies in the retail environment. In order to protect their brand images, the firms have decided to pull their products from those offering their luxury goods at deep discounts. Though such a move will undoubtedly bring near-term pain, protecting the branding of an aspirational-luxury goods maker is imperative to long-term success.

Coach reported a relatively solid fourth quarter of its fiscal 2016 (calendar second quarter) in which net sales jumped 15% on a year-over-year basis and North American comparable store sales increased 25%. Operating margin expansion helped drive non-GAAP earnings per share to $0.45 from $0.31 in the comparable period of fiscal 2015. However, Coach brand net sales at department stores in North America declined at a high-single-digit rate compared to the year-ago period. Coach now expects to close ~250 of its wholesale locations and issue a reduction in markdown allowances, which it hopes will preserve its brand as a high-end aspirational target for consumers.

Nevertheless, Coach expects fiscal 2017 to be the year in which it returns to growth across all financials, including the assumption of low-single-digit comparable store sales growth in North America. Revenue is expected to increase in the low-to-mid single digit range, while earnings per diluted share is expected to make a double-digit jump from fiscal 2016. The firm’s balance sheet, and the financial flexibility it offers, continues to be a key attribute in its turnaround plan, as its net cash position stood above $443 million as of the end of the fourth quarter of its fiscal 2016. We think the company, and its ~3.3% dividend yield, continues to be a nice fit in the Dividend Growth Newsletter portfolio.

Michael Kors' first quarter of fiscal 2017 (calendar second quarter) was not nearly as strong as that of Coach. The firm reported total revenue roughly in-line with that of the year-ago period. While retail sales advanced 7.6% thanks to new store openings, primarily in Asia, wholesale net sales fell 7% and comparable sales decreased 7.4%. Net income per ordinary share on a diluted basis dropped $0.04 from the comparable period in fiscal 2016 to $0.83 in the quarter as ongoing investments in international expansion, digital flagships, and global infrastructure resulted in an increase in operating expenses.

Michael Kors' management was encouraged by the firm’s progress in its North American digital flagships and its global expansion, though such progress was offset by material weakness in its more traditional North American business due to suppressed mall traffic levels and lower tourism spending in major cities. Similar to Coach’s strategy, the company is also working to avoid the aspirational-brand image tarnishing, ultra-competitive discounting taking place at department stores across the US. As CEO John Idol said, “The amount of promotional activity from many of the people who carry our line was at its all-time high, and we had to compete to be able to move our inventories during that period of time. That’s the whole cycle we are going to get ourselves out of.”

Michael Kors expects the aforementioned top-line pressures and operating margin suppressors to continue to impact fiscal 2017 results. The company is projecting total revenue to be flat from fiscal 2016 with comparable sales falling in the mid-single digit range, the latter of which is a downward revision from initial guidance of a low-single digit decline. GAAP diluted earnings per share are expected to come in a range of $4.47-$4.54 compared to $4.44 in fiscal 2016.  We will continue to hold shares, which are trading at just over 11 times fiscal 2017 earnings, in the Best Ideas Newsletter portfolio as we continue to believe in the firm as a long-term idea “Fundamental Strength To Outweigh Short-Term Volatility.”

Michael Kors continues to feel the pain of its global watch licensing agreement with Fossil, which reported a net sales decline of 7% on a year-over-year basis, due to a 10% drop in its watches revenue. Management pointed specifically to its licensed brand category of watches as a key drag on its overall sales growth, and the company was not exempt from the pressures impacting its peers. Global retail comps fell 3% in the quarter from the year-ago period as positive comps in its full price stores were mitigated by material comp declines in its outlet stores, and strength in Asia was offset by weakness in the Americas and Europe.

Though Fossil’s quarter left a good deal to be desired, its shares have received an updraft thanks to its better-than-expected reported results. The firm continues to face an uphill battle in its core watches business, which accounts for ~75% of total sales, as the recent increase in wearable technologies continues to weigh on demand for traditional watches. It has attempted to enter the wearables market, but we have our concerns with the true competitive potential of such offerings from a traditional watch maker entering the market considerably later than many. In addition, Fossil’s brand strength could mean little next to the likes of Apple (AAPL) in the wearables market, in our opinion.

Ralph Lauren has seen many of the same market dynamics impacting its business as its peers. The firm reported a less-than-spectacular first quarter of fiscal 2017 (calendar second quarter), but it beat consensus estimates and its shares have rallied as a result of its execution of its turnaround plan. The company’s ‘Way Forward’ plan remains its focus, and is a large reason why investors were not expecting much in terms of financial performance from it in the most recent quarter. Net revenues fell 4% on a year-over-year basis as wholesale revenue was pushed down 5% by US department store weakness and retail revenue was dragged down 3% by a 6% decrease in comparable store sales.

Operating income margin at Ralph Lauren fell roughly half as much as it was expected to in the period, a large positive for the firm as it continues to set its sights down the road. Adjusted net income per diluted share fell to $1.06 from $1.09 in the year-ago period but easily beat consensus estimates of $0.89; full-year guidance was not increased, however. Like its peers, the company also expects to reduce its reliance on the discretion of traffic-desperate department stores, but it will cut 1,000 jobs and close stores in accordance with its restructuring plans associated with its ‘Way Forward’ plan. $180-$220 million in annualized cost savings are anticipated as a result.

The operating environment for aspirational goods producers is not likely to improve in the near term either; strategy adjustments and restructuring initiatives from players within the space speak to this notion, in our view. We may see more share price volatility across the group as their respective strategies play out, and we’ll continue watching the newsletter portfolio constituents in the arena like a hawk. We continue to hold onto Coach as it works toward righting the ship with respect to its brand image. Its quarterly payout looks to be on solid ground, and at ~2% of the Dividend Growth Newsletter portfolio, we like what it does for us in terms of diversification in a portfolio context. We continue to believe in future price-to-fair value convergence in shares of Michael Kors, which are currently trading below the lower bound of our fair value range of $53-$79, though the road may be bumpy. Kors is included in the Best Ideas Newsletter portfolio.

Interested in Valuentum’s newsletter portfolios? Learn more here.

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KORS: After weak earnings from Kate Spade and Coach, it appears likely that Michael Kors surging stock could hit a roadblock tomorrow. Shares of the luxury brand have risen 25% this year on consecutive beats and strong comparables. Both KATE and COH cited higher discounting and promotions for its poor quarterly results. Similar sentiment is likely to be echoed in KORs report tomorrow. The retail sector has been choppy lately and with a large exposure to volatile international markets both earnings and revenue could see its first downturn in over a year. Michael Kors continues to invest heavily in new store openings, expanding outlets and building its omni channel capabilities to remain competitive in the long term.

RL: Similar to KORS, recent reports from luxury brands doesn’t not bode well for Ralph Lauren. However, unlike KORS, Ralph Lauren stock has been beaten down lately. In the past 12 months shares have dropped over 20%. Despite a couple beats in the past few quarters, comparables continue to turn negative. Last quarter featured a 38% decline on the bottom line and 1% on the top. The company’s key problems include too many brands in retail stores, over reliance on department stores, large inventory hangover and high operating expenses. The company’s new CEO has actively addressed these issues and has implemented a new strategy but it certainly isn’t a quick fix.

WEN: Wendy’s is a part of a group of fast food names that has bounced back in recent months. The stock is up 9% year to date thanks to cost saving initiatives and improving bottom line growth. Revenue, on the other hand, is expected to continue to decline for the foreseeable future. Wendy's recently transitioned its company owned restaurants to franchise based models. Furthermore, a rise in beef prices since the beginning of the year, and other food costs is expected to put pressure on margins. Fortunately, international expansion, promotional campaigns and frequent menu innovations should offset some of the downturn.