3 Big Reasons Ralph Lauren’s Stock Is Booming

Ralph Lauren Corp. shares have been popping all day after the company — which is on the tail end of a major restructuring effort — reported fourth-quarter results that flew past expectations.

As of 1:45 p.m. the shares remained up more than 15 percent at $134.26.

Here are three reasons investors are in celebratory mode.

Profits Are Back in the Black

After reeling in distribution to focus on pushing more full-price merchandise, the New York-based company reported Q4 net income of $41.3 million, or 50 cents per share, compared with a loss of $204 million, or $2.48 per share, last year. In addition to reversing the year-ago loss, on an adjusted basis, Ralph Lauren’s profits were 90 cents per share —  handily topping forecasts for diluted earnings per share of 83 cents.

It’s About Quality

Ralph Lauren said its fourth-quarter sales remained flat year over year at $1.52 billion, which was just above analysts’ bets of $1.48 billion. But the firm’s management noted that its “quality of sales, distribution and product” significantly improved in recent months.

Its average unit retail across direct-to-consumer network was up 4 percent for the full year, with growth during every quarter. Meanwhile, discount rates were also down across regions and channels in the fourth quarter and the full year.

The company said it has also cut off unproductive distribution and reduced its presence in off-price and discount stores as it seeks a more premium image.

Upping the Experience Component

“In-store experience” is perhaps retail’s most prominent buzz phrase, given the newly digital environment that has compelled traditional players to do more with their physical locations. To that end, Ralph Lauren said it has spent the past few months upgrading its store environments as well as evolving its marketing to increase its reach and appeal to new customers.

The firm said its better “assortment discipline and productivity” help send revenue per SKU up 16 percent and gross profit per SKU up 22 percent.

Increased marketing investment of 10 percent, according to the company, also contributed to “significant growth” in digital and social media reach.

Access exclusive content