3. Ralph Lauren Corporation (NYSE:RL)
Share Price Returns From November 2, 2022 to January 30, 2023: 37.19%
Number of Hedge Fund Holders: 22
Net Buyback Yield: 17%
Ralph Lauren Corporation (NYSE:RL) is a New York-based company that designs, markets, and distributes lifestyle products including clothing, footwear, and accessories. On January 27, BMO Capital analyst Simeon Siegel downgraded Ralph Lauren Corporation (NYSE:RL) to Underperform from Market Perform with a price target of $100, up from $96. The analyst noted that although the company has a strong brand and management team compared to its competitors, who created the “Sell Less, Charge More” strategy, the stock has nearly returned to its pandemic-peak levels after a 50% increase over the past 4 months. The firm is also worried that the strong performance in Asia is hiding the declining margins in North America, which are significantly lower than pre-pandemic levels.
According to Insider Monkey’s data, Ralph Lauren Corporation (NYSE:RL) was part of 22 hedge fund portfolios at the end of the third quarter of 2022, compared to 24 in the last quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held the biggest position in the company, with 801,348 shares worth $68 million.
Heartland Value Plus Fund released its Q3 2020 investor letter and mentioned Ralph Lauren Corporation (NYSE:RL). Here is what the fund said:
“The business climate remains cloudy. As such, we continue to seek companies trading at attractive valuations, with strong management teams and that have avenues to succeed under multiple scenarios. For example, we initiated a position in Ralph Lauren Corp. (RL), a global lifestyle company that sells clothing, accessories and home goods.
Shares of Ralph Lauren tumbled earlier this year during the COVID-19 selloff. The stock has yet to fully recover as investors continue to cast a skeptical eye toward apparel companies and retail brands in the Consumer Discretionary space. While the global pandemic has been a severe blow to the beleaguered apparel industry, we view Ralph Lauren as a relative winner in the space.
Ralph Lauren is a best-in-breed brand with high gross profit margins and a loyal clientele. Management is using the disruption from the pandemic to accelerate cost-cutting efforts and pivot to an e-commerce growth model. With approximately $800 million in net cash on its balance sheet, we believe Lauren is well prepared to weather current headwinds in retail and should increase sales and earnings in the long-term. Despite our favorable outlook, shares are trading at roughly 6x enterprise value/next year’s earnings before interest, taxes, depreciation and amortization.”
