Ralph Lauren To Cut Jobs And Close Certain Stores; Stock Falls

(RTTNews) - Ralph Lauren Corp. (RL) said it will rightsize the cost structure and implement an ROI-driven financial model to free up resources to invest in the brand and drive high-quality sales. The new plan includes strengthening the leadership team and creating a more nimble organization by moving from an average of 9 to 6 layers.

The Restructuring Plan will result in a reduction in workforce and the closure of certain stores.

RL is currently trading at $88.75, down $7.58 or 7.87% percent.

The company expects its Fiscal 2017 restructuring activities to result in approximately $180-$220 million of annualized expense savings related to its initiatives to streamline the organizational structure and rightsize its cost structure and real estate portfolio. This is in addition to the $125 million of annualized cost savings associated with the Company's Fiscal 2016 restructuring activities.

The company expects to incur restructuring charges of up to $400 million as a result of the Fiscal 2017 restructuring activities and up to a $150 million inventory charge associated with the reduction of inventory out of current liquidation channels in line with the Company's Way Forward Plan. These charges are expected to be substantially realized by the end of Fiscal 2017.

In the first quarter of Fiscal 2017, the Company expects consolidated net revenues to decline at a mid-single digit rate. Operating margin for the first quarter of Fiscal 2017 is expected to be approximately 110-160 basis points below the comparable prior year period. The first quarter tax rate is estimated to be approximately 29%.

The Company currently expects consolidated net revenues for Fiscal 2017 to decrease at a low-double digit rate due to a proactive pullback in inventory receipts, store closures, pricing harmonization and other quality of sale initiatives, combined with the weak retail traffic environment in the U.S. Operating margin for Fiscal 2017 is currently anticipated to be approximately 10%, as cost savings are expected to be offset by growth in new store expenses, unfavorable foreign currency impacts, infrastructure investments and fixed expense deleveraging. The Fiscal 2017 tax rate is estimated to be approximately 29%. Capital expenditures are expected to be approximately $375 million in Fiscal 2017. This guidance assumes approximately $200 million in share repurchases.

As a result of its Way Forward Plan, the Company expects to stabilize performance in Fiscal 2018 and pivot to growth off of a smaller, more profitable base in Fiscal 2019, with improving operating margins in both fiscal years.

In Fiscal 2020, the company targets market share growth and a mid-teens operating margin.