Thursday, February 12, 2015

Ralph Lauren as a sell

Our investment thesis was that “Ralph Lauren is expected to continue to gain global market share.” This investment thesis has changed from a positive to a negative within the last quarter. The increase of the U.S. dollar when compared to other currencies is terrible for companies that rely on their exporting for revenue. Ralph Lauren has built up their global image so high that 1/3 of their revenues are from their exports. Ralph Lauren said in their earnings report on February 4th, “We gained share early in the holiday shopping period, which positioned us well, as the environment became more competitive in the three weeks before Christmas.” This statement demonstrates that without Ralph Laurens jump-start before the change in currencies that their already lower than expected revenues would have been even lower. They also stated in their earnings call, “We continued to see the best trends in Northern Europe, recovery in the southern part of the continent and more steady expansion in central Europe.” I believe that once the lagged effect of both the larger difference in the currency rates and the bad economic state of Europe are felt by Ralph Lauren it will result in larger loses.

We bought Ralph Lauren at 155.45 with a stop loss at 138. The stock is currently at 138.70, I believe that Ralph Lauren will only get worse in the near future. With this logic I think that we should sell Ralph Lauren.

Sorry for the delay, I thought it was already posted.

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