$RL Horsekicked, Following Earnings Warning, Restructuring Plan, Share Buybacks Continue

People aren’t wearing clothes like they used to. RL just unveiled their restructering plan, guided revenues lower, and reaffirmed a moronic $200 mill share buyback. The market isn’t impressed. The stock is being drilled.

Alas, the mall is dead. Millennials dress like homeless men. Share buy backs are pretty much the dumbest thing a company with core fundamental problems can implement.

Fiscal 2017 Restructuring Activities: Co expects FY17 restructuring activities to result in ~$180-$220 mln 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 mln of annualized cost savings associated with the Fiscal 2016 restructuring activities.Co expects to incur restructuring charges of up to $400 mln as a result of the Fiscal 2017 restructuring activities and up to a $150 mln inventory charge associated with the reduction of inventory out of current liquidation channels in line with the Way Forward Plan. These charges are expected to be substantially realized by the end of Fiscal 2017.

Q1 and Full Year Fiscal 2017 Outlook: Co expects Q1 consolidated net revenues to decline at a mid-single digit rate vs -3.5% consensus, op margin ~110-160 basis points below the comparable prior year period. Co sees FY17 net revenues at a low-double digit rate vs -4% consensus 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. FY17 op margin ~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 ~$375 mln in Fiscal 2017. This guidance assumes ~$200 mln in share repurchases. Q1 2017 and Fiscal 2017 guidance excludes the restructuring and inventory charges associated with the Fiscal 2017 restructuring activities.

Long-Term Financial Outlook: 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 is targeting market share growth and a mid-teens operating margin.

I thought the stock was interesting in the low $120s. In the $80s, this looks like a steal.