How Has Ralph Lauren Performed In Terms Of Inventory Management?
Ralph Lauren (NYSE:RL) has performed quite poorly in the past few years when it comes to inventory management. The growth in inventories has far outpaced the revenue growth for the company. Even in FY 2016, despite a 3% fall in revenue, the inventory increased 8%. The inventory turnover ratio for RL has been declining, implying poor sales, and consequently, excess inventory. The days inventory indicates the number of days a company holds on to its inventory before selling. This metric is usually measured using cost of goods sold, but can also be measured with revenue. Both these factors have been rising, meaning that the average length of time that Ralph Lauren’s cash is tied up in inventory has been increasing. Even an increasing inventory to revenue ratio indicates either falling sales or excess inventory in hand. When all these are considered, the excess inventory problems for Ralph Lauren are highlighted, which have driven up discounting and transfers to outlet and off-price stores. This trend has also significantly impacted the margins of the company.
A number of steps are being taken by the company to fix this problem, the primary one being reducing the long lead times, which results in a mismatch of demand and supply. Currently, the lead times are 15 months, on an average. The company intends to reduce this by six months.
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- Ralph Lauren Stock Slumped 14% In Last Ten Days, What’s Next?
Have more questions on Ralph Lauren? See the links below:
- What Are The Challenges Facing Ralph Lauren?
- What Led To A Sudden Drop In Ralph Lauren’s Share Price?
- What Percentage Of Ralph Lauren’s Stock Price Can Be Attributed To Growth?
- Ralph Lauren Q4 And FY 2016 Earnings And Revenue Beat Expectations
- Why Have Ralph Lauren’s Licensing Revenues Been Declining In Recent Years?
- How Have The Number Of Ralph Lauren Stores Operated By The Company Changed Over The Past Five Years?
- Why Is The Online Market Place The Next Big Thing For Ralph Lauren?
- How Has Ralph Lauren Performed In Comparison To Its Peers?
- How Has Ralph Lauren’s Sales Breakdown According To Geographic Locations Changed Over The Past Five Years?
- How Will Ralph Lauren’s Retail Division Perform In The Next Five Years?
- How Did Just The Month Of February Make Ralph Lauren One Of The Worst Performing Companies, Amongst Its Peers?
- Why Did We Revise Our Price Estimate Of Ralph Lauren To $102?
- How Will Ralph Lauren’s Revenue And EBITDA Composition Change In The Next 3 Years?
- What Is Ralph Lauren’s Fundamental Value Based On Expected 2016 Results?
- What Is Ralph Lauren’s Revenue And EBITDA Breakdown?
- Ralph Lauren: Year 2015 In Review
Notes:
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