Why Investors Are Cheering Ralph Lauren

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Ralph Lauren Corp. (NYSE: RL) shares saw a handy gain on Thursday after the firm announced at its investor day that it will be making some big changes. A couple of the big highlights were that the firm will be raising its dividend, as well as adding to its share repurchase plan.

To put some numbers to it: Ralph Lauren is increasing its dividend by 25% to $0.625 per share, which will be payable on July 13 to shareholders of record on June 29. The new annual dividend rate implies a dividend yield of 1.79%.

The firm also will add $1 billion to its stock repurchase program and incur restructuring charges in the range of $100 million to $150 million, mostly by the end of fiscal 2019. Ralph Lauren expects to incur these charges as the result of consolidation of its distribution network and corporate offices. This restructuring is expected to save about $60 million to $80 million annually going forward.

Looking ahead over the next five years, from fiscal 2018 to fiscal 2023, the company expects revenue to grow at a compounded annual growth rate of low to mid-single digits in constant currency. In addition, the company is targeting a return to revenue growth in fiscal 2020 in constant currency.

In addition to the recent announcement that Michael George joined the board of directors and Angela Ahrendts agreed to be nominated to join in August, the company announced that Linda Findley Kozlowski, chief operating officer at Etsy, agreed to be nominated to join the company’s board in August.

Ralph Lauren, executive board chair and chief executive, commented:

As we reflect on 50 years, I am so energized by the work we are doing to build the future for our Company and iconic brand. With a clear plan, Patrice’s leadership and our dedicated, passionate teams all over the world, we are reigniting the entrepreneurial spirit that is at the heart of our heritage and culture.

Shares of Ralph Lauren was last seen up more than 2% to $142.63, with a consensus analyst price target of $124.77 and a 52-week trading range of $68.50 to $145.94.