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Bull of the Day: Ralph Lauren

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Purveyors of luxury apparel and accessories have been on a strong run lately and the cream of the crop is one of the most recognizable names in the business – Ralph Lauren Corporation (RL - Free Report) . The high-end fashion giant operates the venerable Polo brand and a dozen other labels, including Chaps and Ralph Lauren for Women. They manufacture and market clothing and accessories for both men and women across the spectrum from casual sportswear to formalwear as well as accessories and fragrances.


Selling their goods on three continents through a combination of their own Ralph Lauren branded luxury stores, Polo factory stores, traditional retail department stores and increasingly, online through the company’s websites, RL has seen an improvement in gross margins as demand has grown for its premium brands which have been selling well at full retail prices, alleviating the need to offer discounts.


Founder Ralph Lauren remains Executive Chairman and Chief Creative officer at the company he began 50 years ago.  


The company’s well-defined plan of strategic initiatives includes: Winning over a new generation of customers, Energizing core products, Driving targeted expansion, Leading with digital sales and advertising and operating with discipline to fuel growth.


In RL’s most recent earnings release on July 31st – the company’s fiscal first quarter -  they beat on both the top and bottom lines, reporting earnings of $1.54/share on sales of $1.39B, versus Zacks Consensus Estimates of $1.39/share and $1.36b, respectively. It was Ralph Lauren’s 14th consecutive positive earnings surprise.


In the investor release, President and CEO Patrice Louvet commented “Guided by our three core principles of putting the customer at the center of all that we do, elevating and energizing our brand and balancing productivity and growth, we are on track to return the company to long-term sustainable growth and value creation.”


Analysts have taken note of RL’s recent strength with 5 upward revisions in the past 30 days, earning the company a Zacks Rank #1 (Strong Buy).


Full year 2018 earnings are now expected to be $6.56/share, up from $6.12 90 days ago. Estimates for 2019 have increased from $6.60/share to $7.15/share over the same period.


In the competitive fashion industry, only companies with a reputation for style and quality and strong brand recognition can maintain healthy gross margins. Few brands are as recognizable as Ralph Lauren and they’re working hard to keep it that way - just as they have for the last 50 years.


 

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