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Ralph Lauren (RL) Shares Gain on Robust Pricing Strategy
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Ralph Lauren Corporation (RL - Free Report) has exhibited a decent run on the bourses in the past six months. Banking on its operational initiatives, brand strength, solid demand and expansion across all channels, the stock has outpaced the Zacks Textile-Apparel industry.
Ralph Lauren’s premium pricing strategy has been a key contributor to the company’s growth story. The renowned lifestyle apparel company has always managed to maintain higher prices for its clothing. Its share price also reflects gains from premium prices for its assortments.
In the past six months, shares of this Zacks Rank #2 (Buy) company have rallied 10.5% against the industry’s decline of 3.9%. Also, the stock has outpaced the Consumer Discretionary sector’s growth of 3.1%.
Image Source: Zacks Investment Research
The upward trend in the Zacks Consensus Estimate echoes a positive sentiment. The consensus estimate for RL’s earnings for fiscal 2024 has increased by a penny to $9.43 in the past 30 days. Moreover, the Zacks Consensus Estimate for the current and next financial years implies year-over-year increases of 13.1% and 13.7%, respectively.
The Zacks Consensus Estimate for sales for fiscal 2024 and 2025 is pegged at $6.63 billion and $7 billion, indicating year-over-year increases of 2.8% and 5.7%, respectively. The impressive long-term earnings growth rate of 13.8% emphasizes the intrinsic strength of the company.
Let's Take a Closer Look
What sets Ralph Lauren apart from its peers is its remarkable proficiency in successfully transferring higher price points to its customers. The brand has cultivated a sense of prestige and exclusivity, which allows it to command higher prices. This strategic approach has facilitated the company's exceptional standing within the industry. In the quarter ended Apr 1, 2023, the company reported an impressive 12% increase in average selling prices from the prior-year quarter. This substantial growth builds upon an already remarkable 77% increase in average selling prices over the past five years. The company's success in maintaining its pricing power has not only demonstrated its inherent strength but has also played a significant role in driving its shares.
Ralph Lauren has been actively expanding its digital and omnichannel capabilities, making strategic investments in mobile technology, omnichannel integration and fulfillment. The company's focus on a positive mix of products, investments in AI-powered targeting and consumer acquisition, and online search growth has yielded favorable results. In the fourth quarter of fiscal 2023, the digital business continued to be a significant growth driver, with accelerated digital sales observed across all regions.
RL saw successful brand activations, including sports sponsorship at the Australian Open and Lunar New Year campaigns, in the fourth quarter of fiscal 2023. These activations re-engaged customers and attracted 1 million in the fiscal fourth quarter and more than 5 million in the fiscal year. Social media followers reached 52 million, with growth on platforms like Instagram and TikTok. Ralph Lauren's online search trends surpassed competitors, indicating strong interest in its core categories.
The implementation of the "Next Great Chapter" plan has been a key driver for RL. This plan involves simplifying the company's global organizational structure and introducing enhanced technological capabilities. As a result, the company has been able to focus on its core brands and execute the Next Great Chapter elevation strategy effectively.
Ralph Lauren is dedicated to elevating and energizing its lifestyle brand. The company recognizes its timeless iconic brand as its most valuable asset, aiming to inspire and engage consumers, and foster long-term relationships. This strategic focus has yielded positive results, as the company has experienced growth in market share and a double-digit rise in Average Unit Retail (AUR) globally.
RL experienced exceptional growth in AUR for women's products, with an increase of more than 20% in the fourth quarter of fiscal 2023. This impressive performance can be attributed to robust growth in handbag sales and the successful global launch of Women's Polo intimates.
For fiscal 2024, management forecast a low-single-digit increase in constant-currency revenues, with foreign currency expected to have a positive impact of 20 basis points on reported revenues. The company predicts growth to be primarily driven by double-digit growth in Asia and low-single-digit growth in Europe. It is also anticipated to witness a low-single-digit decline in North America due to softer spring trends and wholesale timing shifts in the first quarter of fiscal 2024.
The company expects the operating margin to expand 30-50 basis points in constant currency, reaching 12.3-12.5%. This expansion is attributed to a gross margin increase of 50-100 basis points. Factors contributing to gross margin growth include lower freight costs, continued growth in AUR, and a favorable product, geographic and channel mix. The company anticipates reduced freight costs to benefit the gross margin by at least 100 basis points.
However, these positives may be partially offset by a negative impact of 20 basis points from foreign currency fluctuations and ongoing pressure from product costs, particularly cotton, throughout the majority of fiscal 2024.
3 More Red-Hot Stocks to Consider
Here we have highlighted three other top-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , lululemon athletica (LULU - Free Report) and Guess (GES - Free Report) .
GIII Apparel, which is a manufacturer, designer and distributor of apparel and accessories, sports a Zacks Rank #1 (Strong Buy) at present. The company has an expected EPS growth rate of 15% for three to five years.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 1.9% and 0.4% from the year-ago period’s actuals. GIII has a trailing four-quarter earnings surprise of 47.4%, on average.
lululemon, which is a yoga-inspired athletic apparel company, currently carries a Zacks Rank #2. The company has an expected EPS growth rate of 20% for three to five years.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17.1% and 18.4%, respectively, from the year-ago period’s reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
Guess, which distributes and licenses casual apparel and accessories, presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21%, on average.
The Zacks Consensus Estimate for Guess’ current financial-year sales and earnings suggests growth of 2.8% and 2.6%, respectively, from the year-ago period’s actuals.
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Ralph Lauren (RL) Shares Gain on Robust Pricing Strategy
Ralph Lauren Corporation (RL - Free Report) has exhibited a decent run on the bourses in the past six months. Banking on its operational initiatives, brand strength, solid demand and expansion across all channels, the stock has outpaced the Zacks Textile-Apparel industry.
Ralph Lauren’s premium pricing strategy has been a key contributor to the company’s growth story. The renowned lifestyle apparel company has always managed to maintain higher prices for its clothing. Its share price also reflects gains from premium prices for its assortments.
In the past six months, shares of this Zacks Rank #2 (Buy) company have rallied 10.5% against the industry’s decline of 3.9%. Also, the stock has outpaced the Consumer Discretionary sector’s growth of 3.1%.
Image Source: Zacks Investment Research
The upward trend in the Zacks Consensus Estimate echoes a positive sentiment. The consensus estimate for RL’s earnings for fiscal 2024 has increased by a penny to $9.43 in the past 30 days. Moreover, the Zacks Consensus Estimate for the current and next financial years implies year-over-year increases of 13.1% and 13.7%, respectively.
The Zacks Consensus Estimate for sales for fiscal 2024 and 2025 is pegged at $6.63 billion and $7 billion, indicating year-over-year increases of 2.8% and 5.7%, respectively. The impressive long-term earnings growth rate of 13.8% emphasizes the intrinsic strength of the company.
Let's Take a Closer Look
What sets Ralph Lauren apart from its peers is its remarkable proficiency in successfully transferring higher price points to its customers. The brand has cultivated a sense of prestige and exclusivity, which allows it to command higher prices. This strategic approach has facilitated the company's exceptional standing within the industry. In the quarter ended Apr 1, 2023, the company reported an impressive 12% increase in average selling prices from the prior-year quarter. This substantial growth builds upon an already remarkable 77% increase in average selling prices over the past five years. The company's success in maintaining its pricing power has not only demonstrated its inherent strength but has also played a significant role in driving its shares.
Ralph Lauren has been actively expanding its digital and omnichannel capabilities, making strategic investments in mobile technology, omnichannel integration and fulfillment. The company's focus on a positive mix of products, investments in AI-powered targeting and consumer acquisition, and online search growth has yielded favorable results. In the fourth quarter of fiscal 2023, the digital business continued to be a significant growth driver, with accelerated digital sales observed across all regions.
RL saw successful brand activations, including sports sponsorship at the Australian Open and Lunar New Year campaigns, in the fourth quarter of fiscal 2023. These activations re-engaged customers and attracted 1 million in the fiscal fourth quarter and more than 5 million in the fiscal year. Social media followers reached 52 million, with growth on platforms like Instagram and TikTok. Ralph Lauren's online search trends surpassed competitors, indicating strong interest in its core categories.
The implementation of the "Next Great Chapter" plan has been a key driver for RL. This plan involves simplifying the company's global organizational structure and introducing enhanced technological capabilities. As a result, the company has been able to focus on its core brands and execute the Next Great Chapter elevation strategy effectively.
Ralph Lauren is dedicated to elevating and energizing its lifestyle brand. The company recognizes its timeless iconic brand as its most valuable asset, aiming to inspire and engage consumers, and foster long-term relationships. This strategic focus has yielded positive results, as the company has experienced growth in market share and a double-digit rise in Average Unit Retail (AUR) globally.
RL experienced exceptional growth in AUR for women's products, with an increase of more than 20% in the fourth quarter of fiscal 2023. This impressive performance can be attributed to robust growth in handbag sales and the successful global launch of Women's Polo intimates.
For fiscal 2024, management forecast a low-single-digit increase in constant-currency revenues, with foreign currency expected to have a positive impact of 20 basis points on reported revenues. The company predicts growth to be primarily driven by double-digit growth in Asia and low-single-digit growth in Europe. It is also anticipated to witness a low-single-digit decline in North America due to softer spring trends and wholesale timing shifts in the first quarter of fiscal 2024.
The company expects the operating margin to expand 30-50 basis points in constant currency, reaching 12.3-12.5%. This expansion is attributed to a gross margin increase of 50-100 basis points. Factors contributing to gross margin growth include lower freight costs, continued growth in AUR, and a favorable product, geographic and channel mix. The company anticipates reduced freight costs to benefit the gross margin by at least 100 basis points.
However, these positives may be partially offset by a negative impact of 20 basis points from foreign currency fluctuations and ongoing pressure from product costs, particularly cotton, throughout the majority of fiscal 2024.
3 More Red-Hot Stocks to Consider
Here we have highlighted three other top-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , lululemon athletica (LULU - Free Report) and Guess (GES - Free Report) .
GIII Apparel, which is a manufacturer, designer and distributor of apparel and accessories, sports a Zacks Rank #1 (Strong Buy) at present. The company has an expected EPS growth rate of 15% for three to five years.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 1.9% and 0.4% from the year-ago period’s actuals. GIII has a trailing four-quarter earnings surprise of 47.4%, on average.
lululemon, which is a yoga-inspired athletic apparel company, currently carries a Zacks Rank #2. The company has an expected EPS growth rate of 20% for three to five years.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17.1% and 18.4%, respectively, from the year-ago period’s reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
Guess, which distributes and licenses casual apparel and accessories, presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 21%, on average.
The Zacks Consensus Estimate for Guess’ current financial-year sales and earnings suggests growth of 2.8% and 2.6%, respectively, from the year-ago period’s actuals.