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Here's Why Ralph Lauren (RL) is Rallying Ahead of Its Industry
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Ralph Lauren Corp. (RL - Free Report) appears commendable on the back of brand strength, solid demand and expansion across all channels. Also, a solid online show and strong AUR growth bode well. The company has been on track with its Next Great Chapter: Accelerate plan.
These strengths have aided the first-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and grew year over year. Notably, RL reported the 12th straight earnings beat and the 10th consecutive revenue surprise in the fiscal first quarter.
Adjusted earnings per share of $2.34 rose 24.5% year over year from $1.88 in the year-ago quarter. Net revenues grew 0.4% year over year to $1,496.5 million. On a constant-currency (cc) basis, revenues were up 1% from the prior-year quarter.
Average unit retail (AUR) increased in the double-digits in first-quarter fiscal 2024, marking the 25th straight AUR rise, driven by product mix elevation, lower freight and a favorable channel mix. The company’s strategy of product elevation, personalized and targeted promotion, disciplined inventory management and favorable channel and geographic mix, as well as ramping up of its targeting and personalization efforts, is likely to support long-term AUR growth.
Consequently, management anticipates fiscal 2024 year-over-year revenue growth (cc) in the low-single digits. Also, the gross margin is forecast to expand 100 bps on a constant-currency basis, driven by solid AUR, a favorable geographic mix and lower freight costs, which more than offset continued product cost inflation.
For the fiscal second quarter, the company anticipated revenues to be flat to up slightly on a constant-currency basis. This includes approximately 100 basis points of positive foreign currency impact. The operating margin is predicted to be 9.5-10% on a reported basis and 9-9.5% in constant currency. The gross margin is expected to expand 40-60 bps, which will more than offset higher operating expenses.
Image Source: Zacks Investment Research
As a result, shares of this Zacks Rank #3 (Hold) company have gained 35.2% in the past year compared with the industry’s 4.8% growth.
Let’s Delve Deeper
Ralph Lauren is making significant progress in expanding digital and omni-channel capabilities through investments in mobile, omni-channel and fulfillment. In the fiscal first quarter, the company’s digital business gained from strength in its international markets, which more than offset weakness in North America. Starting in June, the company witnessed improvements in its North America digital unit.
RL reached a milestone of 53.5 million social media followers globally, which reflects a year-over-year high-single-digit increase. This was mainly driven by its popularity in Instagram, Line, TikTok, WeChat and other key platforms. RL has been witnessing online search trends, outpacing its peers globally, driven by spring icons and accessories.
Region-wise, digital sales were up 8% in Europe and 11% in Asia. For fiscal 2024, management revealed plans for rich digital content and greater customer personalization. It is focused on further digital investments to continue the creation of content for all platforms, enhancing digital capabilities to improve the user experience, and continuing to leverage AI and data to serve its consumers more efficiently.
Ralph Lauren has been scaling and expanding its connected retail capabilities, including virtual selling appointments, “buy online, pick up in store,” and endless aisle product availability. The company launched its first-ever full catalog Ralph Lauren mobile app last holiday season, efficiently leveraging its connected retail capabilities to deliver the most personalized and content-rich platform.
It is on track to exceed its top and bottom-line targets under the “Next Great Chapter” plan announced in June 2018. This plan aims at creating a simplified global organizational structure and rolling out improved technological capabilities. As part of the plan, it completed the transition of Chaps to a licensed business, thus concluding its portfolio realignment announced last year. The move will likely enable it to focus on core brands as part of the Next Great Chapter elevation strategy.
Hurdles on the Way
Ralph Lauren has been reeling under continued product cost inflation and higher compensation. In first-quarter fiscal 2024, adjusted operating expenses inched up 1% from the year-ago period to $830 million, driven by higher compensation, and rent and occupancy costs, partly offset by lower marketing expenses. Adjusted operating expenses, as a percentage of sales, expanded 30 bps to 56%. It expects higher marketing and ecosystem investments for the fiscal second quarter.
The company has been witnessing macro inflationary challenges, particularly in North America. This led to a dismal performance in its North America segment in the fiscal first quarter. Higher promotions in the North America market and an unfavorable wholesale timing shift acted as deterrents. The segment’s revenues declined 10% from the year-ago quarter to $632 million and lagged our estimate of $635 million.
Comparable store sales (comps) for North America’s retail channel fell 6% year over year, wherein the same for brick-and-mortar stores moved down 8%, while digital commerce decreased 5%. Revenues from the North America wholesale business advanced 16% year over year. For fiscal 2024, management expects a low-single-digit decline in North America.
Also, unfavorable currency impacts are concerning.
What Else?
Analysts seem optimistic about the stock. The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2024 sales and EPS is pegged at $6.6 billion and $9.48 each, suggesting respective growth of 2.5% and 13.7% from the year-ago reported figures. The Zacks Consensus Estimate for SPB’s fiscal 2024 earnings for the current financial year has inched up 0.7% in the past 30 days.
To wrap up, Ralph Lauren is likely to continue performing well on the back of such sturdy endeavors. Topping it, a VGM Score of A and a long-term earnings growth rate of 13.4% speak volumes.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates year-over-year increases of 2.2% and 31%, respectively.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases of 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
Crocs, which offers casual lifestyle footwear and accessories, presently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 15%.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 13.1% and 2.8% from the year-ago period’s reported figure. CROX has a trailing four-quarter earnings surprise of 21.8%, on average.
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Here's Why Ralph Lauren (RL) is Rallying Ahead of Its Industry
Ralph Lauren Corp. (RL - Free Report) appears commendable on the back of brand strength, solid demand and expansion across all channels. Also, a solid online show and strong AUR growth bode well. The company has been on track with its Next Great Chapter: Accelerate plan.
These strengths have aided the first-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and grew year over year. Notably, RL reported the 12th straight earnings beat and the 10th consecutive revenue surprise in the fiscal first quarter.
Adjusted earnings per share of $2.34 rose 24.5% year over year from $1.88 in the year-ago quarter. Net revenues grew 0.4% year over year to $1,496.5 million. On a constant-currency (cc) basis, revenues were up 1% from the prior-year quarter.
Average unit retail (AUR) increased in the double-digits in first-quarter fiscal 2024, marking the 25th straight AUR rise, driven by product mix elevation, lower freight and a favorable channel mix. The company’s strategy of product elevation, personalized and targeted promotion, disciplined inventory management and favorable channel and geographic mix, as well as ramping up of its targeting and personalization efforts, is likely to support long-term AUR growth.
Consequently, management anticipates fiscal 2024 year-over-year revenue growth (cc) in the low-single digits. Also, the gross margin is forecast to expand 100 bps on a constant-currency basis, driven by solid AUR, a favorable geographic mix and lower freight costs, which more than offset continued product cost inflation.
For the fiscal second quarter, the company anticipated revenues to be flat to up slightly on a constant-currency basis. This includes approximately 100 basis points of positive foreign currency impact. The operating margin is predicted to be 9.5-10% on a reported basis and 9-9.5% in constant currency. The gross margin is expected to expand 40-60 bps, which will more than offset higher operating expenses.
Image Source: Zacks Investment Research
As a result, shares of this Zacks Rank #3 (Hold) company have gained 35.2% in the past year compared with the industry’s 4.8% growth.
Let’s Delve Deeper
Ralph Lauren is making significant progress in expanding digital and omni-channel capabilities through investments in mobile, omni-channel and fulfillment. In the fiscal first quarter, the company’s digital business gained from strength in its international markets, which more than offset weakness in North America. Starting in June, the company witnessed improvements in its North America digital unit.
RL reached a milestone of 53.5 million social media followers globally, which reflects a year-over-year high-single-digit increase. This was mainly driven by its popularity in Instagram, Line, TikTok, WeChat and other key platforms. RL has been witnessing online search trends, outpacing its peers globally, driven by spring icons and accessories.
Region-wise, digital sales were up 8% in Europe and 11% in Asia. For fiscal 2024, management revealed plans for rich digital content and greater customer personalization. It is focused on further digital investments to continue the creation of content for all platforms, enhancing digital capabilities to improve the user experience, and continuing to leverage AI and data to serve its consumers more efficiently.
Ralph Lauren has been scaling and expanding its connected retail capabilities, including virtual selling appointments, “buy online, pick up in store,” and endless aisle product availability. The company launched its first-ever full catalog Ralph Lauren mobile app last holiday season, efficiently leveraging its connected retail capabilities to deliver the most personalized and content-rich platform.
It is on track to exceed its top and bottom-line targets under the “Next Great Chapter” plan announced in June 2018. This plan aims at creating a simplified global organizational structure and rolling out improved technological capabilities. As part of the plan, it completed the transition of Chaps to a licensed business, thus concluding its portfolio realignment announced last year. The move will likely enable it to focus on core brands as part of the Next Great Chapter elevation strategy.
Hurdles on the Way
Ralph Lauren has been reeling under continued product cost inflation and higher compensation. In first-quarter fiscal 2024, adjusted operating expenses inched up 1% from the year-ago period to $830 million, driven by higher compensation, and rent and occupancy costs, partly offset by lower marketing expenses. Adjusted operating expenses, as a percentage of sales, expanded 30 bps to 56%. It expects higher marketing and ecosystem investments for the fiscal second quarter.
The company has been witnessing macro inflationary challenges, particularly in North America. This led to a dismal performance in its North America segment in the fiscal first quarter. Higher promotions in the North America market and an unfavorable wholesale timing shift acted as deterrents.
The segment’s revenues declined 10% from the year-ago quarter to $632 million and lagged our estimate of $635 million.
Comparable store sales (comps) for North America’s retail channel fell 6% year over year, wherein the same for brick-and-mortar stores moved down 8%, while digital commerce decreased 5%. Revenues from the North America wholesale business advanced 16% year over year. For fiscal 2024, management expects a low-single-digit decline in North America.
Also, unfavorable currency impacts are concerning.
What Else?
Analysts seem optimistic about the stock. The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2024 sales and EPS is pegged at $6.6 billion and $9.48 each, suggesting respective growth of 2.5% and 13.7% from the year-ago reported figures. The Zacks Consensus Estimate for SPB’s fiscal 2024 earnings for the current financial year has inched up 0.7% in the past 30 days.
To wrap up, Ralph Lauren is likely to continue performing well on the back of such sturdy endeavors. Topping it, a VGM Score of A and a long-term earnings growth rate of 13.4% speak volumes.
Stocks to Consider
Some better-ranked companies are Crocs (CROX - Free Report) , Royal Caribbean (RCL - Free Report) and MGM Resorts (MGM - Free Report) .
MGM Resorts currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 81%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates year-over-year increases of 2.2% and 31%, respectively.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases of 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
Crocs, which offers casual lifestyle footwear and accessories, presently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 15%.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 13.1% and 2.8% from the year-ago period’s reported figure. CROX has a trailing four-quarter earnings surprise of 21.8%, on average.