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Ralph Lauren's (RL) Digital & Other Moves Aid: Apt to Hold?
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Ralph Lauren Corporation (RL - Free Report) seems to be in a good spot on the back of its sturdy strategic endeavors. The company has been making significant progress in expanding its digital and omnichannel capabilities through investments in mobile, omnichannel and fulfillment. Ralph Lauren’s “Next Great Chapter” plan appears encouraging too.
The company remains focused on digital investments to continue the creation of content for all platforms, enhancing digital capabilities to improve the user experience and leveraging AI and data to serve its consumers more efficiently. In fiscal 2024, the company witnessed solid direct-to-consumer comp growth, apart from connected ecosystems expansion across significant markets.
Ralph Lauren has been expanding its connected retail capabilities, including virtual selling appointments, buy online, pick up in store, and endless aisle product availability. The company has also launched its first-ever full catalog Ralph Lauren mobile app, thereby efficiently leveraging its connected retail capabilities to deliver the most personalized and content-rich platform.
Impressively, the company has added more than 5 million consumers to its direct-to-consumer business in fiscal 2024. Its followers on social media grew in the low-double digits year over year to more than 58 million, driven by TikTok, Instagram, Line and Douyin. Region-wise, digital sales were up 11% in Europe and 19% in Asia in fourth-quarter fiscal 2024.
Image Source: Zacks Investment Research
As part of the “Next Great Chapter” plan, the company has completed the transition of Chaps to a licensed business, thus concluding its portfolio realignment. This enables it to focus on core brands, as part of the “Next Great Chapter” elevation strategy. In addition, the company’s strategy of product elevation, personalized and targeted promotion, disciplined inventory management, and favorable channel and geographic mix bode well.
Bottlenecks to Growth
However, Ralph Lauren is reeling under macro challenges, as well as inflationary headwinds, including higher compensation, rent and occupancy costs, and elevated marketing investments. These factors resulted in adjusted operating expenses to increase 3% year over year in the fourth quarter of fiscal 2024. The company has also been witnessing a dismal performance across its North America segment’s wholesale channel for a while now.
Bottom Line
Nonetheless, this Zacks Rank #3 (Hold) company is making constant efforts to maneuver the challenges and boost overall growth. Ralph Lauren is optimistic about fiscal 2025. Management anticipates year-over-year revenue growth at constant currency in the low-single digits, revolving around 2-3%. It expects the operating margin to grow in the range of 100-120 basis points at constant currency on higher gross margin and leveraged operating expenses. The gross margin is likely to increase in the band of 50-100 basis points in constant currency.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2025 sales and earnings per share (EPS) is currently pegged at $6.76 billion and $11.07, respectively. These estimates indicate corresponding growth of 2% and 7.4% year over year. The consensus estimate for fiscal 2026 sales and EPS is presently $7 billion and $12.54, respectively, indicating increases of 4.1% and 13.3%.
Buoyed by such strengths, shares of this apparel and accessories designer have gained 47% against the industry’s 8.7% fall in a year.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.4% from the year-ago figure.
Crocs develops and manufactures lifestyle footwear and accessories. It currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 17.1%, on average.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and EPS implies improvements of 4.3% and 5.6%, respectively, from the prior-year actuals.
Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 18.3%, on average.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates increases of 16.8% and 63.8%, respectively, from the year-ago reported levels.
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Ralph Lauren's (RL) Digital & Other Moves Aid: Apt to Hold?
Ralph Lauren Corporation (RL - Free Report) seems to be in a good spot on the back of its sturdy strategic endeavors. The company has been making significant progress in expanding its digital and omnichannel capabilities through investments in mobile, omnichannel and fulfillment. Ralph Lauren’s “Next Great Chapter” plan appears encouraging too.
The company remains focused on digital investments to continue the creation of content for all platforms, enhancing digital capabilities to improve the user experience and leveraging AI and data to serve its consumers more efficiently. In fiscal 2024, the company witnessed solid direct-to-consumer comp growth, apart from connected ecosystems expansion across significant markets.
Ralph Lauren has been expanding its connected retail capabilities, including virtual selling appointments, buy online, pick up in store, and endless aisle product availability. The company has also launched its first-ever full catalog Ralph Lauren mobile app, thereby efficiently leveraging its connected retail capabilities to deliver the most personalized and content-rich platform.
Impressively, the company has added more than 5 million consumers to its direct-to-consumer business in fiscal 2024. Its followers on social media grew in the low-double digits year over year to more than 58 million, driven by TikTok, Instagram, Line and Douyin. Region-wise, digital sales were up 11% in Europe and 19% in Asia in fourth-quarter fiscal 2024.
Image Source: Zacks Investment Research
As part of the “Next Great Chapter” plan, the company has completed the transition of Chaps to a licensed business, thus concluding its portfolio realignment. This enables it to focus on core brands, as part of the “Next Great Chapter” elevation strategy. In addition, the company’s strategy of product elevation, personalized and targeted promotion, disciplined inventory management, and favorable channel and geographic mix bode well.
Bottlenecks to Growth
However, Ralph Lauren is reeling under macro challenges, as well as inflationary headwinds, including higher compensation, rent and occupancy costs, and elevated marketing investments. These factors resulted in adjusted operating expenses to increase 3% year over year in the fourth quarter of fiscal 2024. The company has also been witnessing a dismal performance across its North America segment’s wholesale channel for a while now.
Bottom Line
Nonetheless, this Zacks Rank #3 (Hold) company is making constant efforts to maneuver the challenges and boost overall growth. Ralph Lauren is optimistic about fiscal 2025. Management anticipates year-over-year revenue growth at constant currency in the low-single digits, revolving around 2-3%. It expects the operating margin to grow in the range of 100-120 basis points at constant currency on higher gross margin and leveraged operating expenses. The gross margin is likely to increase in the band of 50-100 basis points in constant currency.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2025 sales and earnings per share (EPS) is currently pegged at $6.76 billion and $11.07, respectively. These estimates indicate corresponding growth of 2% and 7.4% year over year. The consensus estimate for fiscal 2026 sales and EPS is presently $7 billion and $12.54, respectively, indicating increases of 4.1% and 13.3%.
Buoyed by such strengths, shares of this apparel and accessories designer have gained 47% against the industry’s 8.7% fall in a year.
Key Consumer Discretionary Picks
We have highlighted three better-ranked stocks, namely, G-III Apparel Group (GIII - Free Report) , Crocs (CROX - Free Report) and Royal Caribbean (RCL - Free Report) .
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.4% from the year-ago figure.
Crocs develops and manufactures lifestyle footwear and accessories. It currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 17.1%, on average.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and EPS implies improvements of 4.3% and 5.6%, respectively, from the prior-year actuals.
Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 18.3%, on average.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates increases of 16.8% and 63.8%, respectively, from the year-ago reported levels.