Ralph Lauren Corporation (RL Quick QuoteRL - Free Report) remains well-poised to tap the positive trends in the fashion arena, thanks to its sturdy digital endeavors and other robust strategies. 

The company has been making significant progress in expanding its digital reach and omnichannel capabilities through investments in mobile, omnichannel and fulfillment. Ralph Lauren’s “Next Great Chapter” plan appears encouraging too.

Let’s delve deeper.

Ralph Lauren’s Strong Digital Unit

Ralph Lauren’s digital business, including its directly-operated sites, departmentstore.com, pure players and social commerce, is quite impressive. The company added 1.3 million new consumers via its direct-to-consumer (DTC) businesses during the first quarter of fiscal 2025. Its followers on social media grew in the low teens year over year to more than 60 million, driven by TikTok, Threads, Instagram, Line and Douyin. The net promoter scores rose globally led by Europe while online search increased in solid double digits.

Image Source: Zacks Investment Research

Region-wise, digital sales were up 14% in Europe and 21% in Asia. Global DTC comparable store sales jumped 5% year over year, backed by continued brand elevation, double-digit increases in average unit retail and positive retail comps at all regions. 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.

The company is expanding its connected retail capabilities, including virtual selling appointments, “buy online, pick up in store”, endless aisle product availability and more. Its first-ever full catalog Ralph Lauren mobile app has been efficiently leveraging its connected retail capabilities to deliver the most personalized and content-rich platform.

RL’s Other Strategic Moves

RL’s strategy of product elevation, personalized and targeted promotion, disciplined inventory management and favorable channel and geographic mix bodes well. Ralph Lauren concentrates on elevating and energizing its lifestyle brand, driving the core while expanding other businesses and winning in major cities with its consumer ecosystem.

In addition, Ralph Lauren remains on track to exceed its top and bottom-line targets under the “Next Great Chapter” plan. It had also announced measures to accelerate its “Next Great Chapter plan”, which aims at creating a simplified global organizational structure and rolling out improved technological capabilities.

Headwinds Faced by Ralph Lauren

However, Ralph Lauren is not immune to the tough macro challenges, including inflationary pressures. Higher compensation, rent and occupancy costs and elevated marketing investments are acting as deterrents by adding up to costs. As a result, the company has been witnessing higher operating expenses for a while now. 

Next, Ralph Lauren has been struggling with the dismal performance across its North America segment’s wholesale channel for a while. Revenues from the North America wholesale business fell 13% year over year during the first quarter of fiscal 2025, owing to significantly lower sales of excess product into the off-price channel and receipt timing shifts. This has hurt the segment’s performance, whose revenues dipped 4% year over year. Its digital commerce also dipped 4%. 

Going ahead, management anticipates North America wholesale decreases to moderate in the rest of fiscal 2025, with sellout more closely aligning with sell in. This will be due to the business’ ability to chase replenishment on performing core products.

What’s More for Ralph Lauren?

Nonetheless, RL is making constant efforts to tackle the challenges and boost overall growth. Management is optimistic about fiscal 2025. 

For fiscal 2025, management anticipates year-over-year revenue growth in the low-single digits, revolving around 2-3%. RL still expects the operating margin to grow in the range of 100-120 basis points at constant currency (cc) on higher gross margin and operating cost leverage. The gross margin is likely to increase in the band of 50-100 bps at cc.

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for second-quarter fiscal 2025 sales and earnings per share (EPS) is currently pegged at $1.7 billion and $2.39, respectively. These estimates indicate corresponding growth of 2.2% and 13.8% year over year. The consensus estimate for fiscal 2025 sales and EPS is presently $6.7 billion and $11.24, respectively, indicating increases of 1.6% and 9%.

Ralph Lauren’s shares have surged 72.6% in the past year, outperforming the industry’s 3.9% growth. The stock presently carries a Zacks Rank #3 (Hold).

Key Consumer Discretionary Picks

We have highlighted three better-ranked stocks, namely, G-III Apparel Group (GIII Quick QuoteGIII - Free Report) , Crocs (CROX Quick QuoteCROX - Free Report) and Royal Caribbean (RCL Quick QuoteRCL - 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 118.2%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.3% 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 14.9%, on average.

The Zacks Consensus Estimate for Crocs’ current financial-year sales and EPS implies an improvement of 4% and 6.8%, 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 18.5%, on average.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates an increase of 18.2% and 70.9%, respectively, from the year-ago levels.