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Ralph Lauren's Brand Momentum to Drive Q3 Earnings: Time to Invest?
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Ralph Lauren Corporation (RL - Free Report) is set to report third-quarter fiscal 2025 results on Feb. 6, before market open. The Zacks Consensus Estimate for revenues is pegged at $2.01 billion, which indicates growth of 4% from the year-ago quarter’s reported figure.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The consensus estimate for earnings is pegged at $4.46 per share, which indicates growth of 7% from the year-earlier actual. The consensus mark for earnings has moved down a penny in the past seven days.
In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate by 4.5%. Ralph Lauren has a trailing four-quarter earnings surprise of 9.1%, on average.
Key Factors Likely to Have Impacted RL’s Q3 Performance
Ralph Lauren’s quarterly performance is likely to have gained from a strong brand presence, a diverse product portfolio and expanding e-commerce capabilities, which have been strengthening its market position. The company's growing store footprint, coupled with its focus on innovation and integration of AI technology, reflects its commitment to staying ahead in the evolving fashion industry and achieving sustained growth.
The "Drive the Core and Expand for More" initiative has strategically positioned it for success. This initiative aims to bolster the company’s core business and prepare it to seize market opportunities.
RL has been experiencing growth in its digital and omnichannel business, significantly increasing customer acquisition and loyalty. The company added 1.5 million consumers to its direct-to-consumer business in the preceding quarter, highlighting the effectiveness of its strategies and the strong appeal of its products, which is expected to have aided the fiscal third-quarter performance. Such positives are expected to get reflected in its top and bottom-line results.
On the last reported quarter’s earnings call, management was optimistic about business momentum, a strong holiday season and executing the long-term game plan, continuing to elevate the brand and strengthen its positioning in the marketplace. For third-quarter fiscal 2025, the company anticipates revenue growth of 3-4% on a cc basis, led by DTC channels. This includes nearly 10-50 bps of positive foreign currency impacts.
The operating margin is likely to expand 100-140 bps on a cc basis on a higher gross margin. Management predicts Europe wholesale channel growth to improve sequentially in the second half of fiscal 2025, supported by solid underlying trends and timing shifts in receipts from the second quarter to the third and fourth quarters.
However, the company has been facing challenges in its North America segment, particularly within the wholesale channel, which has been underperforming for some time now. Higher promotions in the North America market and an unfavorable timing shift in wholesale operations have been significant obstacles. The ongoing inflationary pressures have been concerning. Management expressed caution about the North America wholesale channel. The Zacks Consensus Estimate for North America wholesale unit’s revenues indicates a year-over-year drop of 2.9%.
What the Zacks Model Unveils for RL
Our proven model does not conclusively predict an earnings beat for Ralph Lauren this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Ralph Lauren currently has an Earnings ESP of -0.94% and a Zacks Rank of 3.
Valuation Picture of RL Stock
Ralph Lauren's stock is trading at a premium valuation relative to the industry. Going by the price-to-earnings ratio, the RL stock is currently trading at 19.53X on a forward 12-month basis, higher than 15.04X of the Textile - Apparel industry. Also, it is trading higher than its median of 16.2X.
The recent market movements show that RL shares have risen 24.9% in the past three months compared with the industry's 16.6% growth.
Image Source: Zacks Investment Research
Stocks With the Favorable Combination
Here are three companies, which according to our model, have the right combination of elements to post an earnings beat this season:
Columbia Sportswear (COLM - Free Report) currently has an Earnings ESP of +5.51% and flaunts a Zacks Rank of 1. COLM is likely to register top and bottom-line growth when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.09 billion, indicating 3.1% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for COLM’s earnings is pegged at $1.92 a share, implying a 3.2% increase from the year-earlier quarter. COLM has a trailing four-quarter earnings surprise of 36.5%, on average.
Disney (DIS - Free Report) presently has an Earnings ESP of +2.85% and a Zacks Rank of 3. DIS is likely to register top and bottom-line growth when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $24.7 billion, indicating a 4.9% increase from the figure reported in the year-ago quarter.
The consensus estimate for Disney’s earnings is pegged at $1.44 per share, implying 18% growth from the year-ago quarter’s actual. DIS has a trailing four-quarter earnings surprise of 13.6%, on average.
KELLANOVA (K - Free Report) currently has an Earnings ESP of +0.69% and a Zacks Rank of 3. K is likely to register bottom-line growth when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for earnings per share is pegged at 82 cents, implying a 5.1% increase from the prior-year quarter's reported number.
The consensus mark for revenues is pegged at $3.1 billion, indicating a decrease of 2.6% from the figure reported in the prior-year quarter. K has a trailing four-quarter earnings surprise of 10.9%, on average.
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Ralph Lauren's Brand Momentum to Drive Q3 Earnings: Time to Invest?
Ralph Lauren Corporation (RL - Free Report) is set to report third-quarter fiscal 2025 results on Feb. 6, before market open. The Zacks Consensus Estimate for revenues is pegged at $2.01 billion, which indicates growth of 4% from the year-ago quarter’s reported figure.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The consensus estimate for earnings is pegged at $4.46 per share, which indicates growth of 7% from the year-earlier actual. The consensus mark for earnings has moved down a penny in the past seven days.
In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate by 4.5%. Ralph Lauren has a trailing four-quarter earnings surprise of 9.1%, on average.
Ralph Lauren Corporation Price and EPS Surprise
Ralph Lauren Corporation price-eps-surprise | Ralph Lauren Corporation Quote
Key Factors Likely to Have Impacted RL’s Q3 Performance
Ralph Lauren’s quarterly performance is likely to have gained from a strong brand presence, a diverse product portfolio and expanding e-commerce capabilities, which have been strengthening its market position. The company's growing store footprint, coupled with its focus on innovation and integration of AI technology, reflects its commitment to staying ahead in the evolving fashion industry and achieving sustained growth.
The "Drive the Core and Expand for More" initiative has strategically positioned it for success. This initiative aims to bolster the company’s core business and prepare it to seize market opportunities.
RL has been experiencing growth in its digital and omnichannel business, significantly increasing customer acquisition and loyalty. The company added 1.5 million consumers to its direct-to-consumer business in the preceding quarter, highlighting the effectiveness of its strategies and the strong appeal of its products, which is expected to have aided the fiscal third-quarter performance. Such positives are expected to get reflected in its top and bottom-line results.
On the last reported quarter’s earnings call, management was optimistic about business momentum, a strong holiday season and executing the long-term game plan, continuing to elevate the brand and strengthen its positioning in the marketplace. For third-quarter fiscal 2025, the company anticipates revenue growth of 3-4% on a cc basis, led by DTC channels. This includes nearly 10-50 bps of positive foreign currency impacts.
The operating margin is likely to expand 100-140 bps on a cc basis on a higher gross margin. Management predicts Europe wholesale channel growth to improve sequentially in the second half of fiscal 2025, supported by solid underlying trends and timing shifts in receipts from the second quarter to the third and fourth quarters.
However, the company has been facing challenges in its North America segment, particularly within the wholesale channel, which has been underperforming for some time now. Higher promotions in the North America market and an unfavorable timing shift in wholesale operations have been significant obstacles. The ongoing inflationary pressures have been concerning. Management expressed caution about the North America wholesale channel. The Zacks Consensus Estimate for North America wholesale unit’s revenues indicates a year-over-year drop of 2.9%.
What the Zacks Model Unveils for RL
Our proven model does not conclusively predict an earnings beat for Ralph Lauren this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Ralph Lauren currently has an Earnings ESP of -0.94% and a Zacks Rank of 3.
Valuation Picture of RL Stock
Ralph Lauren's stock is trading at a premium valuation relative to the industry. Going by the price-to-earnings ratio, the RL stock is currently trading at 19.53X on a forward 12-month basis, higher than 15.04X of the Textile - Apparel industry. Also, it is trading higher than its median of 16.2X.
The recent market movements show that RL shares have risen 24.9% in the past three months compared with the industry's 16.6% growth.
Image Source: Zacks Investment Research
Stocks With the Favorable Combination
Here are three companies, which according to our model, have the right combination of elements to post an earnings beat this season:
Columbia Sportswear (COLM - Free Report) currently has an Earnings ESP of +5.51% and flaunts a Zacks Rank of 1. COLM is likely to register top and bottom-line growth when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.09 billion, indicating 3.1% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for COLM’s earnings is pegged at $1.92 a share, implying a 3.2% increase from the year-earlier quarter. COLM has a trailing four-quarter earnings surprise of 36.5%, on average.
Disney (DIS - Free Report) presently has an Earnings ESP of +2.85% and a Zacks Rank of 3. DIS is likely to register top and bottom-line growth when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $24.7 billion, indicating a 4.9% increase from the figure reported in the year-ago quarter.
The consensus estimate for Disney’s earnings is pegged at $1.44 per share, implying 18% growth from the year-ago quarter’s actual. DIS has a trailing four-quarter earnings surprise of 13.6%, on average.
KELLANOVA (K - Free Report) currently has an Earnings ESP of +0.69% and a Zacks Rank of 3. K is likely to register bottom-line growth when it reports fourth-quarter 2024 results. The Zacks Consensus Estimate for earnings per share is pegged at 82 cents, implying a 5.1% increase from the prior-year quarter's reported number.
The consensus mark for revenues is pegged at $3.1 billion, indicating a decrease of 2.6% from the figure reported in the prior-year quarter. K has a trailing four-quarter earnings surprise of 10.9%, on average.