5 Ways Ralph Lauren Stock is Dressed for Success

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Ralph Lauren stock

Key Points

  • Ralph Lauren stock is in a buy range after gapping up 17%, then pulling back to find support at a short-term moving average.
  • The company's revenue growth accelerated, and earnings growth resumed on better-than-expected holiday-season sales worldwide.
  • Analysts see strength in China, as well as growth in e-commerce sales. 
  • 5 stocks we like better than Ralph Lauren

Ralph Lauren Corp. NYSE: RL stock is in a buy range after its first pullback since gapping up almost 17% following better-than-expected fiscal third-quarter results.

The clothing maker, whose iconic logo is the polo pony and rider, has galloped  29.41% higher in the past month and is up 44.28% in the past three months.

Apparel Stocks Becoming Fashionable

As a group, apparel stocks have risen sharply over the past six months, with Ralph Lauren being one of the top performers. Apparel stocks fall into the category of consumer discretionary. However, despite being considered discretionary, clothing stocks often show resilience, even during weaker economic and market cycles, as consumers replace items or spruce up their wardrobe to keep up with trends.

The Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY has been dominated by fast-moving growth names like Amazon Inc. NASDAQ: AMZN and Tesla Inc. NASDAQ: TSLA, neither of which are dividend payers. As a result, the sector’s yield is just 0.8%. 

However, the Ralph Lauren dividend yield is 1.61%, giving it an edge within its sector for investors seeking income.

Here are five reasons why Ralph Lauren stock is one to watch. 

1. Bullish chart action: The Ralph Lauren chart shows a breakaway gap on February 8, as the stock cleared a six-week consolidation with a buy point above $148.03. 
Trading volume was more than five times the average, indicating massive investor conviction in the stock’s prospects. 


Ralph Lauren stock is currently in an actionable zone, after pulling back from a February 23 high of $190.41 and getting support at its 10-day moving average.

2. Sales resilience: The company is executing on its “Next Great Chapter” plan to accelerate growth worldwide. It’s realigned its brand portfolio and made new licensing deals to better focus on areas with the highest growth potential.

The Ralph Lauren earnings data show revenue growth picking up in the past two quarters, and earnings growth resumed in the third quarter. 

Holiday season sales came in higher than analysts had forecast, with China sales being a key growth driver.

“By region, growth was again led by Asia with particularly strong performance in China, where sales increased more than 30% this quarter on both comp and new store growth,” said CEO Patrice Louvet in the earnings conference call. “This was ahead of our expectations, even with last year's easier compares due to the surge in Covid cases.”

In addition, the company is looking to more robust digital sales channels to boost revenue worldwide. 

3. Earnings and margin growth: Wall Street is expecting the company to earn $10.21 a share this year, an increase of 22%. Next year that’s expected to rise by another 10% to $11.19 per share. 

Both those estimates have been revised higher recently. 

“We see operating margin improving slightly in FY 24 as freight costs and supply chain issues improve,” wrote CFRA analyst Zachary Warring in a February 24 note. 

“Inventory across the sub-industry remains elevated which will continue to drive promotional activity in the short term. We expect 12.2% operating margin in FY 24 after 11.6% in FY 23,” Warring added. “We see operating margin of 12.0% over the long term. Prior to the pandemic RL’s operating margin ranged from 9%-11%”

4. Industry strength: The apparel industry as a whole is outpacing others. A bullish trend within a particular industry shows wide demand. That, in turn, results in strong performance from individual stocks. 

Investors are seeing that play out right now with semiconductor stocks, but it’s also true for other industries, including biotech stocks and apparel. 

Other apparel industry leaders include G-III Apparel Group Ltd. NASDAQ: GIII, PVH Corp. NYSE: PVH and Tapestry Inc. NYSE: TPR. All those companies manufacture or market well-known global clothing brands. 

5. Analyst actions: Ralph Lauren analyst forecasts show a consensus view of “moderate buy.” 

After the third-quarter report, Goldman Sachs boosted its price target to $151 from $132, although that’s a conservative target, compared with many others.

CFRA’s Warring is maintaining a rating of “hold” on the stock. 

“Our Hold opinion and target price reflects our view that RL has benefitted from brand momentum and pent-up demand since the start of the pandemic, which we’ve seen normalize in recent quarters,” he wrote. “RL continues to see momentum in its digital ecosystem even as traffic normalizes in its physical stores, which should help margins moving forward.”

Should you invest $1,000 in Ralph Lauren right now?

Before you consider Ralph Lauren, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Ralph Lauren wasn't on the list.

While Ralph Lauren currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Ralph Lauren (RL)
4.1914 of 5 stars
$161.97+2.2%1.85%18.36Moderate Buy$155.64
Amazon.com (AMZN)
4.8248 of 5 stars
$177.23+1.5%N/A61.11Buy$202.80
Consumer Discretionary Select Sector SPDR Fund (XLY)N/A$170.51+0.4%0.79%N/AHold$0.07
G-III Apparel Group (GIII)
0.6532 of 5 stars
$27.84+0.7%N/A7.38Reduce$25.83
PVH (PVH)
4.956 of 5 stars
$109.57+2.6%0.14%10.10Moderate Buy$129.40
Tesla (TSLA)
4.844 of 5 stars
$142.05-3.4%N/A32.96Hold$194.70
Tapestry (TPR)
4.7047 of 5 stars
$40.31-0.8%3.47%10.18Moderate Buy$47.81
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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