Ralph Lauren (RL) Last Update 2/24/21
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Ralph Lauren
North America
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Ralph Lauren Company


  1. North America constitutes 36% of the Trefis price estimate for Ralph Lauren's stock.
  2. Europe constitutes 27% of the Trefis price estimate for Ralph Lauren's stock.
  3. Asia constitutes 20% of the Trefis price estimate for Ralph Lauren's stock.


  1. Latest Earnings Q2’21
    • The effects of Covid-19 were clearly visible in Ralph Lauren’s performance in the second quarter (three months ended September 2020), with the company falling behind on consensus expectations on revenues and earnings. Overall, revenues for the quarter plunged by 31% y-o-y to $1.2 billion while the company reported a loss of $0.53 per share, as compared to a profit of $1.44 in the year-ago quarter. However, RL’s digital segment continued to thrive, delivering a double-digit comparable sales growth across all regions. Ralph Lauren didn’t provide guidance for FY’21 due to the high level of uncertainty and the evolving situation surrounding the Covid-19 but it expects its FY'21 to be adversely impacted due to Covid-19.
  2. Impact Of Covid-19
    • Ralph Lauren stock has lost a bulk of its value since the outbreak of coronavirus. Moreover, the company has temporarily shuttered stores in North America, as a result of continued measures to help slow the spread of COVID-19. The decline in the company’s stock is understandable, considering the impact that the outbreak and a broader economic slowdown are likely to have on total consumption/consumer spending and the global apparel industry. Notably, the company derives a bulk of its revenues from the US, which has become the new epicenter of the outbreak- recording the largest numbers of COVID-19 cases across the globe. We believe the company’s results for Q4 will confirm this reality with a drop in revenues across all the segments.
  3. Strategic Growth Plan
    • At the beginning of June 2018, RL presented its ‘Strategic Growth Plan’ aimed at winning over a new generation of customers, driving targeted expansion, particularly in under-penetrated regions, and focusing on the digital segment. Some of the wins, in this regard in FY2019, include:

      (1) Average unit retail across its direct-to-consumer network was up 8%, through the better assortment and reduced discounts. (2) Delivered 4% constant currency Asia comps growth and expanded its store network in the region, primarily through 39 new points of distribution in China in 2019. (3) Global digital revenue grew 11% compared to last year. (4) The adjusted gross margin was up 90 basis points driven by the quality of sales.

      As a result of these efforts, the company expects its revenue to grow at a compounded annual growth rate of low to mid-single digits in constant currency over the next five years (till FY 2023), and an operating margin in the mid-teens.

  4. Focus On China
    • During FY2020, the company opened 25 stores globally, with 18 in China, which is its fastest-growing market. Its momentum remained strong in the country before the Covid-19, with 20% revenue growth reported in Greater China in FY’19, including over 30% growth in Mainland China, driven by comps improvement and new stores. Its digital efforts are also powering growth through partnerships with Tmall, Tmall’s Luxury Pavilion, JD.com, and WeChat. We expect these trends to continue through the next fiscal year, resulting in strong growth in the region. China can be considered a key growth market for Ralph Lauren. The brand awareness level in the country is in the 70s currently, which is impressive given the limited store footprint. However, when compared with the U.S., where the metric is at 90%, there is considerable room to grow. The company is also focusing on digital expansion through its partnerships with Tmall, JD.com, and WeChat. Ralph Lauren is aiming to garner $0.5 billion of revenue in five years from Greater China.


Ralph Lauren is a global leader in the design, marketing, and distribution of premium lifestyle products. Its products include apparel, accessories, and fragrance collections for men and women, as well as children’s wear and home furnishings. The company’s brands, such as Ralph Lauren, Club Monaco, and Polo, are some of the world’s most widely recognized consumer brands.

The company offers a broad spectrum of lifestyle products that include:

  1. Apparel: Products include men’s, women’s, and children’s clothing
  2. Accessories: Products encompass a broad range, including footwear, eyewear, watches, jewelry, hats, belts, wallets, sleepwear, and leather goods, including handbags and luggage
  3. Home: Coordinated products for the home that include bedding and bath products, furniture, fabric, rugs, lighting, barware, wallpaper, paint, tabletop, and giftware
  4. Fragrance: Fragrance products are sold under Romance, Polo, Lauren, Safari, Ralph, and Black Label brands, among others.

The company sells its products through company-operated retail stores and its website ralphlauren.com, as well as through upscale and mid-tier department stores and specialty stores.


We believe Ralph Lauren’s North American and European divisions are significant sources of value for Ralph Lauren for the following reasons:

Margin Opportunity

RL has also aimed to reduce its dependence on department stores to generate sales, and in this regard, the company has been in the process of exiting 20% to 25% of such stores that sell its merchandise. While this strategy has had a negative impact on its top-line, it has been a boon to the bottom-line. These efforts should continue to drive margin growth for the company.

Increasing Revenue Share Of Retail business

Over the past few years, Ralph Lauren has focused on increasing its direct-to-consumer reach to gain greater control over its brands and operations. As such, the firm has expanded its store base and increased products and services offered on its online store. This is Ralph Lauren’s response to the ongoing e-commerce boom in the apparel industry.

The result has been a consistent increase in the share of revenues coming from Ralph Lauren’s company-operated stores and the firm’s e-commerce websites.


Ralph Lauren Has a Strong Brand Identity

Ralph Lauren’s greatest competitive advantage has been its ability to maintain the strength of its brand for the past twenty years. While many fashion companies have struggled to retain customers with changing fashion trends, Ralph Lauren’s brand has not only remained strong but has also expanded its brand to other products and geographies. The company’s products are popular through all age groups, and in a study conducted by investment bank Piper Jaffray, Ralph Lauren was ranked in the top five favorite brands among teens, along with Nike, Urban Outfitters, and American Eagle, which target a different set of customers.

Another advantage of Ralph Lauren is its broad consumer appeal. The company offers products across a wide range of price points from discount (Chaps) to luxury (Ralph Lauren Collection), enabling it to appeal to a wide target demographic.

Weak Macroeconomic Conditions in Europe are a Near-Term Threat

Current weak macroeconomic conditions in Europe, particularly in Spain, Greece, and Portugal, pose a threat to Ralph Lauren’s revenues in the near term. Ralph Lauren’s wholesale business is most vulnerable to the situation, as Europe accounts for a significant percentage of the company’s total wholesale revenues.

Expansion in Asia Should Help Sustain Growth

Ralph Lauren has been focusing recently on expanding retail operations in emerging markets, especially in Asia. The Asian market has become a focal point of the global retail industry, with major brands across the globe aggressively expanding their footprint in the region. In FY 2020, Ralph Lauren’s store presence in Asia was stronger than that in Europe. Compared to 94 Ralph Lauren freestanding stores in Europe, there were 132 freestanding stores in Asia. However, the number of wholesale distribution channels in Asia is still minuscule compared to that in North America and Europe (685 vs. 12,623 in North America and 7,229 in Europe). Going forward, there is tremendous scope for the company to expand its presence in wholesale stores in Asia.

Focus On Digital Sales

Ralph Lauren’s digital sales remained robust before the outbreak of Covid-19, with digital sales of more than $1 billion in FY 2019. The company expects the growth in this segment to accelerate as the promotional pullback in the directly operated North America e-commerce business is broadly complete. Ralph Lauren is focusing on improving the site’s functionality and increasing marketing to drive further growth in online sales. Ralph Lauren’s global digital business, including its directly operated sites, department store dot-com, pure players, and social commerce, was up 11% versus last year in fiscal 2019, with strong performance noted across the board. Ralph Lauren has also launched its mid-tier brand – Chaps – on Amazon. We can expect the growth in this segment to accelerate as the promotional pullback in the directly operated North America e-commerce business is broadly complete.