Note: Ralph Lauren’s FY’22 ended on April 2, 2022
Ralph Lauren (NYSE: RL), a company engaged in the design, marketing, and distribution of premium lifestyle products, including apparel, accessories, fragrances, and home furnishings, is scheduled to report its fiscal second-quarter results on Thursday, November 10. We expect Ralph Lauren stock to trade slightly higher due to revenues beating expectations marginally but earnings coming almost in line. Ralph Lauren has seen an impressive recovery in revenues in fiscal 2022 and the fiscal Q1 2023. However, soaring inflation and increasing manufacturing and transport costs, which have been compounded by the geopolitical situation in Ukraine, could continue to negatively impact the company’s bottom line in Q2. That said, almost 40% of Ralph Lauren’s production takes place in China and Vietnam – which could lead to costs rising over the coming quarters as well.
But still, Ralph Lauren backed guidance for high single-digit growth in FY’23 and expects an adjusted operating margin of 14.0% to 14.5% in constant currency. The company also set long term sales and margins growth and presented a strategic growth plan titled “Next Great Chapter: Accelerate.” The company’s three-year financial outlook projects mid-to-high single-digit revenue compounded annual growth along with an expansion of the company’s operating margin to more than 15%.
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Our forecast indicates that RL’s valuation is $100 per share, which is only marginally higher than the current market price. Look at our interactive dashboard analysis on RL Earnings Preview: What To Expect in Q4? for more details.
(1) Revenues to be slightly above the consensus estimates
Trefis estimates RL’s Q2 2023 revenues to be around $1.57 Bil, marginally above the consensus estimate. For its fiscal 2023 first quarter, the luxury retailer saw revenue grow 8% year-over-year (y-o-y) with mid-teens comparable store sales growth. It should be noted that RL’s inventory was up 47% y-o-y at the end of the quarter due to higher increases in goods-in-transit as part of RL’s efforts to mitigate global supply chain delays and meet strong consumer demand along with continued elevation in product mix. We now forecast Ralph Lauren’s Revenues to be $6.3 billion for the full year 2023, up 2% y-o-y.
2) EPS expected to come in line with consensus estimates
RL’s Q2 2023 earnings per share (EPS) is expected to be $2.10 per Trefis analysis, almost matching the consensus estimate. The company’s adjusted gross margin was down 180 basis points to 68.0% of sales in Q1, with better pricing and promotions more than offset by increased freight headwinds to mitigate global supply chain delays. Operating margin also fell 10 bps to 12.7% of sales during the first quarter. Consequently, the company reported EPS of $1.73, down 21% y-o-y.
(3) Stock price estimate marginally higher than the current market price
Going by our Ralph Lauren’s Valuation, with an EPS estimate of around $7.81 and a P/E multiple of 12.8x in fiscal 2022, this translates into a price of $100, which is 5% higher than the current market price.
It is helpful to see how its peers stack up. RL Peers shows how Ralph Lauren compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
|S&P 500 Return||-1%||-20%||71%|
|Trefis Multi-Strategy Portfolio||-3%||-24%||200%|
 Month-to-date and year-to-date as of 11/9/2022
 Cumulative total returns since the end of 2016