What To Expect From Ralph Lauren’s Q3 After Stock Up 40% Since 2023?

Note: Ralph Lauren’s FY’23 ended on April 1, 2023                    

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 third-quarter results on Thursday, February 8. We expect Ralph Lauren stock to likely trade lower with both revenues and earnings missing expectations marginally. For Fiscal 2024, the company continues to expect revenues to increase approximately low single-digits compared to last year. For the third quarter, the company expects revenue to be up approximately 1% to 2% from last year in constant currency. Foreign currency is expected to negatively impact revenue growth by approximately 30 basis points. In addition, the retailer’s operating margin for Q3 is expected to be roughly flat in constant currency, with about 10 basis points of foreign currency benefit. The company also set long-term sales and margin 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.

Our forecast indicates that RL’s valuation is $137 per share, which is 7% lower than the current market price. Look at our interactive dashboard analysis on RL Earnings Preview: What To Expect in Q3 for more details.

(1) Revenues to be slightly below the consensus estimates

Trefis estimates RL’s Q3 2024 revenues to be around $1.85 Bil, marginally below the consensus estimate. For its fiscal 2024 second quarter, the luxury retailer saw revenue grow 3% year-over-year (y-o-y) to $1.6 billion. Growth in Asia Pacific sales alongside a rise in European sales helped to offset declining North American sales trends. It should be noted that RL’s inventory rose to $1.2 billion, up only 1% from the prior year period, due to increases in Asia and Europe to support growth initiatives largely offset by a decline in North America. On the balance sheet, RL ended Q2 with roughly $1.4 billion in cash and short-term investments and around $1.1 billion in long-term debt. We now forecast Ralph Lauren’s Revenues to be $6.6 billion for the full year 2024, up 2% y-o-y.

2) EPS expected to be marginally below consensus estimates

RL’s Q3 2024 earnings per share (EPS) is expected to be $3.51 per Trefis analysis, slightly missing the consensus estimate. In Q2, the retailer reported net income of $147 million or $2.19 per share compared to $2.18 per share a year ago. Its adjusted gross margin improved 80 basis points from a year ago to land at 65.4% of sales in Q2 2024. The company’s margins were driven higher by strong average unit retail growth across all regions, lower freight, and favorable channel and geographic mix shifts, more than offsetting continued pressure from raw material costs.

(3) Stock price estimate lower than the current market price

Going by our Ralph Lauren’s Valuation, with an EPS estimate of around $9.38 and a P/E multiple of 14.7x in fiscal 2024, this translates into a price of $137, which is 7% lower 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.