Ralph Lauren Slingshots Higher as Sentiment Improves for Retailer

Key Points

• Premium consumer apparel maker Ralph Lauren saw a 6% YoY increase in direct-to-consumer (DTC) sales, which rose to two-thirds of total sales, up from 55% in the year-ago period.
• North American brick-and-mortar stores did the heavy lifting with 6% YoY sales growth as digital sales fell 2% in fiscal Q4 2024.
• Ralph Lauren guided fiscal Q1 2025 revenues slightly lower, causing shares to gap down to $159.10, but surged back over 20 points in the following days.  

Premium apparel maker Ralph Lauren Co. NYSE: RL reported its fiscal Q4 2024 earnings report with lowered guidance, causing a predictability gap in shares the following morning. However, the initial drop to $159.10 reversed as the market reassessed the results, turning sentiment bullish and causing shares to surge back up to $173.45 in the following days. Investors are wondering what caused the sentiment reversal and if the gains will stick.

Ralph Lauren competes in the consumer discretionary sector with premium brand apparel makers like Guess? Inc. NYSE: GES and PVH Co. NYSE: PVH, maker of Tommy Hilfiger and Calvin Klein.

Premium All-American Fashion: Ralph Lauren's Legacy

As a brand, Ralph Lauren embodies the spirit of the American Dream premium lifestyle through its line of Polo, RLX, RL, Lauren, Chaps, Polo Sport, Black Label, and the most expensive Purple Label fragrances, clothing, and accessories for men, women, and children. Some of its Polo products can be found on rare occasions at discount retailers like Ross Stores Inc. NASDAQ: ROST.

They've expanded their products to include home goods, accessories, and expensive high-end furniture. Their Ralph Lauren Writer's Chair sells for $14,180, or you might consider plunking down $36,470 for a Ralph Lauren Clivedon Tufted Bed. Their brand company even considers opening a premium hotel after inspiring many boutique hotels to adopt its designer logos.

Daily Cup Pattern and Strong Q4 Performance for Ralph Lauren

Ralph Lauren completed a daily cup pattern, beginning at the cup lip line of $177.45 on April 2, 2024. Ralph Lauren's stock fell to a low of $156.91 on April 19, 2024. Shares rallied back to $167.31 and were chopped sideways until its fiscal Q4 2024 earnings release, which caused a gap down and squeezed back up. Ralph Lauren completed the cup pattern upon surging through $177.85 and entering the gap-fill zone. The $183.75 would complete the gap filled on the April 2, 2024, gap down. The daily relative strength index (RSI) is rising to the 70-band. Pullback support levels are at $174.82, $170.92, $167.31, and $161.81.

In fiscal Q4 2024, Ralph Lauren reported an earnings per share (EPS) of $1.71, beating analyst estimates by 4 cents. Revenues rose 1.8% YoY to $1.57 billion, matching consensus estimates. Global direct-to-consumer (DTC) sales rose 6% YoY, driven by continued brand elevation with double-digit growth rates in average unit retail (AUR) and full-price retail performance.

North American revenues rose 2% to $668 million. Comparable store sales rose 3%, and brick-and-mortar locations saw a 6% increase offset by a 4% decrease in digital sales. North American wholesale revenues fell 2% but were still ahead of expectations as the company managed to sell in alignment with consumer demand.

Mixed Guidance from Petco and Ralph Lauren

Petco's In-Line Guidance

Petco provided in-line guidance for Q2 2024, forecasting an EPS loss of 2 cents, matching consensus analyst estimates. Revenues are expected to be around $1.525 billion, slightly beating the consensus estimate of $1.52 billion. The company projects full-year 2024 net interest expense to be around $145 million and capital expenditures (CAPEX) to be $140 million. Additionally, Petco announced a 10% increase in its quarterly dividend.

Ralph Lauren's Lowered Guidance

Ralph Lauren offered a less optimistic outlook, guiding fiscal Q1 2025 revenues below prior-year estimates, against the consensus estimate of 3.3% growth or $1.55 billion. Despite this, the company expects revenue growth on a constant currency (CC) basis, though the outlook includes a 50 basis points negative impact from the timing of an earlier Easter, which benefited fiscal Q4 2024.

For the fiscal full year 2025, Ralph Lauren anticipates revenue growth of 2% to 3% on a CC basis compared to the previous year.

Ralph Lauren CEO's Insights

CEO Patrice Louvet commented that fiscal 2024 marked the second year of its Accelerate Plan strategy. The company made progress in increasing the desirability of its timeless brand, which resonated with consumers of all ages. They leveraged the breadth and authenticity of their lifestyle product portfolios and made progress in their long-term strategic pivot toward the higher-margin DTC channels, which have grown to two-thirds of its total business, up from 50%.

Chief Creative Office Ralph Lauren summed it up, saying,  "Our brand has always been about inspiring people to live the life of their dreams. We marry elegance and style in aspirational worlds — from our recent fashion show featuring elevated classics to the vibrant home line we showcased last month in Milan — our teams around the world are delivering our vision with passion and care."

Ralph Lauren analyst ratings and price targets are on MarketBeat.