Ralph Lauren Crushes Earnings Shares Up

Shares of luxury fashion designer Ralph Lauren NYSE: RL were trading up close to 11% shortly after the market’s open on Tuesday. The 9% gap up at the open and the subsequent follow-through came on the back of stellar Q3 earnings released before the bell. Both earnings per share and revenue comfortably beat analyst expectations with the latter growing over 1% year on year. Operating income was up 16% and revenue from the Chinese mainland was up 30% alone.

These are solid numbers to be reporting and will allow investors to breathe a little easier. As we noted last November, Ralph Lauren and other big-name, high-end fashion stores were struggling in the face of e-commerce growth and growing consumer preference to shop for luxury names in discount stores. Ralph Lauren’s stock has been in an ugly downtrend since 2013 but Tuesday’s move puts it close to 52-week highs.

Their CEO, Patrice Jean Louvet, commented, “we continue to make strong progress on our Next Great Chapter plan amid a volatile backdrop, with third-quarter results ahead of our overall expectations, including better than expected revenues, operating margin, and double-digit EPS growth. Over the important holiday season, our teams consistently executed across each of our strategic priorities, enabling us to elevate our brand and deliver for our consumers across every touchpoint.”

Are Conditions Easing?

While management is still trying to turn the ship around, at least they’re going in the right direction. Tuesday’s release marked two quarters in a row where the headline numbers came in ahead of the consensus. The December retail report, which was released last month, would also have brought a few smiles to investors. The apparel category, in particular, came in hot and in tandem with a falling tariff risk, should be enough to keep shares pointed north for now.

That being said, this current burst of positive momentum isn’t being felt everywhere and the likes of Macy’s NYSE: M and Kohl’s NYSE: KSS must be scratching their heads and wondering what they’re doing wrong. While the stocks of both of them and Ralph Lauren are all down from the glory days of 2014, it’s only the latter that isn’t in the red over the past 12 months while Macy’s and Kohl’s stock are both down around 30%. While Ralph’s stock is barely treading water over the same period, it is up over 40% in the last 6 months compared to 5% for Macy’s and -4% for Kohl’s.

Getting Involved

Technically, Wall Street will be hoping shares of Ralph Lauren can get up the $140-$150 level. This is the highpoint, set in 2018, since shares cratered over 60% starting in early 2015. If they were to pull back before reaching or breaking that mark, all is not lost as there’s an impressive looking uptrend in play going back to 2002. Were that to come into play, the technically minded traders among us would be eyeing up a tightening wedge which makes for an interesting inflection point a little further down the road.

In the meantime, the MACD is still in a negative crossover on the daily chart but doing its best to swing around while RSI is just creeping above 60. It’s all to play right now and if the stock can keep its momentum into the weekend, it’s all to play for next week as well.