Highlights From Cowen's Meeting With Ralph Lauren Management

Cowen analysts met with Ralph Lauren Corp RL's management team, giving the research firm increased conviction in its bullish stance on the stock.

The Analyst

Cowen's John Kernan maintains an Outperform rating on Ralph Lauren with an unchanged $150 price target.

The Thesis

Cowen analysts met with Ralph Lauren CFO Jane Nielsen and investor relations VP Corinna Van der Ghinst, with the main takeaway being the company is ahead on plans announced in June 2018, Kernan said in a Thursday note.

Ralph Lauren showed "quality" topline growth in the fiscal third quarter, with average unit revenue growth of 9 percent, the analyst said. Gross margins have now expanded by 485 basis points since fiscal 2016.

The fashion brand's momentum appears to be sustainable into fiscal 2020, and the Street's estimates for 2.5-percent sales growth along with 58-basis-point operating margin improvement appear to be conservative, Kernan said. The outperformance could come from recent advancements in personalization and customization in-store and within the digital space, he said. 

The company's international business has also transformed to a "point of strength" after showing 13-percent growth in Europe and 11.4-percent growth in Asia, the analyst said. Over the next five years, Ralph Lauren is targeting 30-50 new store locations in Asia and 100 more across Europe, he said. 

The addition of Nielsen to Ralph Lauren's management team in 2016 has resulted in a "new culture and focus" on productivity, Kernan said. Productivity has "clearly improved" under Nielsen's watch, as inventory turn moved from 2.9 times in fiscal 2017 to 3.2 times in fiscal 2019, he said. 

CEO Patrice Louvet's continued focus on consumer data along with insights and working with micro-influencers has attracted new and younger consumers to the brand, according to Cowen. 

Price Action

Ralph Lauren shares were up 0.82 percent at $126.36 at the time of publication Thursday afternoon. 

Related Links:

Calvin Klein Is Stronger Than The Street Thinks, UBS Says In Upgrade Of Parent Company PVH

UBS Initiates Coverage On Apparel Retailers, Calls Aerie A $2 Billion Brand

Photo by Amin/Wikimedia.