Ralph Lauren's Brand Appeal Remains Strong After Q2 Earnings, Says Analyst

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Ralph Lauren Corp RL with a price target of $155.00.

RL reported better-than-expected EPS of $2.34 (versus $1.88 last year), topping the consensus estimate.

The upside was driven by better-than-expected sales and gross margin performance, led by Asia and Europe, said the analyst.

Gross margin improved 90 basis points to 68.8%, topping the consensus estimate for a 20 basis points increase to 68.1% driven by AUR growth across all regions and lower freight and favorable channel and geographic mix shifts, partially offset by continued pressure from raw material costs and FX, added the analyst.

For FY24, RL continues to expect revenue to increase in the low-single-digit range in constant FX, and the currency is expected to be a 20-bp drag for the year, noted the analyst.

The analyst sees RL's recent string of results as ongoing evidence of the success of the company's efforts to elevate the offering and attract younger, high-value new customers, emphasizing the broad appeal of the brand and its potential.

Despite ongoing macro challenges, the analyst believes that RL has the right strategies in place to deliver accelerated topline growth off a stronger foundation while generating expense leverage and expanding operating margins.

Price Action: RL shares are trading lower by 4.2% at $123.06 on the last check Thursday.