Ralph Lauren is back in style and shows increased high-end potential
Demand is picking up for clothing from Ralph Lauren Corp., boosting analyst confidence in the luxury company’s sales growth.
Ralph Lauren RL,
had been the subject of a recovery strategy prior to COVID-19. During the pandemic, the company, like so many others in the apparel industry, saw declines as vacations, parties and office work came to a halt.
“While many remained skeptical about the company’s takeover prospects, recent audits now indicate a significant acceleration in trends at Ralph Lauren,” Wells Fargo wrote in a note.
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“Additionally, while almost all of the apparel inventories in our coverage universe continue to show strong momentum in recent weeks, Ralph Lauren appears to be experiencing disproportionate demand both in absolute and relative terms.”
Wells Fargo is pricing the overweight position in Ralph Lauren stocks with a price target of $ 150, down from $ 132.
Confidence in improving digital trends and controls, as well as a number of upcoming drivers, prompted a Ralph Lauren stock upgrade to outperform market performance at Cowen.
Cowen analysts raised Ralph Lauren’s price target to $ 152 from $ 110.
“The backdrop of softlines and department stores until the start of the school year favors increased sales, AUR [average unit retail] and EBIT margin versus consensus models as inventory levels improve, distribution channels streamlined and SG&A structures lowered, ”wrote analysts led by John Kernan. (EBIT refers to earnings before interest and taxes and selling, administrative, and other general and administrative expenses.)
Cowen notes a $ 200 million reduction in general and administrative expenses at Ralph Lauren.
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“The integration of the wardrobe into FY22 is positive for the current environment where discretionary spending can shift to more formal clothing compared to the comfort / athletic trends that have dominated 2020,” said Cowen.
Both groups of analysts are also looking to online data, which shows more eyeballs on Ralph Lauren’s offerings in recent weeks.
Ralph Lauren shares rose 2.7% on Wednesday. Shares have gained 27.5% year-to-date. The S&P 500 SPX index,
is up 11.4% for 2021 so far.