Up 11% this year. What will Ralph Lauren stock look like after Q1 results?

Note: Ralph Lauren’s 2024 fiscal year ended on March 30, 2024.

Ralph Lauren (NYSE: RL), a company that designs, markets and distributes premium lifestyle products, including apparel, accessories, fragrances and home furnishings, is set to report fiscal first-quarter results on Wednesday, August 7. We expect Ralph Lauren stock to likely trade sideways on mixed results, with revenues coming in lower but earnings slightly ahead of expectations. For fiscal 2025, Ralph Lauren expects revenue growth to be in the low single digits at constant currency, targeting around 2% to 3%. Based on current exchange rates, foreign currency is expected to negatively impact revenue growth by around 90 basis points in fiscal 2025. The company also has established long-term sales and margin growth and has outlined a strategic growth plan titled “The Next Great Chapter: Acceleration.” The company’s three-year financial outlook calls for mid- to high-single digit compound annual revenue growth.

RL stock has seen extremely strong gains of around 50% from $105 in early January 2021 to around $160 today, compared to around 40% for the S&P 500 over that roughly three-year period. However, RL stock’s gains have been far from steady. Stock returns were 15% in 2021, -11% in 2022 and 36% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022 and 24% in 2023 – suggesting that RL underperformed S&P in 2021.

In fact, consistently beating the S&P 500 – in good times and bad – has been tough for individual stocks in recent years; for heavyweights in the consumer discretionary sector, including AMZN, TSLA and HD, and even megacap stars GOOG, MSFT and AAPL. In contrast, Trefis High Quality Portfolio, with its collection of 30 stocks, has outperformed the S&P 500 every year in the same period of time. Why? As a group, HQ Portfolio stocks have delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride as seen in HQ Portfolio’s performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could RL face a similar situation as in 2021 and underperform the S&P in the next 12 months – or will there be a sharp increase?

Our forecast indicates that RL is valued at $167 per share, which is almost in line with the current market price. Check out our interactive dashboard analysis at RL Results Preview: What to expect in Q1 for more details.

(1) Revenues likely to fall short of consensus estimates

Trefis estimates RL’s first-quarter 2025 revenue will be around $1.5 billion, slightly below consensus. In the fourth quarter of fiscal 2024, the luxury retailer saw revenue increase 2% year-over-year (YoY) to $1.6 billion, driven by 7% sales growth in Asia and 2% sales growth in Europe and North America. The company benefited from continued strength in DTC and better-than-expected sequential improvement in its wholesale business. Of note, RL’s inventory fell 16% year-over-year to $902 million in the fourth quarter. On the balance sheet, RL ended the fourth quarter with around $1.8 billion in cash and short-term investments and around $1.1 billion in long-term debt. We currently forecast Ralph Lauren revenues of $6.8 billion for full-year 2025, up 3% year-over-year.

2) EPS is expected to be slightly above consensus estimates

RL’s Q1 2025 earnings per share are expected to be $2.49, according to Trefis analysis, slightly above consensus estimates. The retailer reported earnings of $1.71 per share in Q4, compared to $0.90 per share a year earlier. Adjusted gross margin improved 480 basis points from a year earlier, reaching 66.6% of sales in Q4 2024. The company’s margins improved on strong average retail sales growth across all regions, lower transportation costs, and favorable channel and geographic mix changes, more than offsetting continued raw material cost pressures.

(3) The estimated share price is in line with the current market price

Following our Ralph Lauren valuationWith estimated earnings per share of around $11.14 and a P/E multiple of 15.0x in fiscal 2024, this translates to a price of $167, which is almost in line with the current market price.

It’s useful to see how its competitors stack up. RL Peers shows how Ralph Lauren stacks up against its competitors on important metrics. You can find other useful comparisons of companies across industries at Peer Comparisons.

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