Ralph Lauren (RL) Stock Forecast & Price Target

Ralph Lauren Corp. reported an impressive increase in European wholesale sales, rising 8% due to higher-than-expected re-orders, following a strong 6% increase in the previous year and a robust 15% growth on a reported basis last year. The company’s strategic increase in marketing expenditure to 8% of sales has yielded favorable results, with operating expense leverage achieved as revenue growth surpassed the marketing investment, contributing to an anticipated 100-140 basis point expansion in full-year operating margins at constant currency. Additionally, the brand experienced an 18% increase in average unit retail prices in the third quarter, driven by effective brand elevation strategies and strong full-price selling, complemented by a 12% increase in European revenue amounting to $676 million.

Ralph Lauren Corp. faces a negative outlook as its operating margin is projected to contract between 80 to 120 basis points in constant currency, with reported margins showing minimal to slight fluctuations. The company has experienced flat retail comparable sales, a significant decline from 26.4% growth in the previous year, coupled with a downward trend in North America's wholesale business due to strategic reductions and market exits. Furthermore, the European operating margin has also decreased by 150 basis points year-over-year, primarily attributed to increased marketing investments, contributing to concerns about profitability and growth potential.