Ralph Lauren Corporation’s (RL Quick QuoteRL - Free Report) shares have risen 2.8% in the past week, following its robust second-quarter fiscal 2025 results on Nov. 7, before market open. The bottom and top lines beat the Zacks Consensus Estimate. Results gained from robust demand and brand strength. Margins were also robust in the fiscal second quarter. The company has raised the revenue and adjusted operating margin view for the current fiscal year, backed by strength in brands and favorable business trends.

The company’s digital business, including its directly-operated sites, departmentstore.com, pure players and social commerce, is quite impressive. Ralph Lauren’s "Drive the Core and Expand for More" initiative has strategically positioned it for success. 

RL stock has gained quite steadily over the past year. The stock has rallied 88.8% in a year, impressively outperforming the Zacks Textile - Apparel industry’s 6.9% growth, the broader Consumer Discretionary sector’s 23.5% rise and S&P 500 index’s 38.4% increase. 

Now let’s assess the company’s fiscal second-quarter results, outlook and other factors to make a better judgement on the stock.

More on RL’s Q2 Results & Outlook

Ralph Lauren’s adjusted earnings per share of $2.54 surpassed the Zacks Consensus Estimate of $2.43 and increased 21% from the year-earlier quarter’s figure. Net revenues grew 6% year over year to $1.72 billion and beat the consensus estimate of $1.67 billion. On a constant-currency (cc) basis, revenues were up 6% from the year-ago quarter. The top line witnessed growth across all regions, driven by brand strength, pricing efforts and continued strategic investments.

RL's Price Performance

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Global direct-to-consumer comparable store sales (comps) jumped 10%, backed by continued brand elevation, double-digit increases in average unit retail (AUR) and positive retail comps at all regions. Adjusted gross profit margin expanded 160 basis points (bps) year over year. This was mainly driven by positive product, channel and geographic mix shifts, reduced cotton costs and AUR growth in all regions. Also, the adjusted operating margin increased 90 bps year over year.

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For fiscal 2025, RL now anticipates year-over-year revenue growth (at cc) to be in the band of 3-4%, up from the prior guided range of 2-3%. Management now expects the operating margin to grow in the range of 110-130 bps at cc on higher gross margin and leveraged operating costs. Earlier, management had predicted the operating margin to increase in the band of 100-120 bps. The gross margin is likely to increase in the band of 80-120 bps in cc compared with 50-100 bps expected earlier.

For the fiscal third quarter, management anticipates revenues to grow nearly 3-4% on a cc basis. Operating margin is likely to expand around 100-140 bps in cc on higher gross margins.

RL’s Estimates Reflect a Positive Trend

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2025 EPS (earnings per share) has increased 2.7%. The consensus estimate for fiscal 2026 earnings has risen 2.9% in the past 30 days.
 

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For fiscal 2025, the Zacks Consensus Estimate for RL’s sales and EPS implies 3.5% and 12.4% growth, respectively, year over year. For fiscal 2026, the consensus mark for sales and EPS indicates 3.4% and 11.9% year-over-year increase, respectively.

Analyzing Ralph Lauren’s Core Strengths

RL has been making investments in key priorities such as marketing, digital capabilities and expansion of ecosystem across the major cities. The company’s direct-to-consumer (DTC) channels, comprising stores and digital-commerce sites offering elevated shopping experiences, have been performing well. Ralph Lauren is making significant progress in expanding digital and omnichannel capabilities via investments in mobile, omnichannel and fulfillment.

The company has also been reinforcing its international presence for a while. RL saw positive retail comparable-store sales at all regions in the most recent quarter. Its strategy, which includes product elevation, personalized promotions, disciplined inventory management and a favorable channel and geographic mix, is proving effective.

Ralph Lauren’s stock performance is due to its progress on ‘Next Great Chapter: Accelerate Plan’ and digital efforts. As part of the plan, the company is focused on elevating its lifestyle brand, expanding core and other businesses and strengthening its presence in key cities. It is enhancing its global lifestyle brands by offering premium products that align with evolving consumer preferences. 

RL’s shareholder-friendly moves have been boding well. The company repurchased nearly $100 million of Class A common stock in the most recent quarter. RL returned about $375 million to shareholders via dividend and repurchases of Class A common stock. It paid a regular quarterly cash dividend of 82.50 cents per share in the fiscal second quarter, totaling $98.9 million in the first six months.

RL Stock’s Valuation

Ralph Lauren’s stock is trading at a discount valuation relative to the industry. Going by the price/sales ratio, the stock is currently trading at 1.91 on a forward 12-month basis, lower than 2.02 for the industry. Also, the stock is trading much lower than its five-year high of 2.03.

Final Words on RL Stock

RL stock seems attractively valued.  Robust strategies, shareholder-friendly initiatives and strong cash flow generating ability are major tailwinds. RL has been seeing a rise in earnings estimates as well. Hence, we suggest investors to include this Zacks Rank #2 (Buy) company in their portfolio.

Other Stocks to Consider

We have highlighted three other top-ranked stocks, namely, G-III Apparel Group (GIII Quick QuoteGIII - Free Report) , Gildan Activewear (GIL Quick QuoteGIL - Free Report) and Royal Caribbean (RCL Quick QuoteRCL - Free Report) .

G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here. 

GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 3.3% from the year-ago figure.

Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank of 2 at present. GIL has a trailing four-quarter earnings surprise of 5.2%, on average. 

The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 14% from the year-ago figure.

Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 18.5%, on average.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates an increase of 17.8% and 67.8%, respectively, from the year-ago levels.