Ralph Lauren To Gain From Brand Elevation, Strength In China, Focus On Under-Penetrated Categories: Analyst

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on Ralph Lauren Corporation RL, with an unchanged price target of $155.

The analyst remains bullish on RL as momentum in China has been strong, and the company looks to stay disciplined in building a platform for long-term growth.

Management emphasized that momentum has been vital in China, with sales growing more than 50% in the first quarter as the business lapped easier compared to last year's Shanghai lockdowns, notes the analyst.

The analyst also applauds RL's strong presentation showcasing a comprehensive brand experience, including Ralph coffee shops, elevated assortments, and customer service.

With a higher-end assortment, growth in China can continue to drive overall company AUR expansion, while the stores also attract new, younger consumers to the brand, Telsey notes. 

While RL is positioned more as a luxury brand in China, it's democratic

offering can help it weather economic uncertainty in the market, mentions the analyst.

Telsey also highlights the company's focus on elevating its product mix while maintaining a clean inventory position in the wholesale channel. 

The analyst adds that there has been a cultural shift under new RL management to a heightened focus on sell-out rather than sell-in.

Despite ongoing macro challenges, the analyst believes that RL has the right strategies in place (elevate the brand, win in key cities, drive the core business while expanding in under-penetrated categories) to deliver accelerated topline growth off a stronger foundation while

generating expense leverage and expanding operating margins.

However, management is taking a somewhat cautious approach to the European consumer through the remainder of the fiscal year and will remain protective of its elevation journey in the channel.

Price Action: RL shares are trading higher by 1.32% to $115.74 on the last check Wednesday.

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