Iconic luxury fashion brand Ralph Lauren's (NYSE:RL) stock has been in a trading range despite the benchmark index sell-off in 2022. The company has emerged from its reorganization, running on all cylinders. Ralph Lauren successfully offset increased logistics and freight costs with successful pricing and product mix, helping boost margins by 60 basis points.
The company has prioritized digital innovation, bolstering its digital channel and appealing to a new generation of younger under 35 and high-value consumers. It teamed with Roblox (NYSE:RBLX) and launched exclusive digital apparel collections in the popular metaverse ZEPETO. It has received over 2.5 million visitors and remains the top brand on the platform.
The company raised fiscal full-year 2022 guidance after a blowout fiscal Q3 and authorized a new $1.5 billion buyback. Shares have been consolidating between $100 and $135. Prudent investors seeking exposure to a turnaround-driven apparel brand leader can watch for opportunistic pullbacks in shares of Ralph Lauren.
Q3 FY Fiscal 2022 Earnings Release
On Feb 2, 2021, Ralph Lauren released its third-quarter fiscal 2022 results for the quarter ending December 2021. The company reported earnings-per-share (EPS) of $2.94 excluding non-recurring items versus consensus analyst estimates for a profit of $2.19, a $0.75 per share beat. Revenues rose 26.7% year-over-year (YoY) to $1.82 billion, beating consensus analyst estimates of $1.65 billion. Inventory ended Q3 at $929 million, up 7% YoY.
Gross margins for the quarter were 66%, and adjusted gross margin rose 60 bps, driven by better pricing and promotion mix, which offset the headwinds of COVID and freight costs. All regions reported double-digit growth. Ralph Lauren's ecosystem revenue rose over 40%, and owned digital commerce grew more than 30%. The company bought back 2.5 million shares and authorized a new $1.5 billion stock buyback program.
CEO Patrice Louvet said,
“Our better-than-expected results across all three regions are a testament to the outstanding work our teams have done to fundamentally reposition our business, elevate our brand and pivot to offense – including in North America, where our turnaround is well underway. With our significant reset work behind us, we are encouraged that our long-term growth is supported by multiple engines – from geographic and channel expansion to recruiting new high-value consumers and developing high-potential product categories."
Upside Guidance
Ralph Lauren issued upside guidance with full-year 2022 revenues to grow between 29% to 41% from 34% to 36% earlier guidance or $6.12 billion to $6.21 billion versus $5.94 billion consensus analyst estimates. Capex is expected to range between $200 million to $225 million for the year and operating margins of approximately 13%.
Conference Call Takeaways
CEO Louvet stated that the turnaround is well underway, as evidenced by its impressive earnings report. Its growth levers are sustainable and driving profits and expanding to recruit higher-value consumers. He reviewed some of the examples of the five strategic pillars of the Next Great Chapter plan. The company firmly pushed to win over a new generation of consumers worldwide by driving brand momentum and demand creation.
This included everything from celebrity activations to digital innovations to the metaverse to drive its digital channels to help recruit younger consumers. New consumer digital sales rose 58%, including next-gen under 35 and high-value customers.
Online search trends across its brand of products rose double digits. The company saw much success reaching the younger demographic through its promotions with Roblox with its Lauren Winter Escape program emphasizing its immersive holiday theme and digital apparel purchase exclusives.
Ralph Lauren also launched on ZEPETO, a famous metaverse with over 2.5 million visitors and the #1 ranking among all brands on the platform. He concluded,
“All channels and geographies are showing strong momentum as we build on an increasingly healthy foundation, leveraging work that we started well before the pandemic, but accelerated through this time of challenge.”
RL Opportunistic Pullback Price Levels
Using the rifle charts on the weekly and daily time frames provides a precise view of the landscape for RL stock. The weekly rifle chart peaked near the $135.68 Fibonacci (fib) level. Shares proceeded to break down to the $101.08 fib before staging a rally. The weekly rifle chart has been consolidating with a flat 5-period moving average (MA) at $119.31 and a flat 15-period MA at $117.35. The weekly 50-period MA sits at $119.51, and 200-period MA support sits at $108.51. The weekly stochastic is forming a mini inverse pup down.
The weekly lower Bollinger Bands (BBs) sit at $101.73. The weekly market structure low (MSL) buy triggers a breakout close above $120.38. The daily rifle chart is jumbled with a flat 5-period MA at $117.43 and a 15-period MA at $112.37. The daily 50-period MA sits at $117.43, and 200-period MA sits at $117.89.
The daily upper BBs sits at $137.05, and lower BBs sits at $94.09. The daily stochastic formed a mini pup towards the 80-band. Prudent investors can watch for opportunistic pullback levels at the $115.50 fib, $111.38 fib, $109.46 fib, $105.54 fib, $101.08 fib, and the $95.78 fib level. Upside trajectories range from the $125.28 fib up to the $142.10 fib level.