Ralph Lauren's stock rallies to a nine-year high, with some help from Taylor Swift

By Tomi Kilgore

CEO lists Taylor Swift's choice of a Ralph Lauren look for the cover of Time's 'Person of the Year' issue as a highlight for the company

Shares of Ralph Lauren Corp. soared Thursday to the highest prices seen in nine years after the luxury lifestyle-products company delivered a big fiscal third-quarter profit beat amid strong holiday sales and a jump in direct-to-consumer sales.

On the post-earnings call with analysts, Chief Executive Patrice Louvet said the quarter's highlights included outfitting "an incredible roster of inspiring women," including Jodie Foster, Jennifer Lopez and America Ferrera, at the Elle Women in Hollywood event.

"And who could forget Taylor Swift, who chose an all-American Ralph Lauren look for the cover of Time Magazine as their 2023 Person of the Year," Louvet said, according to an AlphaSense transcript.

The stock (RL) shot up 14.5% in midday trading, enough to pace the S&P 500 index's SPX gainers. The rally put the stock on track for its biggest one-day gain since a record 19.8% rally on Nov. 9, 2020, and for its highest close since Feb. 3, 2015.

For the quarter to Dec. 30, net income jumped to $276.6 million, or $4.19 a share, from $216.5 million, or $3.20 a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of $4.17 beat the FactSet consensus of $3.57.

Revenue grew 5.6% to $1.93 billion, above the FactSet consensus of $1.87 billion, as global direct-to-consumer comparable-store sales jumped 9%.

Gross margin improved by 1.5 percentage points, to 66.5%.

"Consumers continue to turn to brands they know and trust and styles that live on beyond one season, and this holiday was no exception, as Ralph and our design teams seamlessly married sophisticated casual with styles exuding the luxury and glamour of the season," Louvet said on the call.

North American revenue was about flat, as a 5% increase in same-store sales, which included a 6% rise in brick-and-mortar sales and 4% growth in digital commerce, was offset by a 15% drop in wholesale revenue as the company "carefully manages" supply in the channel, Louvet said.

Meanwhile, Europe revenue rose 11% and Asia revenue increased 16%.

For fiscal 2024, the company still expects revenue growth in the low-single-digit percentage range. The current FactSet revenue consensus of $6.57 billion implies a 2% rise.

CFRA analyst Zachary Warring raised his stock-price target by 11% to $150, but the new target implied an 11% decline from current levels. He downgraded the stock to hold from buy.

"We remain optimistic on [Ralph Lauren] but believe shares will digest gains," Warring wrote in a note to clients.

The stock has rocketed 44.6% over the past three months, while the S&P 500 has advanced 13.9%.

-Tomi Kilgore

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02-08-24 1214ET

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