Ralph Lauren Apparel Stock Upgrade, Says Bank of America will Differentiate itself in Promotional Situations

February 13, 2023

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In a challenging retail environment, Ralph Lauren is one of the best brands to buy, according to Bank of America.

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There is an increase in the price target for Christopher Nardone's clothing stock, from neutral to buy, as he sees the brand as a way to outperform its peers as retailers deal with a promotional environment.

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“With the brand's global diversification, and management's ability to pull cost levers during this choppy environment (the new norm), we are upgrading Ralph Lauren (RL) to Buy since we are confident that strong revenue trends will continue,” Nardone wrote in a Monday note.

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“Based on our opinion, management has baked in an appropriate level of caution into its outlook for the US value channel and the European wholesale business, and we have confidence that the company remains on track to meet its medium-term operating margin target of 15% ccy by F25,” said Nardone.

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The shares of Ralph Lauren have gained about 12% so far in 2023, according to the company. In 2022, the stock outperformed the S&P 500, losing 11% versus the 19% decline for the broader index in the same year.

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Even so, the analyst's current price target of $145, up from $130 previously, suggests that shares of the company may be able to rise another 22% from Friday's closing price. As of Monday's premarket trading, the stock price had gained more than 2%.

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As Ralph Lauren overhauled its North American business over the past few years, it reduced the number of low-quality partners and began to rely more on direct-to-consumer marketing and a direct-to-retail strategy, according to the note. Analysts approved of Ralph Lauren's changes, stating that the moves will help Ralph Lauren stand out from the competition in the marketplace.

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“The strategy of RL's brand elevation will continue and the gains in market share and AUR will contribute to the company's consistent revenue growth over the next few years,” Nardone stated.