Ralph Lauren Corp (NYSE:RL) is scheduled to report its second-quarter fiscal 2027 earnings in early November. The clothing designer is likely to beat estimates and raise its quarter, according to BofA Securities analyst Kendall Toscano.
The Ralph Lauren Rating: Toscano reiterated a Buy rating and a $450 price target.
The Ralph Lauren Thesis: Freight concerns and a weakening U.S. consumer backdrop weigh on the stock. Still, the company seems "relatively insulated from these pressures," Toscano said. The durability of its sales and margin momentum continues to be "underappreciated," he added.
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Ralph Lauren’s core customer base seems to be "doing just fine," the analyst said. That’s because the company’s higher-income cohort "remains resilient."
Toscano expects Ralph Lauren to report better-than-expected North American sales. The gap between the brand’s robust momentum across channels and the focus on short-term investors on credit card data looks soft and "may differ from actual trends in the business."
While guidance reflects conservatism in Europe due to macro pressures, the analyst added that Ralph Lauren is likely to continue gaining market share in the region.
Freight concerns also seem overblown, Toscano said. He expects Ralph Lauren’s EBIT margin to expand by 90 basis points (bps) year-on-year in the second quarter, with gross margin up 60 bps, "driven by AUR growth and favorable mix."
While investors are concerned about rising fuel prices, the analyst notes that:
- Freight is only 5% of Ralph Lauren’s COGS (cost of goods sold)
- Guidance embedded conservatism on fuel surcharges
- Ocean freight is locked in early in the year
The company has "a track record of expanding margins through significantly greater headwinds like tariffs," he further wrote.
RL Price Action: Ralph Lauren shares had declined 0.10% to $372.86 at the time of publication on Tuesday.
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