Ralph Lauren (NYSE:RL) outlined new three-year targets calling for mid-single-digit sales growth and 100–150 basis points of operating margin expansion, with management emphasizing that its 16% margin outlook is not a ceiling.
The company expects growth to be fueled by continued strength in Asia and Europe, alongside incremental gains from women's apparel, handbags, and a broader store footprint across APAC and EMEA.
Bank of America Securities (BofA) said the updated plan mirrors the company's prior strategy, which successfully delivered on its objectives, and pointed to upside potential from gross margin improvement.
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Continued pricing power through higher average unit retail (AUR), easing input costs such as cotton, and productivity gains in supply chain and inventory management are seen as key drivers.
The bank maintained a Buy rating and a $360 price forecast, implying about 14% upside from current levels. The valuation is based on 14x FY27 EV/EBITDA, a premium to peers trading near 9x, justified by Ralph Lauren's more substantial margins, sales growth, and brand equity.
The firm also noted a new $400 million cost savings program, evenly split between gross margin and SG&A, following the completion of a similar initiative between fiscal 2022 and 2025.
At the same time, BofA highlighted that Ralph Lauren's second-half guidance could prove conservative. The bank argued that consumer demand trends for the brand remain stable despite management assuming a sharp slowdown, and flagged a particular opportunity in the women's category where recent investments and early product success, notably in handbags, suggest stronger momentum.
In August, Ralph Lauren delivered stronger-than-expected first-quarter fiscal 2026 results as broad-based demand and margin gains lifted performance. The quarterly revenue rose 14% to $1.72 billion, surpassing the $1.64 billion consensus estimate, while adjusted EPS of $3.77 topped forecasts of $3.43. For fiscal 2026, the company projected low- to mid-single-digit revenue growth at constant currency.
Analyst Christopher Nardone stated that the upside risks include faster sales recovery and greater-than-expected benefits from cost savings. In contrast, downside risks stem from weakness in wholesale, U.S. department store closures, higher reinvestment spending, and global macro headwinds.
Price Action: RL shares were trading lower by 3.26% to $304.39 at last check Wednesday.
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