Stock pick: Ralph Lauren Corp. is suiting up for global expansion

Adjusting its mix for more lucrative female shoppers could re-energize sales

Chart showing trailing 12-month stock performance of Ralph Lauren Corp

After being one of the best performing sectors last year, The U.S.’s retail industry has taken a big hit in 2014. The S&P 500 Textiles, Apparel and Luxury Goods index is down about 5% since January; it was up about 37% last year.

While a lot of retail companies have suffered this year — in part because of bad weather in the first quarter — if you look carefully, there are still some good buys on the market.

One company that’s on a number of analysts’ buy lists is Ralph Lauren Corp. (NYSE: RL), the famous New York-based clothing company.

The company’s stock has had a pullback this year — it’s down about 10% year-to-date and 15% since last August — but the dip is only temporary, says John Apruzzese, chief investment officer with New York’s Evercore Wealth Management.

He started buying the stock in mid-June. It’s fallen mostly because all other retail stocks are down, he says, but it still has a lot of long-term potential.

There are three reasons why this stock will rebound, says Apruzzese. The first is that it’s just starting to grow its e-commerce business. Online sales account for about 10% of total sales, he explains, and he’s confident that should expand over time.

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The second reason is that 60% of its sales come from its men’s division, while 40% come from women, says Apruzzese. It’s typically the other way around for most retailers.

The company is trying to target more women — its flagship Polo store, which is opening in New York in September, will only carry women’s clothing — which is a lucrative market.

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Finally, it’s continuing to expand internationally. While it has a strong presence in Europe, Japan and Russia, it’s still building out its Asian operations.

It currently generates about 66% of its revenues from the U.S. and only gets a low double-digit percentage from Asia. The company has said that it wants a more even balance between America, Europe and Asia in the future, but to do that it will have to raise its revenues overseas.

The stock is trading at $160, but some analysts think it could get as high as $223. The mean 12-month price target is $188 a share.

“It’s an interesting stock,” says Apruzzese. “It’s expanding nicely outside of the U.S. and if it can improve other parts of their business then it will grow quickly.”