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Ralph Lauren isn’t exactly “trendy.” The company’s flagship Rhinelander mansion store on Madison Avenue in Manhattan’s Upper East Side may be the ultimate bastion of the more glamorous end of the “preppy” or “ivy” style and aesthetic. But the advantage of being anchored in traditional, upper-class style is that it tends to transcend time. Many of the attendees at the 2025 Pebble Beach Concours d’Elegance car show dressed in a manner that may have seemed at least familiar 100 years ago to the original owners of the 1924 Hispano-Suiza that won Best in Show at Pebble this year. Incidentally, Ralph Lauren himself has also won Best in Show twice at the world’s most prestigious Concours d’Elegance, with his 1938 Bugatti in 1990 and a 1930 “Count Trossi” Mercedes roadster in 1993. Having lasting appeal is good for creating a stable business, and having an affluent customer base helps with margins. Appealing to well-educated and affluent consumers aged 25-54 in urban and suburban areas provides pricing power and economic resilience. Two years ago, while discussing the company’s operating results, CEO Patrice Louvet said : “(The) more value-oriented consumers are a smaller part of our customer base and getting smaller and smaller, as we bring in more higher-value consumers.” Financially, the company delivered robust fiscal second-quarter results, with revenue reaching $1.72 billion, a 13.7% year-over-year increase and exceeding estimates, alongside adjusted EPS of $3.77, which also beat forecasts. Trailing 12-month revenue grew 9.6%, supported by 69% gross margins, accelerating comparable store sales and wholesale recovery. EPS is projected to rise from $10.31 in FY2024 to $11.92 in FY2025, underscoring earnings momentum. FY2026 Free cash flow yield is expected to be just under 4.7% (RL’s fiscal year ends March 31), and the street anticipates more than 13.5% growth in free cash flow for FY2027 ended March 31, 2027. Despite these solid results, RL has actually fallen about 1.9% since its quarterly earnings release on Aug. 7. The issue isn’t the company’s operating performance; it’s the stock performance. RL’s total return over the past five years is nearly 337%. At this stage, the company is nearly 50% above its five-year historical earnings multiple. Supported by solid operating performance but suppressed by a well-above-average multiple, one can imagine that RL could be range-bound near-term, particularly before their next quarterly earnings release. Consequently, this could provide an opportunity for a strangle sale. One could collect approximately $7.20 by selling the October 270/330 strangle, or about 2.4% of the current stock price over the next 6½ weeks, nearly 19.5% annualized with an attractive probability of profit. The risk, of course, is that one could get long the stock at the put strike less the premium collected, a ~ 11.5% discount to the current stock price, or short at the $330 call strike plus the premium collected, or a 13.5% premium to the current price — which is already close to the stock’s all-time highs. But a move that substantial seems unlikely in the next six weeks given the stock is already up more than 65% to above average valuations. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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