Polo Ralph Lauren Corp. (RL-N)

Management indicates stronger sales in China, full-year up 20% and Q4 up 40%. A great story in China.

A past pick from summer 2020 when we started turning the corner on the pandemic All apparel got lifted by the Pfizer vaccine in November. Great management and trading at 14x next year's earnings. Managers have made good moves in direct-to-consumer sales.

(A Top Pick Feb 19/16. Up 8.67%.) Retailers have had an awful go, but this one has done well. It has weathered the storm and looks good. The volumes have picked up. It looks strong here and he would Buy it at these levels.

He is looking for a retailer and a fixer-upper, and this one looks awful. It is going to take a little bit of heart to buy here, but it is a name that is great. It has shown resilience and has worked hard at certain levels. The last time it was at $80 was in 2010. It tested it at the market selloff, but in here it is cheap. It is going to take some news to move it higher, and he doesn’t see a lot of downside. Just one half decent quarter and it is getting back up over $100.

It is difficult to predict where consumer preferences are going to be in terms of what they buy next year. This company’s focus has been to expand internationally. Right now about 70% of their revenues come from the US. About 13% of their revenue comes from China, and they want to get that up to 20%. They want to grow their accessories line as they feel accessories don’t go out of favour as quickly as clothing. Also, want to beef up their sports apparel line that they are going to roll out in the fall. Have some good growth initiatives on the horizon, but there is going to be a bridging period going from the US globally, and so far they have not been able to execute that.

Ralph Lauren (RL-N) or Gap (GPS-N)? Both of these are very reliant on the US consumer. This one generates about 70% of its revenues from the US while Gap is 80%. Comparing these he would probably favour Gap, primarily because they reach a wider scale of consumer. This one has a great balance sheet with essentially no debt and $1 billion of cash and is looking at growing in Asia, where revenues are around 13%, which they want to get up to 20%. He doesn’t see anything wrong with either of these companies, but would probably look at a name like Nordstrom (JWN-N) instead, which gives you 500 brands.