Ralph Lauren Q1 Earnings Call Highlights

Key Points

• Ralph Lauren exceeded first-quarter expectations: Constant-currency revenue rose 13%, direct-to-consumer comparable sales increased 12%, and adjusted operating margin expanded 150 basis points to 18.5%.
• Asia led regional growth, with revenue up 25% and China sales increasing more than 40%; North America revenue rose 13%, while Europe grew 5% amid softer traffic and macroeconomic pressure.
• The company raised its fiscal 2027 outlook, now expecting 5%–6% constant-currency revenue growth and 60–80 basis points of operating-margin expansion, supported by stronger full-price selling, higher average unit retail and continued brand investment.

Ralph Lauren NYSE: RL reported first-quarter fiscal 2027 results that exceeded its expectations, with revenue rising 13% on a constant-currency basis and adjusted operating margin expanding 150 basis points to 18.5%.

President and Chief Executive Officer Patrice Louvet said growth was broad-based across regions, channels and product categories, supported by increased full-price selling, brand activations and continued investment in the company’s “Next Great Chapter: Drive” strategy. Direct-to-consumer comparable sales rose 12%, while wholesale revenue increased 13%.

“Our first quarter performance exceeded our expectations on both the top and bottom line,” Chief Financial Officer Justin Picicci said. The company raised its full-year outlook while retaining what management described as a prudent view of consumer conditions in Europe.

Regional Growth Led by Asia

Asia was Ralph Lauren’s fastest-growing region, with revenue up 25% in the quarter and retail comparable sales rising 23%. China sales increased more than 40%, driven by comparable growth and new customer recruitment, while Japan and Korea also delivered double-digit growth.

Louvet said Ralph Lauren’s China strategy centers on brand storytelling, expansion in six priority city clusters, core products and higher-potential categories such as women’s apparel and handbags. He cited a Ralph Lauren Polo Cup event in Beijing that drew 74 million livestream viewers.

Management expects China growth of approximately mid-teens for the full fiscal year, noting that the company will face stronger comparisons in the back half. Ralph Lauren raised its fiscal 2027 outlook for Asia to high-single-digit to low-double-digit revenue growth, compared with its previous forecast for high-single-digit growth.

North America revenue increased 13%, including a 9% increase in retail comparable sales and 22% growth in wholesale. The wholesale result benefited from strong spring sellout trends, replenishment orders, resumed shipments to a luxury wholesale account and shipment timing. Picicci said timing shifts and resumed shipments contributed about 15 percentage points of North American wholesale growth in the quarter.

European revenue rose 5%, led by Germany, Italy and Spain. Retail comparable sales in the region increased 1% on top of a double-digit comparison a year earlier, while wholesale revenue rose 8%, including an approximately five-point benefit from earlier shipment timing.

Management said European store traffic has been pressured by the broader macroeconomic environment, including elevated energy costs, weaker consumer sentiment, Middle East-related disruption to partner sales and tourism trends. However, Ralph Lauren said higher conversion rates and basket sizes helped offset softer traffic.

Margins Expanded Despite Tariff and Cost Pressures

Adjusted gross margin expanded 130 basis points to 73.6%. Average unit retail, or AUR, increased 15%, supported by full-price selling, lower discounting, selective pricing actions and favorable product, channel and geographic mix.

Picicci said the stronger AUR and favorable mix more than offset incremental tariff costs, higher labor expenses and higher non-cotton material costs. The company expects mid- to high-single-digit AUR growth in the second quarter and for the full year.

Adjusted operating expenses rose 13%, though they declined 10 basis points as a percentage of sales. Non-marketing expenses generated 90 basis points of leverage, while marketing spending increased to 8.2% of sales from 7.5% a year earlier. The company said the higher marketing investment supported global brand campaigns, fashion events and consumer activations.

Louvet said Ralph Lauren remains comfortable with marketing spending of about 8% of sales for fiscal 2027 and may continue to invest when it sees attractive returns. The company added 1.5 million customers to its direct-to-consumer businesses during the quarter and grew its social media following by high single digits to more than 70 million.

Product and Store Expansion

Core product sales, which represent more than 70% of the business, rose at a mid-teens rate. Higher-potential categories including women’s apparel, outerwear and handbags increased more than 20%, outpacing companywide growth.

Ralph Lauren opened 22 owned and partner stores globally during the quarter, including locations at The Grove in Los Angeles, Stanford Shopping Center in Palo Alto, Istanbul, Sydney and Perth. The company also renovated its Bicester outlet near London and expanded its RL mobile app to Korea, its first market outside North America for the application.

Management said its direct-to-consumer business accounts for about 70% of sales and is likely to become a somewhat larger share over time, in part because Asia is predominantly direct to consumer. Louvet said wholesale remains important for consumer discovery and recruitment in key-city ecosystems, but the company plans to continue reducing off-price sales and exiting lower-tier full-price doors.

Raised Fiscal 2027 Outlook

For fiscal 2027, Ralph Lauren now expects constant-currency revenue growth of 5% to 6%, up from its prior forecast of 4% to 5%. The company expects foreign exchange to reduce reported revenue growth by approximately 50 to 100 basis points. Its fiscal year includes a 53rd week, expected to add roughly one percentage point to revenue growth.

• North America revenue is expected to increase at a low-single-digit rate.
• Europe revenue is expected to rise low- to mid-single digits.
• Asia revenue is expected to increase high single digits to low double digits.
• Operating margin is expected to expand 60 to 80 basis points, up from prior guidance of 40 to 60 basis points.
• Gross margin is expected to expand 50 to 70 basis points, compared with prior expectations for modest expansion.

For the second quarter, Ralph Lauren expects constant-currency revenue growth of approximately 5% to 6% and operating-margin expansion of 80 to 100 basis points. Management said revenue and profit growth are expected to be more heavily weighted toward the first half, reflecting wholesale shipment timing, prior-year comparisons and the planned acceleration of off-price and lower-tier distribution reductions in the second half.

The company ended the quarter with $1.9 billion in cash and short-term investments, $1.2 billion in total debt and net inventory down 3% on a constant-currency basis. Ralph Lauren returned more than $300 million to shareholders through dividends and share repurchases during the quarter.

About Ralph Lauren (NYSE:RL)

Ralph Lauren Corporation NYSE: RL is a global designer, marketer and distributor of premium lifestyle products under the Ralph Lauren name and a portfolio of related brands. The company, founded by Ralph Lauren in 1967 and headquartered in New York City, has grown from a single line of men's neckties into a global lifestyle business that spans apparel, accessories and home goods.

Ralph Lauren's product assortment includes menswear, womenswear and childrenswear along with footwear, leather goods, eyewear, fragrances and home furnishings.

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