Ralph Lauren Q2 Earnings Call Highlights

Key Points

• Ralph Lauren raised its fiscal 2027 outlook after second-quarter revenue grew 10% and exceeded expectations. It now forecasts constant-currency revenue growth of 6% to 7%, with full-year gross and operating margin expansion both expected at 80 to 100 basis points.
• Asia drove growth, with revenue up 28%—including more than 35% growth in China—while North America rose 6% and Europe 3%. The company raised its North America and Asia forecasts but lowered Europe’s to low-single-digit growth amid traffic pressure and macroeconomic volatility.
• Adjusted gross margin expanded 220 basis points to 70.2%, supported by higher prices, favorable mix and lower product costs. For the holiday quarter, Ralph Lauren expects revenue growth of about 3% to 4%; it also repurchased $250 million of shares in Q2.

Ralph Lauren NYSE: RL raised its fiscal 2027 revenue and margin forecasts after second-quarter sales grew 10%, led by a 28% increase in Asia and continued demand for full-price products.

The company’s results exceeded its expectations for both revenue and profitability, Chief Financial Officer Justin Picicci said on the earnings call. Ralph Lauren now expects full-year constant-currency revenue growth of approximately 6% to 7% on a 52-week comparable basis, up from its prior forecast of 5% to 6%.

The outlook also reflects a modestly stronger view of the second half, although management expects growth to slow from the first half because of tougher comparisons, wholesale shipment timing and planned reductions in lower-priced sales. The financial results discussed on the call were on a constant-currency adjusted basis.

Asia Leads Growth as Europe Faces Traffic Pressure

Second-quarter revenue rose 6% in North America and 3% in Europe, while Asia’s 28% growth included a sales increase of more than 35% in China. Japan and Korea also posted double-digit growth, the company said.

Global direct-to-consumer comparable sales rose 10%, with growth across stores and digital commerce. Asia retail comps increased 24%, while North America retail comps rose 6%. Europe retail comps declined 1% against a 10% increase a year earlier.

North America wholesale revenue increased 8%, including approximately four percentage points of benefit from shipments shifted from the second half. Picicci said the company expects wholesale growth in the region to moderate as it laps that benefit and accelerates reductions in off-price sales and lower-tier full-price stores.

Ralph Lauren raised its full-year outlook for North America to low- to mid-single-digit growth from low-single-digit growth. It also increased its Asia forecast to low-teens growth from high-single- to low-double-digit growth. Picicci said the company expects China sales to grow in the mid- to high-teens range for the full year.

Europe’s forecast moved in the opposite direction. Ralph Lauren now expects low-single-digit growth there, down from its prior low- to mid-single-digit forecast, citing consumer traffic pressure and macroeconomic volatility. Picicci said the updated outlook does not depend on a near-term recovery in the region.

Chief Executive Officer Patrice Louvet said the company’s core consumer remains resilient globally, including in Europe, but that traffic pressure was particularly evident at outlets. Picicci said Ralph Lauren would remain disciplined on promotions while retaining flexibility to respond selectively where consumer conditions warrant it.

Margins Expand as Company Plans More Marketing

Adjusted gross margin expanded 220 basis points to 70.2% in the quarter, supported by higher average unit retail prices, favorable geographic mix and lower product costs. Average unit retail rose 9%, reflecting product elevation, mix, selective price increases and reduced promotional activity, Picicci said.

Adjusted operating margin increased 140 basis points to 15.5%, even as marketing spending rose to 8.6% of sales from 7.8% a year earlier. The company added 1.7 million new customers to its direct-to-consumer businesses during the quarter, Louvet said.

Ralph Lauren now expects marketing investment to account for approximately 8% to 8.5% of fiscal 2027 sales, compared with approximately 8% previously. Louvet said the company would continue increasing investment when it sees attractive returns while also expanding operating margin.

For the full year, the company raised its forecast for gross margin expansion to 80 to 100 basis points from 50 to 70 basis points. It also lifted its operating margin expansion outlook to 80 to 100 basis points from 60 to 80 basis points.

Holiday Outlook and Capital Returns

For the third quarter, which includes the holiday selling period, Ralph Lauren expects constant-currency revenue growth centered around 3% to 4% and operating margin expansion of 50 to 70 basis points. The revenue outlook includes approximately one percentage point of pressure from wholesale timing shifts and planned off-price reductions.

The full-year forecast assumes a prevailing U.S. tariff rate of approximately 10% through December, followed by a return to reciprocal rates in the high teens in the fiscal fourth quarter. It excludes benefits from tariff refunds. Fiscal 2027 includes a 53rd week, which the company expects to add approximately one percentage point to revenue growth.

Ralph Lauren repurchased approximately $250 million of shares in the second quarter, bringing year-to-date repurchases to $500 million and completing its fiscal 2027 buyback plans. It ended the quarter with $1.8 billion in cash and short-term investments and $1.2 billion in total debt.

About Ralph Lauren (NYSE:RL)

Ralph Lauren Corporation is a global designer, marketer and distributor of premium lifestyle products. Founded by Ralph Lauren in 1967 with a collection of men's ties, the company has grown into a fashion and lifestyle business built around its namesake brand and Polo Ralph Lauren.

Its products include apparel, footwear, accessories, fragrances and home furnishings. The company sells through department stores and other wholesale partners, as well as its own retail stores and e-commerce channels, and also licenses its brands for selected products and services.

Ralph Lauren serves customers in North America, Europe and Asia, among other markets.

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