Core Viewpoint - Ralph Lauren reported strong third-quarter earnings and revenue, exceeding Wall Street expectations, but shares fell due to margin pressure warnings from tariffs [1][3] Group 1: Earnings and Revenue Performance - The company posted earnings per share of $5.82, slightly above analyst estimates of $5.78 [1] - Revenue rose 12% year over year to $2.41 billion, surpassing expectations of $2.30 billion [1] - On an adjusted basis, earnings per share reached $6.22, up 29% from a year earlier, while reported EPS increased 25% from $4.66 [2] - Revenue grew 10% in constant currency terms, with foreign exchange contributing approximately 220 basis points to growth [2] Group 2: Consumer Demand and Product Performance - Sales were driven by demand for products such as Polo shirts and leather handbags, with affluent consumers continuing to spend on luxury goods despite economic pressures on lower- and middle-income households [2] Group 3: Future Outlook - The company expects fourth-quarter operating margin to contract by approximately 80 to 120 basis points due to higher U.S. tariffs [3] - For fiscal 2026, the company raised its outlook for constant-currency revenue growth to the high-single-digit to low-double-digit range, up from the previous forecast of 5% to 7% [4] - Operating margin expansion is projected at 100 to 140 basis points, compared to an earlier estimate of 60 to 80 basis points [4] - Fourth-quarter revenue is expected to grow at a mid-single-digit rate in constant currency [4]

Financial Data and Key Metrics Changes - The company reported a total revenue growth of 10% in Q3, exceeding the mid-single-digit outlook, with Asia leading at 22% growth, followed by North America at 8% and Europe at 4% [23][31] - Adjusted gross margin expanded by 140 basis points to 69.8%, driven by AUR growth and a favorable mix shift towards full-price businesses [24][33] - Adjusted operating margin increased by 200 basis points to 20.7%, with operating profit rising by 21% [25] Business Line Data and Key Metrics Changes - Core product sales grew in low double digits, driven by strong demand in categories like cotton cable knits and children's programs [13][24] - High-potential categories, including women's apparel and handbags, increased in high teens, outpacing total company growth [14][15] - Direct-to-consumer (DTC) business in North America increased by 7%, with retail comps up 7% and digital comps also growing by 7% [26] Market Data and Key Metrics Changes - Asia's revenue increased by 22%, with retail comp growth of 20%, driven by strong performance in China, which grew over 30% [29][31] - North America revenue grew by 8%, with strong performance across both DTC and wholesale businesses [26][27] - Europe saw a revenue increase of 4%, with healthy comps in full-price stores offset by softer outlet trends [28][32] Company Strategy and Development Direction - The company is focused on its "Next Great Chapter: Drive" strategic plan, which aims to elevate the brand, drive core products, and expand in key cities [8][20] - The strategy emphasizes a cinematic storytelling approach to marketing, aiming to connect deeply with consumers and enhance brand desirability [5][44] - The company plans to continue leveraging advanced technology, AI, and analytics to improve consumer engagement and operational efficiency [7][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's resilience and ability to navigate an uncertain global environment, focusing on long-term growth and value creation [20][30] - The outlook for fiscal 2026 has been raised, expecting constant currency revenues to increase in the high single to low double digits [31][33] - Management remains cautious about the North American operating environment due to ongoing consolidation in the wholesale channel [32] Other Important Information - The company added 2.1 million new consumers to its DTC businesses in Q3, reflecting strong momentum among younger consumers [11][12] - The launch of "Ask Ralph," an AI-powered digital shopping assistant, is expected to enhance customer engagement and provide valuable first-party data [78] - The company opened 32 new stores globally, expanding its presence in key markets [18] Q&A Session Summary Question: How is the company thinking about sustaining longer-term brand momentum with increased marketing? - Management emphasized the importance of cultural moments and experiences in attracting and retaining consumers, alongside consistent execution across all business aspects [42][44] Question: What are the drivers of the raised outlook for Q4? - Management noted continued global momentum across regions and channels, particularly in North America and Asia, despite expected moderation in growth due to timing of wholesale receipts [46][47] Question: Can you elaborate on the drivers of AUR increase and any price resistance from consumers? - Management highlighted that AUR growth was driven by reduced promotional activity and strong full-price demand, with no observed price resistance from core customers [50][54] Question: What is the outlook for Europe and the impact of outlet performance? - Management confirmed that Europe is expected to grow at the high end of mid-single digits, with a focus on enhancing quality of sales and reducing promotional activity in outlets [59][64] Question: What are the early learnings from the implementation of Ask Ralph? - Management reported encouraging early reviews and insights from consumer interactions, with plans to expand features and integrate further into the digital ecosystem [77][78]

Financial Data and Key Metrics Changes - The company reported a total revenue growth of 10% for the third quarter, exceeding the mid-single-digit outlook, with Asia leading at 22% growth, followed by North America at 8% and Europe at 4% [23][32] - Adjusted gross margin expanded by 140 basis points to 69.8%, driven by average unit retail (AUR) growth and a favorable mix shift towards full-price businesses [24][34] - AUR grew by 18% in the third quarter, significantly above the initial guidance of high single digits, supported by strong full-price selling trends and reduced discounting [24][55] Business Line Data and Key Metrics Changes - Core product sales grew in low double digits, driven by strong demand in categories such as cotton cable knits and children's programs [13][24] - High-potential categories, including women's apparel and handbags, increased in high teens, outpacing total company growth [13][15] - The direct-to-consumer (DTC) business in North America increased by 7%, with significant quality of sales gains across channels [26] Market Data and Key Metrics Changes - Asia's revenue increased by 22%, with retail comp growth of 20%, driven by strong performance in China, which grew over 30% [30][32] - North America saw a revenue increase of 8%, with retail comps up 7%, while Europe experienced a 4% revenue increase, maintaining strong brand momentum [25][27] - The digital ecosystem sales grew in mid-teens, reflecting growth across all regions, particularly led by Asia [23][30] Company Strategy and Development Direction - The company is focused on its three-year strategic plan, "Next Great Chapter: Drive," which aims to elevate the lifestyle brand, drive core products, and expand in key cities [8][20] - The strategy emphasizes a shift towards full-price DTC sales and reducing reliance on off-price channels, with a commitment to operational agility and leveraging advanced technology [7][20] - The company plans to continue expanding its consumer ecosystems in top cities globally, enhancing customer engagement through immersive experiences [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's resilience and relevance across generations, despite navigating an uncertain global environment [20][39] - The outlook for fiscal 2026 has been raised, expecting constant currency revenues to increase high single to low double digits, reflecting strong execution and improved market conditions [32][34] - Management remains cautious about the North American operating environment due to ongoing consolidation in the wholesale channel [32][33] Other Important Information - The company added 2.1 million new consumers to its DTC businesses in the third quarter, building on last year's record results [11] - The launch of "Ask Ralph," an AI-powered digital shopping assistant, is expected to enhance customer engagement and provide valuable first-party data [18][80] - The company opened 32 new stores globally, including key locations in China and Europe, as part of its expansion strategy [18] Q&A Session Summary Question: How to sustain longer-term brand momentum with increased marketing budget? - Management emphasized the importance of cultural moments and experiences in attracting consumers, alongside consistent execution across marketing and product offerings [43][45] Question: What are the drivers of the raised outlook for the fourth quarter? - Management noted continued global momentum across regions and channels, with solid underlying demand despite expected moderation in growth due to timing of wholesale receipts [47][48] Question: What drove the 18% AUR growth and is there price resistance? - Management attributed AUR growth to reduced promotional activity and strong full-price demand, with no observed price resistance from core customers [51][55] Question: Can you quantify the performance spread between full-price stores and outlets in Europe? - Management confirmed that full-price stores led growth, allowing for a strategic pullback on outlet promotions, which is part of a long-term brand elevation strategy [59][62] Question: What is the impact of increased marketing investment on Europe margins? - Management indicated that increased marketing investments in Europe pressured margins but were necessary for long-term growth, with strong returns expected [70][73]

Financial Data and Key Metrics Changes - The company reported a total revenue growth of 10% for the third quarter, exceeding the mid-single-digit outlook, with Asia leading at 22% growth, North America at 8%, and Europe at 4% [20][24][26] - Adjusted gross margin expanded by 140 basis points to 69.8%, driven by average unit retail (AUR) growth and a favorable mix shift towards full-price businesses [21][31] - Free cash flow reached approximately $650 million, with $500 million returned to shareholders year-to-date [19] Business Line Data and Key Metrics Changes - Core product sales grew in low double digits, with significant contributions from cotton cable knits, wool cashmere, and children's programs [11][19] - High-potential categories, including women's apparel and handbags, increased in high teens, outpacing total company growth [11][12] - Direct-to-consumer (DTC) business in North America increased by 7%, with retail comps up 7% and digital comps also growing by 7% [23] Market Data and Key Metrics Changes - Asia's revenue increased by 22%, with China growing over 30%, driven by strong full-price demand and successful marketing campaigns [14][26] - Europe saw a 4% revenue increase, with strong performance in Germany, the UK, Italy, and Spain, despite a highly promotional competitive environment [24][25] - North America wholesale revenue increased by 11%, driven by stronger-than-expected reorders and digital wholesale performance [23] Company Strategy and Development Direction - The company is focused on its "Next Great Chapter: Drive" strategic plan, which aims to elevate the brand, drive core products, and expand in key cities [6][17] - The strategy includes leveraging advanced technology, AI, and analytics to enhance consumer engagement and operational efficiency [5][15] - The company plans to continue expanding its presence in top cities globally, with 32 new stores opened this quarter [15][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's resilience and ability to navigate an uncertain global environment, emphasizing a focus on long-term sustainable growth [17][34] - The outlook for fiscal 2026 has been raised, expecting constant currency revenues to increase high single to low double digits, up from a previous estimate of 5%-7% [29][31] - Management remains cautious about the North American operating environment due to ongoing consolidation in the wholesale channel [30] Other Important Information - The company launched the AI-powered digital shopping assistant "Ask Ralph," which is expected to enhance customer engagement and provide valuable first-party data [15][74] - The company was recognized as one of America's Best Companies by Forbes, and Ralph Lauren received the CFDA's 2025 American Womenswear Designer of the Year award [16] Q&A Session Summary Question: How to sustain long-term brand momentum with increased marketing budget? - Management emphasized the importance of cultural moments and experiences in attracting consumers, alongside consistent execution across all business aspects [39][41] Question: Drivers of raised outlook for Q4 and trends in North America and Europe? - Management noted continued global momentum and solid growth in North America, despite some moderation expected in Q4 due to timing of wholesale receipts and strategic reductions in off-price sales [43][44] Question: Drivers of AUR increase and any signs of price resistance? - Management highlighted that AUR growth was driven by reduced promotional activity and strong full-price demand, with no signs of price resistance from core customers [49][51] Question: Performance of full-price stores versus outlets in Europe? - Management confirmed that full-price stores led growth, while strategic pullbacks in outlet promotions were made to enhance long-term brand health [57][61] Question: Margin outlook for Q4 and impact of tariffs? - Management indicated that operating margin contraction in Q4 is primarily due to tariffs and timing of marketing campaigns, with expectations for continued AUR growth [81][33]

Core Viewpoint - Ralph Lauren reported third-quarter sales exceeding Wall Street expectations, driven by a strong holiday season and robust demand for its Polo shirts and leather handbags among affluent shoppers [1] Group 1: Sales Performance - The company's third-quarter sales surpassed analyst forecasts, indicating strong market performance [1] - The holiday season contributed significantly to the sales growth, reflecting consumer confidence and spending [1] Group 2: Product Demand - There was resilient demand for Polo shirts and leather handbags, highlighting the brand's appeal among affluent consumers [1]

Financial Data and Key Metrics Changes - The company's second quarter revenue growth was 14%, exceeding the high single-digit outlook, with total adjusted gross margin expanding 70 basis points to 67.7% [21][22] - Adjusted operating margin increased 210 basis points to 13.5%, with adjusted operating income rising 34% [22][23] - The company ended the period with $1.6 billion in cash and short-term investments and $1.2 billion in total debt [28] Business Line Data and Key Metrics Changes - Core product sales grew mid-teens, driven by strong performance in cotton cable knit and seasonal Oxford shirts [12] - Women's apparel and high-potential categories like handbags saw strong double-digit growth, outpacing total company growth [12][14] - Digital ecosystem sales grew double digits, reflecting balanced growth across regions [21] Market Data and Key Metrics Changes - Asia and Europe led performance with sales increasing 16% and 15% respectively, while North America sales grew 13% [21] - China sales increased more than 30%, driven by strong consumer response to brand-building activities [16][25] - North America retail comps were up 13%, with digital comps growing 15% [23] Company Strategy and Development Direction - The company introduced the Next Great Chapter Drive Plan, aiming to capture a larger share of the $400 billion premium and luxury market [4][5] - The strategy focuses on elevating the lifestyle brand, driving core products, and expanding in key cities [5][15] - The company plans to continue investing in brand activations and technology to enhance consumer engagement [17][18] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the second half of the year due to potential consumer headwinds and general volatility [7] - Despite macroeconomic uncertainties, the company is confident in capturing market share opportunities [7][29] - The full-year revenue growth outlook was raised to approximately 5%-7%, reflecting better-than-expected performance in the first half [28][29] Other Important Information - The company added 1.5 million new consumers to its DTC businesses, driven by digital and full-price store customers [10] - The company plans to exit 90-100 wholesale doors in fiscal 2026, with approximately half related to Hudson's Bay [24] - The company launched an AI styling tool, Ask Ralph, developed with Microsoft, to enhance consumer shopping experience [17] Q&A Session Summary Question: Updated outlook for consumer health and brand awareness - Management noted strong momentum in business and no significant changes in consumer behavior, with a focus on attracting full-price customers [40][42] Question: Pricing strategy and tariff mitigation - Management discussed the sustained AUR growth driven by brand investment and pricing actions, with expectations for continued gross margin expansion despite tariff pressures [48][50] Question: Engagement strategies for North America value-oriented consumers - The company emphasized flexibility in pricing and a compelling value proposition to appeal to value-sensitive customers during the holiday season [56][58] Question: North America wholesale trajectory - Management indicated healthy growth in North America wholesale, with expectations for some pressure in the second half due to planned reductions in off-price sales [76][78] Question: Performance in outlet versus full-price channels - Consistent growth was observed across full-price and outlet stores, with a focus on expanding full-price locations while consolidating outlet presence [80]

Financial Data and Key Metrics Changes - The company's second quarter revenue growth was 14%, exceeding the high single-digit outlook, with total adjusted gross margin expanding 70 basis points to 67.7% [18][19] - Adjusted operating margin increased 210 basis points to 13.5%, with adjusted operating income rising by 34% [19][20] - The company ended the period with $1.6 billion in cash and short-term investments and $1.2 billion in total debt, with net inventory increasing 12% year-over-year, aligning with revenue growth [23][24] Business Line Data and Key Metrics Changes - Core product sales, representing over 70% of the business, grew mid-teens, driven by strong performance in various categories including sweaters and jackets [11][12] - High-potential categories such as women's apparel, outerwear, and handbags saw strong double-digit growth, outpacing total company growth [11][12] - The direct-to-consumer (DTC) segment delivered strong comp growth across regions, with global comps increasing 13% [13][14] Market Data and Key Metrics Changes - Asia led growth with sales up mid-teens, particularly in China, which grew more than 30% [14][22] - North America revenue increased 13%, with retail comps also up 13%, driven by strong performance in both direct-to-consumer and wholesale businesses [20][21] - Europe revenue increased 15%, with retail comps up 10%, reflecting ongoing brand strength [21][22] Company Strategy and Development Direction - The company introduced the "Next Great Chapter Drive Plan," aiming to capture a larger share of the $400 billion premium and luxury market, currently holding less than 2% market share [4][5] - Strategic initiatives include elevating the lifestyle brand, driving core products, and expanding in key cities [5][13] - The company is focused on investing in brand-building activations and enhancing consumer engagement through innovative tools like the AI styling assistant [15][33] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the second half of the year due to potential consumer headwinds and macroeconomic volatility, but is confident in capturing market share opportunities [6][18] - The company raised its full-year revenue guidance to a range of 5%-7%, reflecting better-than-expected performance in the first half [24][25] - Management emphasized the resilience of the core consumer and the ongoing demand for the brand, despite macroeconomic pressures [32][34] Other Important Information - The company plans to exit 90-100 wholesale doors in fiscal 2026, with a focus on elevating brand presence and reducing off-price sales [21][22] - Recent marketing investments normalized at 7.8% of sales, down from 8.7% the previous year, with expectations to maintain around 7.5% for fiscal 2026 [19][20] - The company is committed to leveraging its strong balance sheet for strategic growth investments and shareholder returns, having repurchased $313 million in shares this fiscal year to date [23][24] Q&A Session Summary Question: Updated outlook for consumer health and macro assumptions - Management noted strong momentum in business and no significant changes in consumer behavior, maintaining a focus on full-price customer recruitment [31][32] Question: Pricing strategy and ability to mitigate tariffs - The company continues to leverage pricing as a growth driver and expects to mitigate tariff impacts through strategic actions [37][40] Question: Engagement strategies for North America value-oriented consumers - Management highlighted flexibility in pricing architecture and targeted marketing to appeal to value-sensitive consumers during the holiday season [42][45] Question: AUR growth and unit sales - The company has seen consistent AUR growth and is focusing on unit growth in targeted areas, while navigating macro pressures [48][50] Question: North America wholesale trajectory - Management expressed confidence in the underlying quality growth of the wholesale business, despite planned reductions in off-price sales [52][56] Question: Performance in outlet versus full-price stores - Consistent growth was observed across full-price and outlet stores, with a focus on expanding full-price locations while consolidating outlet presence [58][59]

Core Viewpoint - Ralph Lauren has raised its annual revenue forecast, indicating confidence in the demand for its premium products despite economic uncertainties [1] Company Summary - The company is betting on strong demand for its high-priced Polo shirts and cotton cable knit sweaters [1]