Ralph Lauren — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance

• Second quarter net revenue increased 9% to $2.2 billion on a reported basis and 10% in constant currency.
• Earnings per diluted share were $4.87 on a reported basis (up 47% year-over-year) and $4.64 on an adjusted basis (up 22% year-over-year).
• Net income was $297 million on a reported basis and $283 million on an adjusted basis, compared to $207 million and $237 million respectively in the prior year quarter.
• Reported gross margin was 74.2%, an expansion of 620 basis points year-over-year, driven by tariff refunds; adjusted gross margin was 70.5%, an expansion of 250 basis points.
• Reported operating margin was 16.6%; adjusted operating margin was 15.7%, an expansion of 160 basis points year-over-year.
• Inventory decreased 9% to $1.2 billion compared to the prior year period.
• Total debt remained flat at $1.2 billion, while cash and short-term investments increased to $1.8 billion.

Guidance and Future Outlook

• Raised full-year Fiscal 2027 constant currency revenue growth outlook to mid- to high-single digits, centered around 6% to 7%, up from the previous 5% to 6% range.
• Raised full-year Fiscal 2027 adjusted operating margin expansion outlook to 80 to 100 basis points in constant currency.
• Forecasted third quarter Fiscal 2027 revenue growth of low- to mid-single digits in constant currency, centered around 3% to 4%.
• Forecasted third quarter adjusted operating margin expansion of 50 to 70 basis points in constant currency.
• Full-year Fiscal 2027 tax rate expected to be 21% to 22%; third quarter tax rate expected to be 23% to 24%.
• Capital expenditures for Fiscal 2027 expected to be 4% to 5% of revenue.
• Fiscal 2027 is a 53-week year, with the 53rd week expected to contribute an additional 1 point to revenue growth.

Business Segments and Product Lines

• Asia revenue led growth with a 28% increase to $571 million, driven by a 35% revenue increase in China.
• North America revenue increased 6% to $885 million; Europe revenue increased 1% to $696 million.
• Global Direct-to-Consumer comparable store sales increased 10%, with balanced growth across digital and brick-and-mortar channels.
• Average Unit Retail (AUR) grew 9% across the direct-to-consumer network.
• Core business grew 10%, while high-potential categories (Women's Apparel, Outerwear, and Handbags) increased low double-digits.
• New product launches included the Ralph Lauren x Gee's Bend and Polo Ralph Lauren x TÓPA capsule collections, the U.S. Open Collection, and the Polo Blaze handbag collection.
• Opened 22 new owned and partnered stores, including locations in Boston, London, St. Tropez, and Beijing.
• Launched the Ralph Lauren mobile app in Japan.
• Acquired 1.7 million new consumers in direct-to-consumer businesses.

Market and Competitive Landscape

• Foreign currency negatively impacted revenue growth by approximately 50 basis points in the second quarter.
• Digital commerce comparable store sales increased 31% in Asia, 9% in Europe, and 5% in North America.
• Brick-and-mortar comparable store sales increased 23% in Asia, 6% in North America, and decreased 4% in Europe.
• The company reported over 72 million social media followers, a mid-single digit increase year-over-year.

Risks and Challenges

• Outlook considers geopolitical and macroeconomic headwinds, including tariffs, inflationary pressures, consumer spending trends, global supply chain disruptions, and foreign currency volatility.
• Potential risks include military conflicts, civil unrest, diplomatic tensions, and anti-American sentiment.
• Risks related to inflationary pressures on raw materials, energy, transportation, and wages.
• Uncertainty regarding the scope, duration, and legal status of tariffs and potential retaliatory measures.
• Risks of supply chain disruptions, including capacity constraints, labor shortages, port congestion, and trade restrictions.
• Potential impacts from cybersecurity breaches, data privacy issues, and the regulation of artificial intelligence.
• Risks associated with the loss of key personnel, including Executive Chairman Ralph Lauren.

Management Commentary and Tone

• Patrice Louvet, President and CEO, stated the company delivered strong second-quarter performance enabling the raise of the Fiscal 2027 outlook.
• Management expressed confidence in the strength of the brand, teams, and diversified engines of growth.
• The company is executing its "Next Great Chapter: Drive" plan to strengthen brand desirability and delight multi-generational customers.
• Ralph Lauren, Executive Chairman and Chief Creative Officer, highlighted the company's 60-year history of optimism and values centered on family and the world around us.

Other Key Points

• Returned more than $600 million to shareholders year-to-date through dividends and share repurchases.
• Repurchased approximately $250 million of Class A Common Stock in the second quarter, completing the Fiscal 2027 share repurchase plan.
• Completed the sale of the Club Monaco business, with consideration received from Regent, L.P.
• Received tariff refund recoveries of $82.3 million in the second quarter.
• Invested in marketing and long-term growth initiatives while maintaining expense discipline.
• The company operates a global network of 606 directly operated stores and 620 concessions as of the end of the second quarter.