Ralph Lauren Q4 Earnings Call Highlights
Key Points
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- Ralph Lauren beat fiscal Q4 expectations, with constant-currency revenue up 12% and full-year revenue topping $8 billion for the first time. Growth was broad-based across regions, channels and product categories, led by strong results in Asia.
- Margins held up better than expected despite tariff pressure, as adjusted gross margin expanded 40 basis points to 69%. Full-year adjusted operating margin also improved, showing the company’s pricing power and favorable mix.
- Management sees continued growth in fiscal 2027, forecasting mid-single-digit revenue growth and 40 to 60 basis points of operating margin expansion. The company also plans to keep investing in brand building, digital capabilities and key growth categories like women’s apparel and handbags.
Ralph Lauren (NYSE:RL) reported stronger-than-expected fourth-quarter and full-year fiscal 2026 results, with management citing broad-based growth across regions, channels and product categories as the company completed the first year of its “Next Great Chapter: Drive” strategic plan.
President and Chief Executive Officer Patrice Louvet said the company’s reported full-year revenue surpassed $8 billion for the first time, supported by growth in both retail and wholesale and in every region. He said Ralph Lauren’s performance reflected “healthy, consistent, sustainable growth” tied to brand elevation, product breadth and expansion in key cities.
“There’s no single or one-time element that drove the outperformance,” Louvet said during the call. “That’s really the power of our diversified model.”
Fourth-quarter sales beat expectations
Chief Financial Officer Justin Picicci said fourth-quarter revenue increased 12% on a constant-currency basis, ahead of the company’s prior mid-single-digit outlook. Asia led regional growth, with revenue up 28%, followed by North America at 8% and Europe at 6%.
Retail comparable sales rose 17% globally, accelerating from the prior quarter, with double-digit growth in both owned digital and brick-and-mortar channels. Total digital ecosystem sales, including the company’s own websites and wholesale digital accounts, grew at a mid-teens rate.
By region, North America revenue increased 8%, driven by 14% growth in direct-to-consumer sales. North America retail comps rose 16%, including 21% growth in digital comps. Wholesale revenue in North America was flat, which Picicci said was ahead of plan as replenishment orders and full-price selling offset reduced off-price sales and rationalization of lower-tier wholesale doors.
Europe revenue rose 6%, with growth in both direct-to-consumer and wholesale. Germany, the U.K., Italy and Spain led the region. Europe retail comps rose 5% on top of an 18% increase a year earlier, while wholesale grew 7%.
Asia revenue increased 28%, with all markets contributing to growth. Retail comps in the region rose 25%. China sales grew more than 50% in the quarter, supported by a strong Lunar New Year period, healthy comparable sales and new customer acquisition.
Margins improve despite tariff pressure
Adjusted gross margin expanded 40 basis points to 69%, compared with the company’s expectation for roughly 100 basis points of contraction. Picicci said stronger-than-expected average unit retail growth and favorable channel mix more than offset higher U.S. tariff costs, as well as modest labor and non-cotton material cost headwinds.
Average unit retail rose 16% in the quarter. Picicci said about half of that increase came from stronger full-price selling, reduced discounting and modest targeted pricing, with the rest coming from product, channel and geographic mix.
Adjusted operating expenses rose 14%, or 90 basis points as a percentage of sales, as higher marketing investment more than offset leverage in non-marketing expenses. marketing represented 8.1% of fourth-quarter sales, up from 6.6% a year earlier, reflecting spending tied to the Winter Olympics and fashion presentations in Milan, New York City and Paris.
Fourth-quarter adjusted operating margin contracted 60 basis points to 9.7%. For the full year, adjusted operating margin expanded 140 basis points to 15.4% on a constant-currency basis, which Picicci said was ahead of plan.
Brand activations and product categories drive growth
Louvet highlighted sports, entertainment and fashion activations as important brand drivers. Ralph Lauren served as the official outfitter of Team USA for the 2026 Milan Cortina Olympics and Paralympics and activated around the event with celebrities and friends of the brand, including Usher, Shaun White, Maggie Rogers, Snoop Dogg and Taylor Swift. Louvet said the Olympics campaign helped Ralph Lauren achieve the No. 1 share of voice across social media and improve luxury perception, brand relevance and consideration.
The company added 1.4 million new customers to its direct-to-consumer businesses in the fourth quarter, a low-double-digit increase from a year earlier. Social media followers increased by high single digits to about 70 million, led by Instagram, LINE and Douyin.
Louvet said core product sales, which represent more than 70% of the business, grew mid-teens in both the quarter and the full year. High-potential categories including women’s apparel, outerwear and handbags increased more than 20% for both the quarter and full year, outpacing total company growth.
In the question-and-answer session, Louvet said those categories are expected to remain growth accelerators. He noted that women’s apparel is close to a $2 billion business for Ralph Lauren but still represents about 1% market share, leaving “significant runway.” He also pointed to the planned fall launch of the Polo Blaze handbag family.
Fiscal 2027 outlook calls for continued growth
For fiscal 2027, Ralph Lauren expects constant-currency revenue to increase by mid-single digits on a 52-week comparable basis, centered around 4% to 5%. The year includes a 53rd week, expected to add about 1 point to revenue growth.
By region, the company expects North America revenue to grow approximately low single digits, Europe revenue to increase low to mid single digits and Asia revenue to increase high single digits. China is expected to grow in the mid-teens range after growing 40% in fiscal 2026.
Ralph Lauren expects full-year operating margin to expand 40 to 60 basis points in constant currency, with modest gross margin expansion and operating expense leverage more than offsetting continued brand investments and distribution optimization. The outlook does not assume any potential tariff refunds.
For the first quarter, the company expects revenue to rise mid- to high single digits on a constant-currency basis and operating margin to expand 80 to 120 basis points, led by gross margin expansion.
Picicci said the company expects average unit retail growth to continue in fiscal 2027, though at a more normalized mid-single-digit pace after a 15% increase in fiscal 2026. He said first-quarter AUR growth is expected to be high single digits.
Management emphasizes balance sheet and investment plans
Ralph Lauren ended the year with $2.1 billion in cash and short-term investments and $1.2 billion in total debt. The company generated about $750 million in free cash flow during fiscal 2026 and returned more than $700 million to shareholders through dividends and repurchases. Its board approved a 10% increase in the annual dividend.
Management said investment priorities remain focused on brand building, product elevation and key city ecosystems, including digital and AI-enabled capabilities. Louvet said marketing spend is expected to reach about 8% of sales in fiscal 2027, and that the company will continue to evaluate marketing investment based on returns.
“We remain on offense,” Louvet said, citing Ralph Lauren’s brand strength, core products, high-potential categories and geographic expansion opportunities as drivers of long-term growth.
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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