Updated 4:40 p.m. ET Aug. 7
Ralph Lauren Corp. charged past first-quarter expectations and raised its outlook for the full fiscal year, even with some trepidation over how consumers will react to the impact of higher tariffs.
Net income rose 30.7 percent in the quarter to $220.4 million from $168.6 million a year ago. Adjusted income increased a slightly faster 34.9 percent to $236 million, or $3.77 a diluted share — 22 cents ahead of the $3.50 earnings per share analysts forecast, according to Yahoo Finance.
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Revenues for the three months ended June 28 increased 14 percent to $1.7 billion, an 11 percent bump-up in constant currency.
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Investors, who had driven shares of the company up 90 percent over the past year, decided to take a step back given the cloudiness going into the fall and sent shares of the company down 6.5 percent to $283.34.
Despite that decline, the firm has been one of fashion’s standouts on Wall Street and has a market capitalization of $17.2 billion — about three-times the combined market cap of competitors Capri Holdings and PVH Corp.
There are a lot of elements to the company’s stock price expansion over the longer term — Ralph Lauren has been steadily increasing its average prices by pumping more into the brand and solidifying its image while also navigating all the operational complexities of tariffs and a global supply chain.
But a lot of it seems to be that, even after nearly 60 years in the business, Ralph is still Ralph.
“What we stand for — aspiration, optimism, individuality and authenticity — inspires people in every corner of the world,” said Ralph Lauren, executive chairman and chief creative officer, in a statement. “And we are bringing these values to life and inviting people to step into their dreams in new and powerful ways — from our first-ever fashion presentation in Shanghai this April to our MLB World Tour Tokyo Series activations and our Women’s Polo presentation in Paris.”
Despite being the player that so many of the American fashion brands have aspired to be — each in their own way — Ralph Lauren continues to stand on its own.
Patrice Louvet, president and chief executive officer, told WWD Thursday morning: “It’s very difficult to pigeonhole Ralph Lauren in a specific box because of the breadth of our product offering, because of the breadth of our price architecture. We recently sold a $300,000 watch, and then we also sell packs of tennis socks for $15.
“It is all about authenticity,” Louvet said. “People see that. I have lunch with Ralph every week when neither of us are traveling and the thing that we always talk about is, are we staying true to who we are?
“It’s so tempting in this industry to chase a trend, to want to create a trend, to copy what someone else is doing,” he said. “It’s so tempting to do it, and it might work in the near term, but over time you end up diluting what you stand for and you end up confusing the consumer. We are in an industry where a number of brands are a little lost right now in terms of what they stand for and who they are. And we work very hard to stay true to who we are.”
He framed it as a fidelity to both value and values.
“We put a lot of emphasis on value perception,” he said. “Value perception isn’t just about price. It’s about how’s the storytelling, what’s the product experience, what’s the shopping experience. And then you put that relative to the price that we asked for. We know the consumer is discerning, and we’re putting a lot of emphasis on making sure that relative to the competitive set, we provide a very attractive value.”
It’s an approach that seems to have connected with shoppers around the world in the first quarter, when average unit retail prices increased 14 percent through the brand’s own stores and website.
By region:
The brand’s total North American revenues rose 8 percent to $656 million, with comparable sales up 12 percent.
The European top line advanced 16 percent to $555 million, or 10 percent in constant currency, with comp sales also up 10 percent.
Revenues in Asia grew 21 percent to $474 million, a 19 percent increase in constant currencies, with an 18 percent comp sales rise.
Louvet said Ralph Lauren was taking share from just about everyone.
“We are seeing consumers coming from brands that might be below us from a pricing standpoint, but consumers are excited about what we have to offer,” he said. “We are seeing trade across from competitors that are playing at our price tiers. And that’s both true in the Polo world and in the luxury space of Collection and Purple Label.
“Then we are seeing, I wouldn’t say it’s direct trade-down, but I do think consumers in that [top] tier are redirecting their spending. I suspect we are benefiting somewhat from consumers redirecting money they used to spend on maybe handbags and hard luxury like jewelry and watches, now [buying] into our apparel.”
Accordingly, the company has grown more confident on the year ahead and is now projecting revenues will increase in the low- to midsingle digits on a constant currency basis, up from the low-single digit forecast made in May. The operating margin for fiscal 2026 is now expected to expand by 40 to 60 basis points in constant currency. Before, the firm said that it would grow operating margin only “modestly.”
Neil Saunders, managing director of GlobalData and an astute retail observer who readily calls out poor performance and management missteps, lauded Ralph Lauren’s “stellar set of numbers.”
“Ralph Lauren is doing a great job of attracting younger consumers to the brand,” Saunders said. “Through a combination of refreshed marketing campaigns and very strong social media activation, our data indicate that Ralph Lauren has successfully increased both penetration and spend among younger demographics. Placing Ralph Lauren in important cultural moments, such as Selena Gomez’s outfit at the Oscars, also cements the more youthful stance of the brand. All of this has been achieved without sacrificing the older consumer base that has long shopped Ralph Lauren.”
The company’s performance comes against a macro backdrop that’s been tough and could be getting tougher.
Louvet said: “We’re cautious in the back half disproportionately in North America because we don’t know how consumers are going to respond to what will likely be a more inflationary environment. We have heard many companies across industries talk about how they will increase pricing to deal with tariffs among different interventions. And we don’t really know how the consumer’s going to respond to all these expected increases across industries.”
Next month, Louvet will reveal more of the company’s plans for the future at an investor day, particularly for its “high potential” categories, women’s apparel, handbags and outerwear.
“We’ll be sharing the size of prize of these categories that we play in,” Louvet said. “We’ve only just begun.”