Ralph Lauren Corporation 2027 Q1 Earnings Call

Thank you for joining Ralph Lauren's first quarter fiscal 2027 conference call. Joining me today are Patrice Louvet, the company's President and Chief Executive Officer, and Justin Picicci, Chief Financial Officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller. During today's call, our financial performance will be discussed on a constant currency-adjusted basis. Our reported results, including foreign currency, can be found in this morning's press release. We will also be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties.

Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our investor relations website. With that, I'll turn the call over to Patrice.

Thank you, Corie. Good morning, everyone, and thank you for joining today's call. We are off to a strong start in the second year of our Next Great Chapter Drive plan. Around the world, the core brand values that Ralph envisioned when he started this company nearly 60 years ago, authenticity, quality, timeless style, are resonating powerfully across generations and geographies. We are connecting with and engaging consumers as only Ralph Lauren can, inspiring people to step into their dream of a better life. This strengthening brand desirability across lifestyle categories, channels, and regions is translating into healthy, consistent, sustainable growth, and value creation for our business. In the first quarter, our top and bottom line results exceeded our expectations, supported by our diversified drivers of growth. Revenues increased 13%, including double-digit growth in both Asia and North America and mid-single-digit growth in Europe.

Performance was balanced across global DTC comps and wholesale, up 12% and 13% respectively in constant currency. We achieved this all while continuing to improve our quality of sales with increased full price selling and investing back into our key strategic priorities. Notably, a rolling thunder of brand activations, new AI capabilities, and expanding our key city ecosystems, along with returning cash to shareholders. With first quarter revenues and gross and operating margins ahead of the expectations we outlined in May, we have confidence in raising our full-year outlook to reflect our first quarter over delivery, even as we continue to take a measured approach to the macro backdrop in Europe in particular. Despite dynamic global operating conditions, we remain on offense.

Based on our continued commitment to invest behind our brands, driving high quality and new customer recruitment and retention, our strong and growing geographical presence anchored in our key cities in each region, and our strategic investments in advanced analytics, technology, and AI to better serve our consumers and drive greater efficiencies in our business, all underpinned by our strong balance sheet and operating discipline. Let me take you through a few recent highlights across the three strategic pillars of our plan. As a reminder, these include, first, elevate and energize our lifestyle brand, second, drive the core and expand for more, and third, win in key cities with our consumer ecosystem. Starting with our efforts to elevate and energize our lifestyle brand. At the intersection of culture, style, and luxury, the Ralph Lauren brand continues to captivate new generations while deepening its connection with existing consumers around the world.

To our fashion shows, key city campaigns, celebrations of important historical moments, and heritage sporting events, we are bringing the world of Ralph Lauren to life in distinct and immersive ways. We are leveraging our unique lifestyle authority to create bold, innovative experiences that engage, inspire, and strengthen brand desirability. Key highlights from the first quarter included, first, in celebration of America's 250th anniversary, we unveiled our American Icons collection of commemorative stamps with the U.S. Postal Service Making Ralph the first designer ever invited to have this honor. The curated collection aligns with our brand's enduring creative vision, which is deeply rooted in the tapestry of American heritage, landscapes, cultures, and artistry. We also invited consumers to step into our vision of timeless style through our spring 2026 global campaign, A Sporting Life, a tribute to sophistication and sport with events in the Hamptons, Pebble Beach, and beyond.

Our men's Purple Label and Polo fashion show at our palazzo in Milan, capturing the spirit of adventurous travel through reimagined icons, where we welcome guests including Lewis Hamilton, Maluma, Henry Golding, Tom Hiddleston, and more. Our home presentation during Salone del Mobile, also in Milan, transformed a Palazzo Ralph Lauren into an immersive celebration of design and craftsmanship. The launch of our newest book, "Ralph Lauren Catwalk," which chronicles more than 50 years of our iconic womenswear shows, and marking the first time an American designer has been featured in this prestigious series. In Asia, we kicked off our year-long celebration of 50 years in Japan with the launch of our Very Ralph documentary at the landmark Akasaka Palace, and we hosted activations around the 20th anniversary of our Omotesando flagship in Tokyo.

Reinforcing our leadership in the world of sports, we hosted our first ever Ralph Lauren Polo Cup in Beijing and Sydney, an elegant live polo match seamlessly blending equestrian heritage with high fashion and the world of celebrity. Beyond the quarter, we were proud to once again serve as the official sponsor of Wimbledon, marrying the traditions of this storied tournament with sophisticated spectator style. These activations are driving strong, sustainable growth in new customer acquisition and retention. In the first quarter, we added 1.5 million new customers to our DTC businesses, led by Ralph Lauren stores and our digital commerce sites. We continue to drive progress across brand equity metrics, including increased NPS and luxury perception scores, as well as our ongoing recruitment of key consumer cohorts, including women, luxury, and younger customers.

We increased our social media followers by high single digits to more than 70 million, led by Instagram, LINE, Douyin, and TikTok. We look forward to sharing more of our rolling thunder of activations ahead as we continue to build brand desirability across generations around the world. Moving to our second key initiative, Drive the Core and Expand for More. Our design teams continue to honor the heritage and enduring codes of our brand while thoughtfully evolving them for the way consumers live today. Starting with our core, which represents more than 70% of our business. Core product sales grew mid-teens in the first quarter. Recent highlights include a broad range of foundational sweaters, our linen Oxford and seersucker shirts, and our iconic chino caps.

We also introduced our By the Lake children's collection, featuring versatile pieces that provide an easy transition into back to school, led by mini cable sweaters, windbreakers, and full-zip hoodies. Our high-potential categories, including women's apparel, outerwear, and handbags, continue to be accelerators for our business. Together, these categories increased more than 20% for the quarter, outpacing total company growth. In women's, we drove strong performance across cable knit and jersey sweaters, linen shirts, shirt dresses, and cotton chino pants. Our lightweight outerwear, led by our city jacket and oversized windbreaker, along with our fleece programs and bold Polo graphics, are driving seasonal newness and consumer engagement. Our spring handbag campaigns continue to focus on our foundational Polo Play and Polo ID collections in a colorful array of pebbled leathers, denim, beading, and seasonal raffia, all ahead of our next foundational launch, the Polo Blaze, for fall 2026.

Special releases this quarter included our Wimbledon collection honoring our heritage of sport, sophistication, and timelessness; our latest home collections, Sterling Square and Saddlebrook, inspired by Ralph's homes in New York City and Bedford; the launch of our partnership with Pebble Beach Resorts, marking the destination's first and only branded retail concept. As we transition into fall, we will continue to lean into the breadth of our lifestyle product offering, both connecting with consumers around the world while driving resilience in our business. Turning to our third key initiative, Winning Key Cities with Our Consumer Ecosystem. Our teams continue to set the standard for innovative consumer lifestyle experiences, bringing Ralph Lauren to life in our top 30 cities around the world, while also laying the groundwork for long-term growth in our next 20 cities.

Within DTC, which comprises the majority of our business, we delivered another quarter of healthy comp growth across regions. Global comps increased 12%, led by our Ralph Lauren stores and digital commerce. By region, Asia again led our growth, with sales up 25%, driven by all key markets. China's sales remained strong, increasing more than 40% as we continue to build our brand. Our China performance was supported by local activations such as our Ralph Lauren Polo Cup, along with further expansion across our top six city clusters and on digital. Europe delivered mid-single-digit growth this quarter on top of last year's strong compares, and we continued to drive results ahead of expectations in our largest region, North America, with retail and wholesale both contributing to this quarter's 13% growth. As we deepen our presence in our top cities, we opened 22 new owned and partner stores globally this quarter.

New stores included The Grove in L.A., Stanford Shopping Center in Palo Alto, our second store in the Bay Area ecosystem and first in Silicon Valley, including a Ralph's Coffee, Istanbul, new Polo stores in Sydney and Perth, and we renovated our highly elevated Bicester outlet outside of London, which also now includes a Ralph's Coffee. In addition, we expanded our RL mobile app to Korea, our first market to have the app outside of North America, with strong early performance that exceeded our expectations. Finally, touching on our enablers. Our business continues to be supported by our five key enablers. Recent highlights include, first, as part of our focus on advanced technology, AI and analytics, we continue to drive progress in enhancing our creativity, productivity and customer engagement. This quarter, we improved user experiences on our digital commerce sites and expanded brand discoverability across key LLMs.