RALPH LAUREN CORP Q2 FY2025 earnings call

• Elevate and energize lifestyle brand: Strong summer sports campaigns (Olympics, Wimbledon, U.S. Open) delivered over 142 billion PR impressions. World of Ralph Lauren Spring 2025 runway show in Hamptons drove over 33 billion PR impressions. Added 1.5 million new consumers to DTC businesses, with brand consideration and Net Promoter Scores increasing globally.
• Drive the Core and Expand for More: Core products (over 70% of business) saw low double-digit sales growth. High potential categories (women’s apparel, outerwear, handbags) grew mid-teens. Highlights included iconic mesh Polo Shirts, cable knit sweaters, and strong growth in Polo original label.
• Win in consumer ecosystem: Focused on key city ecosystems. DTC drove accelerated comp growth, with 25 new owned and partner stores opened, especially in Asia. China revenue up low-teens, with growth from new customers and platforms like Douyin.
• Enablers: Achieved 33% reduction in absolute greenhouse gas emissions. Created first 100% recycled cotton Polo Shirt for Paris Olympics collection.

North America: Second quarter revenue inflected back to growth, up 3%, exceeding expectations. Retail comps accelerated to 6%, with brick-and-mortar up 9% and digital comps declining 2% but improving sequentially. Wholesale revenues decreased 3%, but wholesale AUR increased mid-single digits. Europe: Second quarter revenue increased 6%, driven by strong retail channels. All key markets delivered growth except the U.K., with Europe retail comps up 15% and AUR continuing to grow strongly. Wholesale increased slightly but below full-year outlook. Asia: Revenue increased 10%, reflecting growth in all markets. Retail comps up 11%, led by Japan and China with low-teens growth.

• Constant currency revenues expected to increase in range of 3%-4%, up from 2%-3% previously.
• Operating margin expected to expand about 110 basis points to 130 basis points, to range of 13.6%-13.8%.
• Gross margin expected to expand 80 basis points to 120 basis points, driven by favorable mix, AUR growth, and lower cotton costs.
• Third quarter expected to be negatively impacted by holiday timing, but partly offset by Europe digital comps shift; fourth quarter negatively impacted by late Easter.

• Geopolitical and macro developments, along with consumer behavior closely monitored.
• Supply chain disruptions related to Red Sea, though teams leveraged agile supply chain to reroute receipts.
• Foreign currency volatility, which was expected to negatively impact revenue growth by 40-60 basis points, down from 150 basis points previously.

Q: Could you elaborate on the enablers driving outsized growth in Europe and China and confidence in sustainability?

A: Patrice Louvet mentioned unique brand, resonating product, and elevated go-to-market strategy. Justin Picicci spoke about margin drivers including brand elevation, product mix, and customer acquisition.

Q: Talk about pricing power and full-price store performance.

A: Justin Picicci discussed AUR drivers like product, geo/channel mix, and customer acquisition. Patrice Louvet talked about strong momentum in North America full-price stores, with comps up 6% and promotional discounts down.

Q: Comp store sales performance in North America and Europe drivers.

A: Patrice Louvet mentioned North America brick-and-mortar comp up high single-digit, outlet acceleration. For Europe, strong performance across key markets with healthy underlying trends.

Q: Outlook for China and Europe store expansion.

A: Patrice Louvet discussed continued momentum in China with new stores and platforms, and Europe with significant expansion opportunities in key cities and underpenetrated areas.