Ralph Lauren Corporation Q2 FY2026 earnings call

• Elevate and energize lifestyle brand: Reinforced position in sports, hosted Spring '26 Women's Collection fashion show, added 1.5 million new consumers to DTC businesses, increased social media followers. • Drive the Core and Expand for More: Core product sales grew mid-teens, high-potential categories (women's apparel, outerwear, handbags) increased strong double digits, had special releases and capsule collections. • Win in Key Cities with Consumer Ecosystem: Delivered strong DTC comp growth across regions, opened 38 new owned and partner stores globally, announced opening of sixth restaurant in London. • Enablers: Launched AI styling tool Ask Ralph, named one of America's Best Employers for Company Culture, honored in Fast Company's Innovation by Design Awards.

North America: Second quarter revenue increased 13%, with North America Retail comps up 13% (led by Ralph Lauren stores, digital comps up 15%), and North America wholesale revenue up 13% but with a more measured outlook for the second half. Europe: Second quarter revenue increased 15%, driven by momentum in retail and wholesale channels, with Europe retail comps up 10% and Europe digital ecosystem up double digits, Europe wholesale up 18%. Asia: Second quarter revenue and retail comps each grew 16%, with China up more than 30% driven by robust comps and new customer recruitment, Japan up high single digits, and digital presence building out remaining a significant opportunity.

• Fiscal '26 constant currency revenues expected to increase in range of approximately 5% to 7%, up from low to mid-single digits previously. • North America revenues now expected to be up slightly for full year vs prior outlook of low single-digit decline. • Europe expected to grow at high end of mid-single digits. • Asia expected to be up high single to low double digits for second half and full year. • Operating margin expected to expand approximately 60 to 80 basis points in constant currency. • Third quarter constant currency revenues expected to increase approximately mid-single digits, third quarter operating margin expected to expand approximately 60 to 80 basis points in constant currency.

Q: Congrats on a great quarter. What does your updated outlook for this year assume for health of the consumer, particularly macro assumptions that you embedded for the back half? Have you seen any change in consumer behavior in any key markets today? And just larger picture, could you walk through global brand awareness for Ralph Lauren relative to only 2% market share for the brand today? And just how that supports your revenue targets longer term?

A: On consumer health, continue to see strong broad-based momentum, no meaningful changes in consumer behavior across key segments/markets. On brand awareness, highest in North America, strong in Europe, opportunities in Germany, Korea, China; less than 2% market share in $400B market, building awareness helps expand market share.

Q: Justin, the company has successfully driven 8 straight years of AUR growth. How are you thinking about using pricing as a lever over the next few quarters before you start to lap tariffs? And how should we think about your ability to mitigate tariffs over time? And how much of your guidance of a second half deceleration is due to your general caution on a consumer slowdown versus true structural or timing shifts this year?

A: Targeted pricing as a lever, continue to feel good about ability to expand gross margin and mitigate tariffs. Second half deceleration due to combination of structural and timing shifts but underlying growth tracks to mid-single digits.

Q: Justin, Patrice, I was hoping you could dive a little bit deeper into the strategic actions that you're taking to engage the North America value-oriented consumer this holiday season. You continue to take a little bit of a conservative approach there, but it looks like you've been outperforming your expectations to date. Wondering what the plan is for this holiday and what you're looking to do if the consumer does look to get a little bit weaker?

A: Flexibility in price architecture, laser focused on value, strong branding and storytelling, and product offering strategy resonating across consumer segments.

Q: Congrats on a nice quarter. On the AUR, look at a few metrics here. Is there an opportunity for the units to help you start to outpace the AUR growth as you look at the rest of the year? And Patrice, the Investor Day plan looks for EBIT margins, 15%, 15.5% range by fiscal '28. There's a scenario where you get to that range this year.

A: Continued unit growth in areas like full-price businesses, digital businesses, etc. On OI margin, committed to balancing near-term commitments with reinvestment for long-term growth, will balance flow-through between operating margin expansion and reinvestment.

Q: I want to ask just 2. So on the AUR, is there an opportunity for the units to help you start to outpace the AUR growth as you look at the rest of the year? And Patrice, the Investor Day plan looks for EBIT margins, 15%, 15.5% range by fiscal '28.

A: Continued unit growth in targeted areas, and on OI margin, will balance flow-through between operating margin expansion and reinvestment.

Q: Wanted to kind of dig more into North America wholesale. You've been -- you've inflected the positive, I think, 3 quarters in a row now, but you kind of went low double digits this quarter, but there's an 11-point shift. And then, some of your comments on the fourth quarter kind of suggests you're going to pull back from some unproductive sales. So kind of just peeling the onion back, just how should we think about the trajectory of North America wholesale?

A: Healthy underlying growth in North America wholesale, balancing growth in top-tier doors, digital, key cities with wholesale partners with off-price reduction pressure, caution on U.S. consumer, and continued brand elevation reinvestments.

Q: As you think about your retail distribution, both full price and outlet, anything different you're seeing in outlet from full-price? And with the AUR increases, how is trajectory and outlets basically globally of higher-priced product there? And just lastly, anything on the supply chain to make note of as a benefit for margin going forward?

A: Consistent growth across full-price stores, outlet stores, and digital; higher-priced product trajectory in outlets; supply chain well positioned, diversified, and innovative to mitigate cost inflation.

Q: Patrice, I have to ask about China. I've seen China grew over 30% this quarter. How should we think about growth this year for China?

A: China performance driven by strategy execution, brand building resonating with Chinese consumer, core items and high-potential categories performing well, selective store expansion, and digital growth, with confidence in continued strong, steady performance in China.