| • Second Quarter Revenue Increased 6% on Both a Reported and Constant Currency Basis, Ahead of Expectations Led by Europe and Asia |
| • Global Direct-to-Consumer Comparable Store Sales Grew 10%, Driven by Positive Retail Comps Across All Regions |
| • Adjusted Gross and Operating Margin Expansion Exceeded Our Outlook, with Brand Elevation and Expense Discipline More than Offsetting Planned Investments in Marketing and Key City Expansion |
| • Maintained a Healthy Balance Sheet Including $1.7 Billion in Cash and Short-Term Investments and Well Positioned Inventories Ahead of the Holiday While Mitigating Global Supply Chain Disruptions |
| • Returned Approximately $375 Million to Shareholders Through Our Dividend and Repurchase of Class A Common Stock This Fiscal Year-to-Date |
| • Raised Year Fiscal 2025 Revenue and Adjusted Operating Margin Expansion Outlook, Reflecting Confidence in Brand Momentum and Business Trends |
| Ralph Lauren Corporation (NYSE: RL), a global leader in the design, marketing, and distribution of luxury lifestyle products, today reported earnings per diluted share of $2.31, up 5% to the prior year on a reported basis and $2.54, up 21% on an adjusted basis, excluding restructuring-related and other net charges, for the second quarter of Fiscal 2025. This is compared to earnings per diluted share of $2.19 on a reported basis and $2.10 on an adjusted basis, excluding restructuring-related and other net charges for the second quarter of Fiscal 2024. |
| "A spirit of optimism and the easy elegance of timeless style -- these are elements that have come to define our brand," said Ralph Lauren, Executive Chairman and Chief Creative Officer. "This summer was a celebration of all that we cherish, and as we turn our focus to holiday, we will continue inspiring people around the world to come together and step into their dreams." |
| "Our teams are executing well on our long-term strategy, injecting energy and excitement behind our storied brand through what continues to be a choppy global operating environment," said Patrice Louvet, President and Chief Executive Officer. "Our strong business performance across every geography this quarter underscores the resilience of our diversified growth drivers and our elevated consumer base, giving us the confidence to take up our financial outlook for the full fiscal year ahead of the all-important holiday season." |
| Key Achievements in Second Quarter Fiscal 2025 We delivered the following highlights across our Next Great Chapter: Accelerate priorities in the second quarter of Fiscal 2025: |
| • Elevate and Energize Our Lifestyle Brand |
| ◦ Drove continued momentum in new customer acquisition and loyalty with 1.5 million new consumers in our direct-to-consumer businesses, increases in brand consideration and net promoter scores, and more than 62 million social media followers, a low double-digit increase to last year |
| ◦ Created powerful, authentic connections with consumers through key moments, notably: our 2024 Paris Olympics campaign as the official outfitter of Team USA; iconic sponsorships of Wimbledon and the U.S. Open Tennis Championships; and our Spring 2025 World of Ralph Lauren fashion show, inspired by the natural beauty and quiet sophistication of coastal living in the Hamptons. |
| • Drive the Core and Expand for More |
| ◦ Drove continued momentum in our Core business, up low double-digits, along with our high-potential categories (Women's Apparel, Outerwear, and Handbags), which increased mid-teens to last year in constant currency and outpaced total company growth |
| ◦ Product highlights this quarter included: our U.S. Open capsule, featuring modern sportswear inspired by the tournament's bold energy and timeless Polo style; "Denim Daydream," the 3rd drop in our Artist in Residence collaboration with Naiomi Glasses; and our Pink Pony collection, supporting Ralph Lauren's longstanding commitment to cancer care and research ◦ Increased average unit retail ("AUR") by 10% across our direct-to-consumer network in the second quarter, above expectations and on top of a 9% increase last year, reflecting continued mix shift toward our full-price businesses and the durability of our multipronged elevation approach. |
| • Win in Key Cities with Our Consumer Ecosystem |
| ◦ By geography, revenue growth was led by Asia, up 9% on a reported basis and 10% in constant currency, exceeding our expectations with China up low-teens on a reported and constant currency basis. Europe sales grew 7% on a reported basis and 6% in constant currency driven by continued brand momentum across the region. North America inflected to 3% growth as stronger direct-to-consumer performance more than offset a modest planned decline in wholesale |
| ◦ Continued to expand and scale our key city ecosystems with the opening of 25 new owned and partnered stores in the second quarter. Key store openings during the period included: Tulsa, Oklahoma; Giverny, France; and Shenzhen, China |
| Our business is supported by our fortress foundation, which we define through our five key enablers, including our people and culture, best-in-class digital technology and analytics, superior operational capabilities, a powerful balance sheet, and leadership in citizenship and sustainability. |
| Second Quarter Fiscal 2025 Income Statement Review |
| Net Revenue. In the second quarter of Fiscal 2025, revenue increased 6% to $1.7 billion on a reported basis and was also up 6% in constant currency. Foreign currency favourably impacted revenue growth by approximately 10 basis points in the second quarter. |
| Revenue performance for the Company's reportable segments in the second quarter compared to the prior year period was as follows: |
| • North America Revenue. North America revenue in the second quarter increased 3% to $739 million. In retail, comparable store sales in North America increased 6%, with a 9% increase in brick-and-mortar stores more than offsetting a 2% decrease in digital commerce. North America wholesale revenue decreased 3%, in line with our outlook. |
| • Europe Revenue. Europe revenue in the second quarter increased 7% to $566 million on a reported basis and 6% in constant currency. In retail, comparable store sales in Europe increased 15%, significantly exceeding our expectations, with a 15% increase in brick-and-mortar stores and a 14% increase in digital commerce. Europe wholesale revenue increased 2% to the prior year on a reported basis and increased slightly on a constant currency basis, with stronger re-order trends more than offsetting a timing shift of receipts into the second half of the year. |
| • Asia Revenue. Asia revenue in the second quarter increased 9% to $380 million on a reported basis and 10% in constant currency, ahead of our expectations. Comparable store sales in Asia increased 11%, with a 10% increase in our brick-and-mortar stores and a 19% increase in digital commerce. |
| Gross Profit. Gross profit for the second quarter of Fiscal 2025 was $1.2 billion and gross margin was 67.0%. Adjusted gross margin was also 67.0%, 160 basis points above the prior year. Gross margin expansion was driven by favourable product, channel and geographic mix shifts, lower cotton costs and AUR growth across all regions. |
| Operating Expenses. Operating expenses in the second quarter of Fiscal 2025 were $977 million on a reported basis. On an adjusted basis, operating expenses were $958 million, up 7% from last year. The adjusted operating expense rate was 55.5%, compared to 54.9% in the prior year period, driven by higher marketing investments due to the planned timing of key campaigns. Excluding marketing expenses, the adjusted operating expense rate was flat compared to the prior year period. |
| Operating Income. Operating income for the second quarter of Fiscal 2025 was $179 million and operating margin was 10.4% on a reported basis. On an adjusted basis, the operating income was $197 million and the operating margin was 11.4%, 90 basis points above the prior year. Operating income for the Company's reportable segments in the second quarter compared to the prior year period was as follows: |
| • North America Operating Income. North America's operating income in the second quarter was $122 million on both a reported and adjusted basis. The adjusted North American operating margin was 16.5%, up 140 basis points from last year. |
| • Europe Operating Income. Europe's operating income in the second quarter was $146 million on both a reported and adjusted basis. Adjusted Europe operating margin was 25.8%, up 70 basis points from last year. Foreign currency negatively impacted the adjusted operating margin rate by 20 basis points in the second quarter. |
| • Asia Operating Income. Asia's operating income in the second quarter was $86 million on both a reported and adjusted basis. Adjusted Asia's operating margin was 22.7%, up 310 basis points from last year. Foreign currency negatively impacted the adjusted operating margin rate by 80 basis points in the second quarter. |
| Net Income and EPS. Net income in the second quarter of Fiscal 2025 was $148 million, or $2.31 per diluted share on a reported basis. On an adjusted basis, net income was $162 million, or $2.54 per diluted share. This compared to net income of $147 million, or $2.19 per diluted share on a reported basis, and net income of $141 million, or $2.10 per diluted share on an adjusted basis, for the second quarter of Fiscal 2024. |
| In the second quarter of Fiscal 2025, the Company had an effective tax rate of approximately 21% on both a reported and adjusted basis. This is compared to an effective tax rate of approximately 11% on a reported basis and 18% on an adjusted basis in the prior year period. The increase was driven primarily by the absence of favourable discrete tax benefits realized in the prior year period, more than offsetting a favourable stock compensation adjustment as compared to the prior year. |
| Balance Sheet and Cash Flow Review The Company ended the second quarter of Fiscal 2025 with $1.7 billion in cash and short-term investments and $1.1 billion in total debt, compared to $1.5 billion and $1.1 billion, respectively, at the end of the second quarter of Fiscal 2024. |
| Inventory at the end of the second quarter of Fiscal 2025 was $1.1 billion, down 6% compared to the prior year period, primarily driven by strategic reductions in North America. |
| The Company repurchased approximately $100 million of Class A Common Stock in the second quarter. |
| Full Year Fiscal 2025 and Third Quarter Outlook |
| The Company's outlook is based on its best assessment of the current geopolitical and macroeconomic environment, including inflationary pressures, other consumer spending-related headwinds, global supply chain disruptions and foreign currency volatility, among others. The full-year Fiscal 2025 and third-quarter guidance excludes any potential restructuring-related and other net charges that may be incurred in future periods, as described in the "Non-U.S. GAAP Financial Measures" section of this press release. |
| For Fiscal 2025, the Company now expects constant currency revenues to increase in a range of approximately 3% to 4%. Based on current exchange rates, foreign currency is expected to negatively impact revenues by approximately 40 to 60 basis points in Fiscal 2025. |
| The Company now expects operating margin for Fiscal 2025 to expand approximately 110 to 130 basis points in constant currency, driven by gross margin expansion and operating expense leverage. Gross margin is expected to increase approximately 80 to 120 basis points in constant currency. Foreign currency is expected to negatively impact gross and operating margins by approximately 20 basis points. |
| For the third quarter, the Company expects constant currency revenues to grow approximately 3% to 4%. Foreign currency is expected to benefit revenue growth by approximately 10 to 50 basis points. |
| Operating margin for the third quarter is expected to expand approximately 100 to 140 basis points in constant currency, driven by gross margin expansion. Foreign currency is expected to have a roughly neutral impact on gross and operating margins in the third quarter. |
| The Company's full-year Fiscal 2025 tax rate is now expected to be in the range of approximately 22% to 23%, increasing from 19% in the prior year, following discrete tax benefits recognized in the prior year period. The third quarter tax rate is expected to be approximately 22%. The Company expects capital expenditures for Fiscal 2025 of approximately $250 million to $300 million. |
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| Ralph Lauren Corporation |
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