- Third Quarter Revenue Increased 11%, Ahead of Expectations, with Better Than Expected Holiday Performance in All Geographies Driving Outperformance.
|
- Global Direct-to-Consumer Comparable Store Sales Grew 12%, Driven by Positive Retail Comps Across Regions and Channels; Global Wholesale Sales Increased by High-Single Digits Including a Return to Growth in North American wholesale.
|
- Adjusted Gross and Operating Margin Expansion Exceeded Our Outlook, with Strong Full-Price Demand and Expense Discipline More than Offsetting Investments in Marketing and Key Cities
|
- Maintained d Healthy Balance Sheet with Accelerated Free Cash Flows and Well-Positioned Inventories at Quarter-End
|
- Returned Approximately $500 Million to Shareholders Through Our Dividend and Repurchase of Class A Common Stock This Fiscal Year-to-Date
|
- Raised Full Year Fiscal 2025 Revenue and Adjusted Operating Margin Expansion Outlook Based on Strong Year-to-Date Performance
|
| 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 $4.66, up 11% to the prior year on a reported basis and $4.82, up 16% on an adjusted basis, excluding restructuring-related and other net charges, for the third quarter of Fiscal 2025. This is compared to earnings per diluted share of $4.19 on a reported basis and $4.17 on an adjusted basis, excluding restructuring-related and other net charges for the third quarter of Fiscal 2024. |
| "I have always been inspired by the spirit of the holidays — the sense of optimism, celebrating the warmth of family and togetherness, and an enduring sense of tradition," said Ralph Lauren, Executive Chairman and Chief Creative Officer. "We are proud that a growing number of customers are turning to us for these key moments and in their everyday lives." |
| "Our teams around the world executed very well across geographies, channels, and categories this holiday to deliver on our long-term, Next Great Chapter: Accelerate strategy," said Patrice Louvet, President and Chief Executive Officer. "We are encouraged by this quarter's strong performance, and we continue to be sharply focused on what's ahead for Ralph Lauren: leveraging the incredible power of our brand and diverse drivers of growth to stay on offence into the next year and beyond." |
| Key Achievements in Third Quarter Fiscal 2025 |
| We delivered the following highlights across our Next Great Chapter: Accelerate priorities in the third quarter of Fiscal 2025: |
- Elevate and Energize Our Lifestyle Brand
|
-
- Drove continued momentum in new customer acquisition and loyalty with 1.9 million new consumers in our direct-to-consumer businesses, increases in brand consideration, purchase intent and net promoter scores, and more than 64 million social media followers, a low double-digit increase to last year.
|
-
- Invested in powerful, authentic connections with consumers through key moments, notably: our global "Ralph's New York" Holiday 2024 campaign and Timeless Gifting programs including our Holiday pop-up and coffee shop at Saks Fifth Avenue in New York City; Very Ralph documentary event in Shanghai; Singles Day livestream activations; and Polo Red fragrance campaign featuring Formula 1 driver Lando Norris.
|
- Drive the Core and Expand for More
|
-
- Drove continued momentum in our Core business, up low-teens, along with our high-potential categories (Women's Apparel, Outerwear, and Handbags), which increased 20% to last year in constant currency and outpaced total Company growth.
|
-
- Product highlights this quarter included: our Holiday 2024 collections, an ode to the elegance of New York City's art deco-inspired glamour; our Double RL x Zefren-M capsule, the second collaboration in our groundbreaking Artist in Residence program, focused on empowering and celebrating artisans within the communities that have historically inspired our designs; and our annual Pink Pony collection, supporting Ralph Lauren's longstanding commitment to cancer care and research.h
|
-
- Increased average unit retail ("AUR") by 12% across our direct-to-consumer network in the third quarter, above expectations and on top of a 9% increase last year, reflecting our continued elevation and strong full-price selling trends, with lower-than-planned holiday promotions
|
- Win in Key Cities with Our Consumer Ecosystem
|
-
- By geography, revenues were led by low- to mid-teens growth in Europe and Asia, with China notably up more than 20%. North America accelerated to 7% growth driven by continued strength in our direct-to-consumer channels and a return to growth in our wholesale business.
|
-
- Continued to expand and scale our key city ecosystems with the opening of 34 new owned and partnered stores in the third quarter. Key store openings during the period included: Hong Kong Pacific Place, Beijing China World Mall, St. James Quarter in Edinburgh, and our Ralph Lauren Collection women's shop in Harrods London.
|
| 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. |
| Third Quarter Fiscal 2025 Income Statement Review |
| Net Revenue. In the third quarter of Fiscal 2025, revenue increased 11% to $2.1 billion on a reported basis and was also up 11% in constant currency. Foreign currency negatively impacted revenue growth by approximately 40 basis points in the third quarter. |
| Revenue performance for the Company's reportable segments in the third quarter compared to the prior year period was as follows: |
- North America Revenue. North America revenue in the third quarter increased 7% to $998 million. In retail, comparable store sales in North America increased 8%, with a 10% increase in brick-and-mortar stores and a 3% increase in digital commerce. North American wholesale revenue increasedby 6% to the prior year.
|
- Europe Revenue. Europe revenue in the third quarter increased 16% to $604 million on a reported basis and was also up 16% in constant currency. In retail, comparable store sales in Europe increased 17% with an 18% increase in brick-and-mortar stores and a 14% increase in digital commerce. Europe wholesale revenue increased 15% to the prior year on a reported basis and increased 14% in constant currency, supported by strong re-order trends and a previously- discussed timing shift of receipts from the second quarter.
|
- Asia Revenue. Asia revenue in the third quarter increased 14% to $507 million on a reported basis and 15% in constant currency. Comparable store sales in Asia increased 14%, with a 13% increase in our brick-and-mortar stores and a 29% increase in digital commerce.
|
| Gross Profit. Gross profit for the third quarter of Fiscal 2025 was $1.5 billion and gross margin was 68.4%. Adjusted gross margin was also 68.4%, 200 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, more than offsetting incremental pressure from freight and other product costs. |
| Operating Expenses. Operating expenses in the third quarter of Fiscal 2025 were $1.1 billion, up 11% from last year on a reported basis. On an adjusted basis, operating expenses were also $1.1 billion, up 10% from last year. Adjusted operating expense rate was 49.7%, compared to 50.0% in the prior year period. |
| Operating Income. Operating income for the third quarter of Fiscal 2025 was $390 million and operating margin was 18.2% on a reported basis. On an adjusted basis, the operating income was $402 million and the operating margin was 18.7%, 230 basis points above the prior year. Operating income for the Company's reportable segments in the third quarter compared to the prior year period was as follows: |
- North America Operating Income. North America's operating income in the third quarter was $264 million on both a reported and adjusted basis. Adjusted North America operating margin was 26.4%, up 460 basis points from last year.
|
- Europe Operating Income. Europe's operating income in the third quarter was $169 million on both a reported and adjusted basis. Adjusted Europe operating margin was 27.9%, up 420 basis points from last year. Foreign currency favorably impacted the adjusted operating margin rate by 70 basis points in the third quarter.
|
- Asia Operating Income. Asia's operating income in the third quarter was $136 million on both a reported and adjusted basis. Adjusted Asia's operating margin was 26.9%, up 270 basis points from last year. Foreign currency negatively impacted the adjusted operating margin rate by 50 basis points in the third quarter.
|
| Net Income and EPS. Net income in the third quarter of Fiscal 2025 was $297 million, or $4.66 per diluted share on a reported basis. On an adjusted basis, net income was $308 million, or $4.82 per diluted share. This compared to net income of $277 million, or $4.19 per diluted share on a reported basis, and net income of $275 million, or $4.17 per diluted share on an adjusted basis, for the third quarter of Fiscal 2024. |
| In the third quarter of Fiscal 2025, the Company had an effective tax rate of approximately 23% on a reported basis and 22% on an adjusted basis, in line with our outlook. This is compared to an effective tax rate of approximately 16% on a reported basis and 17% 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. |
| Balance Sheet and Cash Flow Review |
| The Company ended the third quarter of Fiscal 2025 with $2.1 billion in cash and short-term investments and $1.1 billion in total debt, compared to $1.9 billion and $1.1 billion, respectively, at the end of the third quarter of Fiscal 2024. Inventory at the end of the third quarter of Fiscal 2025 was $1.0 billion, down 5% compared to the prior year period. |
| The Company repurchased approximately $74 million of Class A Common Stock in the third quarter. |
| Full Year Fiscal 2025 and Fourth Quarter Outlook |
| The Company's outlook is based on its best assessment of the current geopolitical and macroeconomic environment, including inflationary pressures, tariffs and other consumer spending-related headwinds, global supply chain disruptions and foreign currency volatility, among other factors. The year Fiscal 2025 and fourth 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 6% to 7%. Based on current exchange rates, foreign currency is expected to negatively impact revenues by approximately 100 to 150 basis points in Fiscal 2025. |
| The Company now expects operating margin for Fiscal 2025 to expand approximately 120 to 160 basis points in constant currency, up slightly from its prior outlook, driven by gross margin expansion of approximately 130 to 170 basis points. Foreign currency is now expected to negatively impact both gross and operating margins by approximately 30 to 50 basis points. |
| For the fourth quarter, the Company expects constant currency revenues to grow in a range of approximately 6% to 7%. Foreign currency is expected to negatively impact revenue growth by approximately 300 basis points. |
| Operating margin for the fourth quarter is expected to expand approximately 120 to 140 basis points in constant currency, driven by approximately 80 to 120 basis points of gross margin expansion and modest operating expense leverage. Foreign currency is expected to negatively impact both gross and operating margins by approximately 60 to 80 basis points in the fourth quarter. |
| The Company's full-year Fiscal 2025 tax rate is still 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 fourth quarter tax rate is expected to be approximately 24% to 25%. |
| The Company now expects capital expenditures for Fiscal 2025 of approximately $200 million to $250 million. |
| For the full document click the link below: |
| Ralph Lauren Corporation |
| Stay ahead of the curve! Subscribe to InsidEntity for daily updates on all your favourite companies. |
