• Revenue Growth: 11% increase in total company third quarter revenue.
• Retail Comps: 12% growth in total company retail comps.
• Adjusted Gross Margin: Expanded by 190 basis points to 68.3%.
• AUR (Average Unit Retail): Increased 12% in the third quarter.
• Adjusted Operating Margin: Expanded by 230 basis points to 18.7%.
• Free Cash Flow: Approximately $980 million year-to-date.
• Returns to Shareholders: $500 million year-to-date.
• North America Revenue Growth: 7% increase in third quarter revenue.
• Europe Revenue Growth: 16% increase in third quarter revenue.
• Asia Revenue Growth: 15% increase in third quarter revenue.
• China Sales Growth: More than 20% increase year-over-year.
• Net Inventory: Decreased 5% year-over-year.
• Store Openings: 34 new own and partner stores, largely in Asia.
• Fiscal '25 Revenue Outlook: Expected to increase 6% to 7% on a constant currency basis.
• Fiscal '25 Operating Margin Outlook: Expected to expand 120 to 160 basis points.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ralph Lauren Corp (NYSE:RL) reported double-digit revenue growth, exceeding expectations across all geographies.
• The company achieved strong performance in both retail and wholesale channels, with retail comps increasing by 12%.
• Ralph Lauren Corp (NYSE:RL) added a record 1.9 million new consumers to its direct-to-consumer businesses, driven by younger, higher-value cohorts.
• The company successfully reduced its global discount rate by more than 500 basis points, enhancing profitability.
• Ralph Lauren Corp (NYSE:RL) continues to expand its store footprint, with plans to open around 85 new stores, focusing on key cities globally.

Negative Points

• Foreign currency fluctuations negatively impacted revenue growth by approximately 100 to 150 basis points.
• The company faces ongoing geopolitical and macroeconomic challenges, including inflationary pressures and supply chain disruptions.
• Despite strong performance, the North American wholesale market remains volatile and challenging.
• Ralph Lauren Corp (NYSE:RL) is still in the early stages of its next-generation transformation project, with significant costs expected over the next few years.
• The company continues to prune its wholesale distribution, planning to exit 60 departmental store doors this fiscal year.

Q & A Highlights

Q: What are the biggest drivers of Ralph Lauren's outperformance this holiday season, and how much is attributed to near-term versus sustainable factors? Also, what's driving growth in women's and handbags? A: Patrice Louvet, President and CEO, explained that the outperformance is due to the cumulative effect of their multi-lever strategy, which includes brand strength, a broad lifestyle portfolio, and the key city ecosystem model. The growth in women's apparel and handbags is driven by a strong foundational core, enhanced marketing, and improved distribution. These are seen as durable drivers with significant runway for future growth.

Q: With North America returning to growth, how should we think about its trajectory moving forward? A: Justin Picicci, CFO, noted that Ralph Lauren has made deliberate choices to elevate the brand and distribution in North America, leading to improved results. The company has seen six consecutive quarters of solid comp growth in DTC and a return to growth in wholesale. While not providing specific guidance, they believe they have established a solid foundation for sustainable revenue growth and margin expansion.

Q: What foundational investments are driving double-digit growth in Europe and China, and what is the market share opportunity abroad? A: Patrice Louvet highlighted investments in marketing and store openings as key drivers. The company plans to continue expanding its footprint in key cities globally. The market is highly fragmented, providing significant market share opportunities, especially in women's apparel and handbags.

Q: How is Ralph Lauren balancing reinvestment in the business with margin expansion? A: Justin Picicci stated that the company balances reinvestment in long-term growth with delivering near-term operating margin commitments. They have increased marketing spend, which has shown clear returns, and continue to focus on high-quality revenue growth.

Q: What changes have been observed in brick-and-mortar performance, and what is the impact of AI on the business? A: Justin Picicci noted strong performance in both full-price and outlet stores, driven by positive traffic trends and increased basket size. Patrice Louvet added that AI is being leveraged for creativity and productivity, including search and navigation on websites, contact center engagement, and predictive buying and allocation tools.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.