Executive Summary

Strong Q1 FY26 beat: revenue $1.72B (+14% reported, +11% cc) and adjusted EPS $3.77; margin expansion driven by AUR +14%, favorable mix, and lower cotton costs; global DTC comps +13% . Versus S&P Global consensus, revenue and EPS exceeded by ~$63M and ~$0.27, respectively (see Estimates Context) *.
Broad-based outperformance across regions: Asia +21% reported (+19% cc; China >+30%), Europe +16% reported (+10% cc), North America +8%; segment operating margins expanded across all regions to 20.7% NA, 26.4% Europe, 30.7% Asia .
Guidance raised: FY26 cc revenue growth lifted to low–mid single digits (from low single digits) and FY26 operating margin expansion to ~40–60 bps cc; Q2 cc revenue guide high-single digits with OM +120–160 bps cc; FY26 tax rate cut to 19–20% (from 20–22%) .
Watch points: tariff-related cost inflation and potential U.S. consumer price sensitivity in 2H; inventory up 18% YoY due to strategic tariff-related pull-forward but expected to moderate through the year .

What Went Well and What Went Wrong

What Went Well

Broad-based growth and elevation: DTC comps +13%, AUR +14% on strong full-price selling and lower promotions; adjusted gross margin up 160 bps cc to ~72.1% (72.3% reported) .
International strength: Asia +21% reported with China >+30%; Europe +16% reported; both regions delivered double-digit retail comps and strong wholesale momentum .
Margin execution and cost discipline: adjusted operating margin 17.0% (+270 bps YoY) with marketing stepped up to 7.5% of sales (vs 6.7% LY) while still leveraging SG&A .
Quote: “We delivered strong first quarter results across geographies, channels and consumer segments… encouraged by the broad-based strength in our brand” — CEO Patrice Louvet .

What Went Wrong

Tariff headwinds and 2H caution: management highlighted tariffs as the most meaningful gross margin headwind and remains cautious on back-half consumer elasticity in the U.S. .
Inventory build: inventories +18% YoY, partly from strategic U.S. core receipt pull-forward during tariff pause; ex-tariff actions, growth closer to sales; expected to normalize by year-end .
North America wholesale still cautious: revenue +2% with planned exits of 90–100 wholesale doors in FY26 (about half Hudson’s Bay), monitoring elasticity as fall pricing rolls through .

Financial Results

Headline metrics (sequential trend)

Metric	Q3 FY25	Q4 FY25	Q1 FY26
Revenue ($USD Millions)	$2,143.5	$1,697.3	$1,719.1
Diluted EPS (Adjusted)	$4.82	$2.27	$3.77
Gross Margin % (Reported)	68.4%	68.6%	72.3%
Operating Margin % (Adjusted)	18.7%	10.3%	17.0%

Q1 FY26 vs Prior Year (Q1 FY25)

Metric	Q1 FY25	Q1 FY26
Revenue ($USD Millions)	$1,512.2	$1,719.1
Diluted EPS (Adjusted)	$2.70	$3.77
Gross Margin % (Reported)	70.5%	72.3%
Operating Margin % (Adjusted)	14.3%	17.0%

Segment breakdown (Q1 FY26)

Segment	Revenue ($USD Millions)	Operating Income ($USD Millions)	Operating Margin %
North America	$656.2	$135.5	20.7%
Europe	$554.5	$146.2	26.4%
Asia	$474.0	$145.4	30.7%
Licensing/Other	$34.4	$30.6	N/A

Sales channel (Q1 FY26)

Channel	North America	Europe	Asia	Total
Retail ($USD Millions)	$461.0	$285.8	$454.4	$1,201.2
Wholesale ($USD Millions)	$195.2	$268.7	$19.6	$483.5
Licensing ($USD Millions)	—	—	—	$34.4

KPIs (Q1 FY26)

KPI	North America	Europe	Asia	Global
DTC Comparable Sales (cc)	+12%	+10%	+18%	+13%
DTC Digital (cc)	+19%	+11%	+35%	N/A
DTC Brick & Mortar (cc)	+10%	+10%	+16%	N/A
AUR Growth (DTC)	—	—	—	+14%
Marketing as % of Sales	—	—	—	7.5%
Store Openings (owned/partnered)	—	—	—	24

Balance sheet and cash returns: Cash & ST investments $2.3B; total debt $1.6B; repurchased ~$250M; dividends declared $0.9125/share in Q1 .

Non-GAAP adjustments: Q1 adjusted EPS excludes Next Gen Transformation, restructuring, cease-use rent; net income adjustments $15.4M; per-share adjustment $0.25 .

Guidance Changes

Metric	Period	Previous Guidance (May 22, 2025)	Current Guidance (Aug 7, 2025)	Change
Revenue Growth (cc)	FY26	Low-single digits	Low- to mid-single digits	Raised
Operating Margin (cc)	FY26	Modest expansion	~+40 to +60 bps	Raised
Gross Margin (cc)	FY26	~Flat	Slightly up (CFO)	Raised
FX impact on Revenue	FY26	Minimal	+150 to +200 bps benefit	Improved
FX impact on Margins	FY26	Minimal	+10 bps gross, +40 bps operating	Improved
Tax Rate	FY26	20%–22%	~19%–20%	Lowered
Capex	FY26	~4%–5% of revenue	~4%–5% of revenue	Maintained
Revenue Growth (cc)	Q2 FY26	N/A	High-single digits	New
Operating Margin (cc)	Q2 FY26	N/A	+120 to +160 bps	New
FX benefit on Revenue	Q2 FY26	N/A	+100 to +150 bps	New
Tax Rate	Q2 FY26	N/A	~15%–17%	New

Rationale: raise driven by Q1 overdelivery and continued momentum, partly offset by tariff caution in 2H .

Earnings Call Themes & Trends

Topic	Q3 FY25 (Dec-24)	Q4 FY25 (Mar-25)	Q1 FY26 (Jun-25)	Trend
AI/Technology	Marketing tech and digital enhancements noted in strategy	Continued digital investments, groundwork for future growth	Expanding AI predictive buying beyond pilots; DC automation in Europe; Investor Day to detail next chapter	Improving
Supply chain	Stable with strong replenishment and reorders	Diversified supply chain as enabler; FX minimal	DC automation; toolkit to mitigate tariffs via sourcing, pricing, promo pullback	Improving with tariff risk
Tariffs/Macro	Return to growth; cautious macro flagged	FY26 prelim guide cautious on tariffs	Tariffs biggest GM headwind; 2H U.S. price sensitivity risk	Cautious
Product performance	Core +low-teens; high-potential categories +20%	Core +LDD; high-potential +mid-teens	Core mid-teens; high-potential >+20% cc; AUR +14%	Improving
Regional trends	Europe/Asia lead; NA accelerates	Europe +12%, Asia +9%, NA +6%	Asia +21% (China >+30%); Europe +16%; NA +8%	Improving
Pricing/AUR	AUR +12% with lower promos	AUR HSD FY; GM beat LT targets	AUR +14%; targeted fall pricing; focus on “more-for-more” value	Improving
Digital & DTC	DTC momentum; digital growth	DTC growth; elevation	DTC comps +13%; “Total Digital Ecosystem” mid-teens growth	Improving

Also relevant: post-quarter press release introduced “Ask Ralph” AI stylist on Azure OpenAI, supporting conversational commerce and personalization .

Management Commentary

Brand momentum and diversification: “We are encouraged by our strong start… with first quarter results that exceeded our expectations across the top and bottom line… diversified drivers of growth” — CEO Patrice Louvet .
Elevation and DTC strength: “Adjusted gross margin expanded… AUR increased 14%… strong full price selling and lower discounting” — CFO Justin Picicci .
2H caution on tariffs and elasticity: “First half is strong, second half a bit lower due to… tariffs… biggest headwind is the tariffs… watching consumer price sensitivity” — CFO .
China and handbags momentum: “China grew more than 30%… we’re in early innings in handbags… Polo Play launch seeing very strong initial response” — CEO .

Q&A Highlights

Durability of drivers and 2H view: Management emphasized durable growth drivers (brand desirability, core + high-potential categories, key city ecosystems) but remains cautious on 2H due to tariff-related consumer sensitivity .
Gross margin trajectory: FY26 GM now guided slightly up YoY despite tariffs; first half strong, second half pressured; tailwinds include AUR growth, promo pullback, favorable mix, lower cotton costs .
Europe outlook: Broad-based strength across key markets and channels continues into Q2; expect deceleration in 2H due to wholesale timing shifts and lapping Red Sea-related shifts .
Inventory strategy: +18% YoY inventory partly reflects strategic U.S. core receipt pull-forward during tariff pause; ex-tariff actions, growth aligns with sales; moderation expected through FY26 .
SG&A leverage: Q1 SG&A leverage achieved despite higher marketing (7.5% of sales); company can flex opex in tougher macros while continuing key city, digital, and NG transformation investments .

Estimates Context

Consensus vs actuals (S&P Global):

Metric	Q3 FY25 Estimate	Q3 FY25 Actual	Surprise	Q4 FY25 Estimate	Q4 FY25 Actual	Surprise	Q1 FY26 Estimate	Q1 FY26 Actual	Surprise
Revenue ($USD)	$2,013,752,640*	$2,143,500,000	+$129,747,360*	$1,648,246,850*	$1,697,300,000	+$49,053,150*	$1,656,417,260*	$1,719,100,000	+$62,682,740*
Primary EPS ($)	$4.5256*	$4.82	+$0.2944*	$2.0399*	$2.27	+$0.2301*	$3.4976*	$3.77	+$0.2724*

Values retrieved from S&P Global.*

Implications: Street likely lifts FY26 EPS and revenue models given beats, margin raise, and FX tailwind, but may temper 2H assumptions for U.S. elasticity and tariffs .

Key Takeaways for Investors

Quality of sales trends remain robust: AUR +14%, DTC comps +13%, and 180 bps higher gross margin reflect successful elevation and lower promos — supports multiple resilience even as tariffs loom .
International-driven mix shift is accretive: Asia and Europe growth and higher profitability (26–31% segment OM) help offset U.S. tariff pressures .
Guidance reset upward with clear guardrails: FY26 cc revenue and OM expansion raised; FX now a material tailwind; watch 2H elasticity and North America wholesale door rationalization .
Inventory strategy appears prudent: tariff-driven core pull-forward should unwind as the year progresses; monitor working capital normalization and cash conversion .
Near-term trading setup: Q2 high-single-digit cc growth and OM expansion +120–160 bps provide potential positive catalysts; tariff headlines and U.S. consumer response are key risks to sentiment .
Medium-term thesis: multi-year elevation, key city ecosystem buildout, AI/automation capabilities (predictive buying, DC automation, and new “Ask Ralph” conversational AI) underpin continued margin and ROIC improvement .

Additional Notes

Capital return: ~$250M buybacks in Q1; dividend declared at $0.9125/share .
Balance sheet: Cash & ST investments $2.3B; total debt $1.6B; net cash & ST investments $639.8M .
Non-GAAP: Q1 adjustments include Next Gen Transformation, restructuring, cease-use rent; adjusted operating margin 17.0% vs 14.3% LY .

Appendix: Selected Disclosures and Brand Activations

Shanghai fashion presentation, Douyin live shopping, Wimbledon sponsorship, and new store openings (Vancouver, Marbella, Korea) supported brand heat and growth in China and Europe .
Post-quarter: Ralph Lauren launched “Ask Ralph,” a conversational AI shopping experience with Microsoft Azure OpenAI, enhancing digital engagement and personalization .

RALPH LAUREN CORP (RL)·Q1 2026 Earnings Summary