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RL

RALPH LAUREN CORP (RL)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 delivered a broad-based beat: revenue $2.01B (+17% reported, +14% CC) and adjusted diluted EPS $3.79, both above consensus; gross margin expanded to 68.0% on strong full-price sell-through and lower cotton costs .
  • Management raised FY2026 guidance: CC revenue growth to 5–7% (from low–mid single digits) and operating margin expansion to 60–80 bps (from 40–60 bps); North America now expected “slightly up” for the year, Asia raised, Europe maintained high end of mid-single digits .
  • Q2 comps +13% with double-digit growth across regions; AUR +12% continued the multi‑year elevation strategy; cash & ST investments $1.6B, total debt $1.2B after retiring $400M notes .
  • Near-term watch items: reciprocal tariffs and planned timing shifts expected to drive Q4 gross margin down YoY; Q3 guided to mid-single-digit CC revenue growth and 60–80 bps OM expansion .
  • Stock reaction catalysts: outsized beats on top/bottom line; raised outlook; commentary on durable AUR/pricing power and China strength (>30% growth), tempered by tariff headwinds and off-price reductions in Q4 .

What Went Well and What Went Wrong

  • What Went Well
    • Double-digit growth across all regions; Q2 revenue $2.01B with adjusted operating margin up to 14.1% on AUR gains and expense leverage .
    • Brand and product elevation driving AUR +12% and global DTC comps +13%; strong full-price demand with reduced discounting .
    • China strength: sales up >30% YoY, continued new customer recruitment and digital momentum (Douyin) .
    • Management quote: “Top-line performance exceeded our expectations, reaching our highest Q2 revenues since we began our elevation journey” — CFO .
  • What Went Wrong
    • Tariff headwinds expected to ramp in Q3 and be most pronounced in Q4, with notable YoY gross margin decline in Q4 due to reciprocal tariffs and timing shifts .
    • North America wholesale to face 2–3pt pressure in Q4 from strategic off-price reductions; ongoing exit of 90–100 doors (≈ half Hudson’s Bay) .
    • Elevated macro uncertainty and elasticity risk as pricing actions take hold; management remains cautious on U.S. consumer into back half .

Financial Results

MetricQ4 2025Q1 2026Q2 2026
Revenue ($USD Billions)$1.697 $1.719 $2.011
Diluted EPS (Reported) ($)$2.03 $3.52 $3.32
Diluted EPS (Adjusted) ($)$2.27 $3.77 $3.79
Gross Margin (%)68.6% 72.3% 68.0%
Operating Margin (Adjusted, %)10.3% 17.0% 14.1%

Segment revenues ($USD Millions):

SegmentQ4 2025Q1 2026Q2 2026
North America Revenue$705 $656 $832
Europe Revenue$526 $555 $688
Asia Revenue$432 $474 $446

KPIs and mix:

KPIQ4 2025Q1 2026Q2 2026
Global Retail Comps (%)+13% +13% +13%
AUR Growth (%)High single digits +14% +12%
Marketing as % of Sales8.7% prior-year ref; Q1 7.5% 7.5% 7.8%
Cash & Short-term Investments ($B)$2.083 $2.277 (Q1 end) $1.646
Total Debt ($B)$1.143 (FY end) $1.637 (Q1 end) $1.238
Share Repurchases FYTD ($MM)$425 FY25 $250 Q1 $313 FYTD; $63 in Q2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth (CC)FY 2026Low–mid single digits 5–7% Raised
Operating Margin Expansion (CC)FY 202640–60 bps 60–80 bps Raised
Gross Margin (CC)FY 2026Slightly up vs LY (was “~flat” prelim) +10–30 bps Raised
North America RevenueFY 2026Low single-digit decline Slightly up Raised
Asia RevenueFY 2026High single digits High single to low double digits (2H & FY) Raised
Europe RevenueFY 2026High end of mid-single digits High end of mid-single digits (unchanged) Maintained
Q3 Revenue (CC)Q3 2026—Mid-single digits New
Q3 Operating Margin (CC)Q3 2026—+60–80 bps New
Tax RateQ3 / FY 2026Q2 guide: Q2 15–17%; FY 19–20% Q3 21–23%; FY 19–21% Updated
Marketing % of SalesFY 2026~7.3% ~7.5% Raised
CapexFY 20264–5% of revenue 4–5% of revenue Maintained
Dividend per ShareQuarterly$0.9125 declared (run-rate) $0.9125 declared in Q2 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025, Q1 2026)Current Period (Q2 2026)Trend
AI/Technology initiativesPredictive buying pilot expansion; supply chain automation; strong digital comps Launch of “Ask Ralph” AI stylist with Microsoft; encouraging engagement Building; scaling consumer-facing AI
Supply chain & sourcingDiversified sourcing; automation; inventory pull-forward due to tariff pause Country-of-origin shifts, mitigation plans; tariff headwinds ramp in Q3/Q4 Mitigation underway; near-term pressure
Tariffs/MacroPrelim FY26 guide cautious; gross margin slightly up vs LY despite tariffs Reciprocal tariffs + timing shifts to hit Q4 GM; cautious U.S. consumer elasticity Headwinds peaking in Q4
Product performanceCore and high-potential categories (women’s, outerwear, handbags) up double digits Continued acceleration in women’s and handbags; seasonal capsules strong Durable elevation, breadth
Regional trendsEurope leading; Asia high-teens, China >30% Q1; NA up high single digits All regions double-digit; China >30% again; NA wholesale stable but exiting doors Broad-based strength; strategic pruning in NA
Wholesale disciplineStable-to-up normalized trajectory; exit 90–100 doors Off-price reductions in Q4 (2–3 pts); door exits ongoing Elevation over volume
Hospitality/Brand ecosystemKey city expansion; new stores and concepts Announced Polo Bar London opening (2028), 38 new stores in Q2 Ecosystem scaling

Management Commentary

  • CEO: “We are off to a strong start… second quarter performance outpacing our expectations across the top and bottom line… broad-based momentum of our iconic brand” .
  • CFO: “Adjusted operating margin expanded 210 bps to 13.5%… AUR increased 12% supported by strong full-price selling, reduced discounting, modest pricing, and favorable mix” .
  • CEO on China: “Performance… is driven by idiosyncratic elements from the Ralph Lauren mix… guidance low double digits over the three-year period… strong momentum” .
  • CFO on tariffs/Q4 cadence: “We still expect a notable year-over-year gross margin decline in Q4 due to… reciprocal tariffs and timing shifts… our smallest revenue quarter” .
  • Technology: “Ask Ralph builds on our history of innovating the consumer shopping experience… customer engagement encouraging” .

Q&A Highlights

  • Consumer health and awareness: Management sees resilient core consumer; broader awareness opportunities, especially in China; continued brand-building activations to drive engagement .
  • Pricing/AUR vs units: Targeted pricing layered in for fall; leaning more into AUR vs units near-term to navigate cost inflation, with unit growth in elevated categories/markets (China, women’s, handbags) .
  • NA value-oriented consumer: Flexibility in price architecture without compromising brand guardrails; focus on compelling value proposition and precise segmentation .
  • Wholesale trajectory: Stable-to-up normalized algorithm over time; Q4 off-price reduction to impact by 2–3 pts; continued elevation and pruning of lower-tier distribution .
  • Outlet vs full-price and supply chain: Consistent performance across channels; consolidating outlet presence; diversified sourcing and regionally scaled capabilities to mitigate costs .

Estimates Context

  • Actual vs S&P Global consensus (EPS/Revenue/EBITDA) shows consistent beats:
    • Q2 2026: EPS $3.79 vs $3.45; Revenue $2.011B vs $1.888B; EBITDA ~$340M vs $314M.
    • Q1 2026: EPS $3.77 vs $3.50; Revenue $1.719B vs $1.656B; EBITDA ~$335M vs $328M.
    • Q4 2025: EPS $2.27 vs $2.04; Revenue $1.697B vs $1.648B; EBITDA ~$205M vs $218M (slight miss on EBITDA).
      Values retrieved from S&P Global.*
MetricQ4 2025Q1 2026Q2 2026
EPS (Actual vs Consensus)$2.27 vs $2.04$3.77 vs $3.50$3.79 vs $3.45
Revenue ($B, Actual vs Consensus)$1.697 vs $1.648$1.719 vs $1.656$2.011 vs $1.889
EBITDA ($MM, Actual vs Consensus)$205 vs $218$335 vs $328$340 vs $314
# EPS Estimates161616
# Revenue Estimates151515

Key Takeaways for Investors

  • Elevation strategy remains the primary driver: sustained AUR growth (+12% in Q2) and reduced discounting underpins margins and high-quality revenue; expect AUR to stay high single digits in 2H .
  • Guidance raise signals confidence despite tariffs: FY26 CC revenue +5–7% and OM +60–80 bps; North America now slightly up; Asia raised; monitor Q4 margin dip from tariffs/timing .
  • China momentum is durable and idiosyncratic: >30% growth again; strong digital/social commerce execution (Douyin); long runway with relatively small share .
  • Wholesale discipline continues: off-price reductions and door exits constrain near-term NA wholesale growth but support brand elevation and mix quality .
  • Capital allocation and balance sheet: $1.6B cash/ST investments, $1.2B debt; retired $400M notes; $313M repurchases FYTD; quarterly dividend ~$0.9125 supports shareholder returns .
  • Near-term trading setup: strong beat and raised outlook vs tariff caution—expect volatility around Q4 margin narrative; Q3 should show mid-single-digit CC growth and OM expansion .
  • Medium-term thesis: multi-engine growth across regions and categories (women’s/handbags/outerwear), expanding key city ecosystems, and scaling consumer-facing AI (Ask Ralph) enhances conversion and LTV .

Cross-references and notes

  • Q2 press release and 8-K detail all quarterly figures and non-GAAP reconciliations .
  • Q1 and Q4 press releases support prior-quarter trend comparisons .
  • Earnings call commentary and Q&A provide color on pricing, tariffs, wholesale strategy, and regional dynamics .