Executive Summary

Delivered a high-quality holiday quarter: revenue up 11% to $2.14B, adjusted EPS $4.82 (+16% YoY), and adjusted operating margin up 230 bps to 18.7%, with broad-based strength across DTC and wholesale and outperformance in all regions .
Management characterized results as “above expectations” and raised FY25 outlook: constant-currency revenue growth to 6–7% (from 3–4%), and operating margin expansion to +120–160 bps (from +110–130 bps), though FX headwinds increased; FY25 capex cut to $200–$250M (from $250–$300M) .
Key drivers: +12% AUR on lower promotions (>500 bps discount reduction), strong full-price sell-through, and improving North America wholesale; Europe and Asia grew mid-teens with China up >20% .
Balance sheet robust (cash + ST investments $2.14B vs. total debt ~~$1.14B), inventory down 5% YoY; YTD CFO $1.11B supports returns to shareholders (~~$500M YTD) and strategic investments .

What Went Well and What Went Wrong

What Went Well
- Broad-based top- and bottom-line beat with double-digit comps and margin expansion; adjusted operating margin reached 18.7% (+230 bps YoY) on strong AUR and lower promotions .
- Europe and Asia led growth (Europe +16% to $604M; Asia +14% to $507M), with China up >20%; NA accelerated to +7% and wholesale returned to growth (+6%) .
- Pricing power and brand elevation: +12% AUR, with global discount rate reduced by >500 bps; management cited durability of AUR drivers and full-price selling .
- Quote: “Third quarter results…exceeded our expectations in every geography across the top and bottom line.” — Patrice Louvet .
What Went Wrong
- FX headwinds increased: FY25 revenue headwind now -100 to -150 bps (prior -40 to -60 bps); FY25 gross/operating margin headwind now -30 to -50 bps (prior -20 bps) .
- Higher freight to mitigate East Coast port disruptions pressured gross margin; net impact offset by mix and AUR, but logistics risk persists .
- Macro/tariff overhang and promotional environment remain watch items; management expects minimal annual impact from newly announced U.S. tariffs but continues to monitor .

Financial Results

Metric	Q3 FY2024	Q1 FY2025	Q2 FY2025	Q3 FY2025
Revenue ($USD Billions)	$1.93	$1.51	$1.73	$2.14
Diluted EPS (Reported) ($)	$4.19	$2.61	$2.31	$4.66
Diluted EPS (Adjusted) ($)	$4.17	$2.70	$2.54	$4.82
Gross Margin (%)	66.5%	70.5%	67.0%	68.4%
Operating Margin (Reported, %)	16.4%	13.8%	10.4%	18.2%
Operating Margin (Adjusted, %)	16.4%	14.3%	11.4%	18.7%
Consensus Revenue	Unavailable*	Unavailable*	Unavailable*	Unavailable*
Consensus EPS	Unavailable*	Unavailable*	Unavailable*	Unavailable*

*S&P Global consensus data unavailable at time of retrieval (API limit). Values intended to be sourced from S&P Global.

Segment performance (Q3 FY2025 vs. Q3 FY2024):

Segment	Revenue Q3 FY2024 ($M)	Revenue Q3 FY2025 ($M)	YoY % (as reported)	Adj Operating Margin Q3 FY2025 (%)
North America	933.3	997.7	6.9%	26.4%
Europe	521.5	604.4	15.9%	27.9%
Asia	446.4	506.7	13.5%	26.9%
Other	32.8	34.7	5.9%	86.8%

Key KPIs and comps

KPI trend

KPI	Q1 FY2025	Q2 FY2025	Q3 FY2025
AUR Growth (DTC)	+6%	+10%	+12%
Global DTC Comparable Sales (cc)	+5%	+10%	+12%

Q3 FY2025 comps (constant currency)

Region	Brick & Mortar	Digital	Total
North America	+10%	+3%	+8%
Europe	+18%	+14%	+17%
Asia	+13%	+29%	+14%
Global DTC	—	—	+12%

Balance sheet and cash flow highlights (Q3 FY2025)

Cash + ST investments: $2.14B; Total debt ~$1.14B; Inventory $1.00B (-5% YoY) .
Nine-month CFO: $1.113B; share repurchases ~$74M in Q3 and ~$500M YTD returns to shareholders .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth (cc)	FY2025	+3% to +4%	+6% to +7%	Raised
Operating Margin Expansion (cc)	FY2025	+110 to +130 bps	+120 to +160 bps	Raised
Gross Margin Expansion (cc)	FY2025	+80 to +120 bps	+130 to +170 bps	Raised
FX Impact on Revenue	FY2025	-40 to -60 bps	-100 to -150 bps	More Negative
FX Impact on Margins	FY2025	~-20 bps	-30 to -50 bps	More Negative
Tax Rate	FY2025	22%–23%	22%–23%	Maintained
CapEx	FY2025	$250–$300M	$200–$250M	Lowered
Revenue Growth (cc)	Q4 FY2025	—	+6% to +7%	New
FX Impact on Revenue	Q4 FY2025	—	~-300 bps	New
Operating Margin Expansion (cc)	Q4 FY2025	—	+120 to +140 bps	New
Gross Margin Expansion (cc)	Q4 FY2025	—	+80 to +120 bps	New
FX Impact on Margins	Q4 FY2025	—	-60 to -80 bps	New

Q3 FY2025 actual vs. prior guidance:

Revenue growth (cc): guided +3% to +4% vs. actual +11% — beat.
Operating margin expansion (cc): guided +100 to +140 bps vs. actual +230 bps (to 18.7% adj) — beat.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2, Q1)	Current Period (Q3)	Trend
Marketing intensity/ROI	Continued step-up; marketing timing drove higher OpEx rate; maintaining ~7% of sales framework	Marketing 7.1% of sales; ROI strong; “7% is not a ceiling” (will invest with ROI discipline)	Increasing, ROI-backed
AUR and promotions	AUR +6% (Q1), +10% (Q2); elevation and mix drove GM	AUR +12%; global discount rate -500+ bps; durable AUR levers	Strengthening
Supply chain/logistics	Monitored Red Sea/global disruptions; balanced inventories	Higher freight to mitigate East Coast port disruptions; agile supply chain cited	Managed with cost
AI/technology	Investing in digital capabilities (implicitly referenced)	GenAI for search/contact center/creative; predictive buying & allocation; next-gen ERP	Expanding use cases
Wholesale (NA)	Q1 planned declines; Q2 modest decline but improving	Return to growth (+6%); pruning 60 lower-tier doors; alignment of sell-in/out	Stabilizing/Improving
Regional trends	Q1: EU +6%, Asia +4% (cc +9%), NA -4%; Q2: EU +7%, Asia +9%, NA +3%	EU +16%, Asia +14% (China >20%), NA +7%	Accelerating
Tariffs/macro	Macro headwinds cited in outlook	Newly announced U.S. tariffs seen as minimal annual impact	Watch, manageable
Next Gen Transformation (ERP)	Project referenced in adjustments	Staged implementations likely starting FY27; cost update next quarter	Planning stage

Management Commentary

“Third quarter results…exceeded our expectations in every geography across the top and bottom line.” — Patrice Louvet .
“AUR increased 12%… we reduced our global discount rate by more than 500 basis points.” — Justin Picicci .
“Our China market grew more than 20% to last year… North America wholesale revenues increased 6%… above our expectations.” — Management remarks .
“With regards to the recently announced U.S. tariffs… we currently anticipate a minimal annual impact.” — Justin Picicci .
“AI is a big opportunity… leveraging generative AI for search and consumer navigation… predictive buying… allocation tools.” — Patrice Louvet .

Q&A Highlights

Drivers of outperformance are durable: brand strength via “rolling thunder” marketing, breadth of lifestyle portfolio (women’s/handbags/outerwear up ~20%), and key-city ecosystem; inventory agility noted (top line +11% vs inventory -5%) .
North America trajectory: DTC has delivered six consecutive quarters of solid comp growth; wholesale returned to growth faster than expected; pruning ~60 department store doors continues .
Margins/promotions: Discount pullback across regions/channels has “runway” as full-price acquisition improves; AUR drivers include mix and reduced promotions .
Marketing spend: ~7% is not a ceiling; will increase with ROI justification .
Transformation and tech: Next-gen ERP staged from FY27; predictive buying and allocation already improving inventory efficiency .

Estimates Context

Street consensus (S&P Global) for Q3 FY2025 EPS and revenue was unavailable at time of retrieval due to API limits; management characterized results as above expectations and raised FY25 outlook accordingly .
Implications for sell-side models: need to reflect raised FY25 cc revenue growth (6–7%), higher FY25 gross/operating margin expansion, lower FY25 capex, and Q4 cc growth of 6–7% with FX headwinds .
Note: S&P Global consensus data unavailable at time of retrieval; values intended to be sourced from S&P Global.

Key Takeaways for Investors

Broad-based beat with powerful holiday execution: double-digit comps, +12% AUR, and 230 bps adj operating margin expansion; strength across Europe/Asia, and NA wholesale inflecting positive — a multi-year narrative shift .
Guidance raised meaningfully on both revenue and margins; however, FX headwinds intensified — monitor USD trends into Q4 and FY26 .
Structural levers (brand elevation, mix, reduced promotions) appear durable; management confident in continued AUR and margin runway .
Wholesale stabilization in North America (with continued door pruning) supports multi-channel growth while preserving brand elevation .
Tech enablement (AI, predictive buying/allocation) should enhance inventory turns and full-price sell-through; ERP implementation staged from FY27 offers medium-term productivity upside .
Near-term trading: Q4 set up for +6–7% cc revenue growth and +120–140 bps OM expansion (cc), offset by FX (-300 bps on revenue); watch Easter timing headwind (~1 pt) and freight/logistics costs .
Capital deployment remains supportive (robust CFO, buybacks, dividend), with FY25 capex lowered to $200–$250M providing flexibility .

Appendix: Additional Detail and Data Sources

Press release (Q3 FY2025): results, comps, margins, guidance .
Form 8-K (Item 2.02) with exhibit and detailed financials .
Earnings call transcript: strategy, drivers, promotions, AI/tech, wholesale pruning, tariffs, FY27 ERP timeline .
Prior quarters’ press releases for trend/guidance baseline and .

RALPH LAUREN CORP (RL)·Q3 2025 Earnings Summary