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RL

RALPH LAUREN CORP (RL)·Q4 2025 Earnings Summary

Executive Summary

  • RL delivered a broad-based beat in Q4 FY2025: revenue rose 8% YoY to $1.70B and adjusted EPS was $2.27, with adjusted gross margin expanding 200 bps to 68.6% and adjusted operating margin up 160 bps to 10.3% . Versus S&P Global consensus, revenue modestly beat (~$1.70B vs ~$1.65B*) and adjusted EPS materially beat ($2.27 vs ~$2.04*) as pricing power and mix drove margins (see Estimates Context).
  • Europe (+12% reported, +16% cc) and Asia (+9% reported, +13% cc) led, with China up >20%; North America grew 6%. Global DTC comps rose 13%, and AUR increased 9% in Q4, underscoring brand elevation .
  • FY2026 initial outlook is cautious: constant-currency revenue growth low-single digits, operating margin to expand modestly, and gross margin roughly flat as AUR/mix offsets tariff and non-cotton cost headwinds; Q1 FY26 revenue guided to high-single digits cc, with 150–200 bps OM expansion cc .
  • Capital return accelerated: quarterly dividend raised 10% to $0.9125 (from $0.825) and a new $1.5B buyback authorization added; combined with strong cash and short-term investments of ~$2.1B, this supports shareholder returns while funding selective investments (e.g., Soho flagship real estate acquisition) .

What Went Well and What Went Wrong

  • What Went Well

    • Pricing power and mix: AUR up 9% in Q4 and discount pullbacks drove 200 bps YoY adjusted gross margin expansion to 68.6% . “We remain on offense — with a focus on driving our multiple engines of growth…” .
    • International strength and DTC momentum: Europe +12% reported (+16% cc), Asia +9% reported (+13% cc); global DTC comps +13% with double-digit brick-and-mortar and digital growth . “China… grew more than 20%” in Q4; double-digit growth expected to continue in FY26 .
    • Capital allocation and balance sheet: Dividend up 10% to $0.9125, new $1.5B buyback; cash & ST investments ~$2.1B vs total debt ~$1.1B; Q4 adj. operating margin expanded to 10.3% .

  • What Went Wrong

    • Tariff and cost headwinds ahead: FY2026 gross margin guided roughly flat cc as tariffs and non-cotton costs offset AUR and mix; mgmt flagged greater second-half pressure .
    • North America wholesale still being pruned: exits of ~90 doors planned in FY26 (about half Hudson’s Bay) as distribution is refined, reflecting lingering channel pressure despite stabilization .
    • Op-ex rate uptick YoY in Q4: adjusted opex rate was 58.4% vs 57.8% prior year, reflecting compensation/variable expenses, though full year margins expanded and Q4 OM still rose .

Financial Results

MetricQ4 FY2024Q3 FY2025Q4 FY2025Q4 FY2025 Consensus
Net Revenue ($B)$1.568 $2.144 $1.697 ~$1.648*
Adjusted Diluted EPS ($)$1.71 $4.82 $2.27 ~$2.04*
GAAP Diluted EPS ($)$1.38 $4.66 $2.03 n/a
Adjusted Gross Margin (%)66.6% 68.4% 68.6% n/a
Adjusted Operating Margin (%)8.7% 18.7% 10.3% n/a

  • Revenue by Region (Q4) | Region | Q4 FY2024 ($MM) | Q4 FY2025 ($MM) | |---|---:|---:| | North America | 667.7 | 704.7 | | Europe | 469.2 | 525.5 | | Asia | 394.3 | 431.6 | | Other/ Licensing | 36.7 | 35.5 |

  • Operating Income by Region (Q4) | Region | Q4 FY2024 ($MM) | Q4 FY2025 ($MM) | Q4 FY2025 OM (%) | |---|---:|---:|---:| | North America | 113.5 | 134.7 | 19.1% | | Europe | 111.8 | 130.9 | 24.9% | | Asia | 66.0 | 83.5 | 19.4% |

  • KPIs | KPI (Q4, cc unless noted) | Q4 FY2024 | Q4 FY2025 | |---|---|---| | Global DTC Comps | 10% | 13% | | North America Comps | 6% | 9% | | Europe Comps | 15% | 18% | | Asia Comps | 12% | 15% | | AUR (Company, reported) | n/a | +9% | | Digital Commerce Comps NA/ EU/ Asia | 8% / 25% / 27% | 8% / 25% / 27% |

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue (cc)FY2026—Low-single digits YoY Initial
Operating Margin (cc)FY2026—Modest expansion Initial
Gross Margin (cc)FY2026—~Flat (AUR/mix offsets tariffs/non-cotton costs) Initial
Tax RateFY2026—~20–22% Initial
CapExFY2026—~4–5% of revenue Initial
Net Revenue (cc)Q1 FY2026—High-single digits YoY Initial
Operating Margin (cc)Q1 FY2026—+150–200 bps Initial
Dividend (per quarter)Starting Jul 2025$0.825 (declared Mar 14, 2025) $0.9125 (10% increase) Raised
Share Repurchase AuthorizationN/A$352MM remaining (at FY25 YE) New $1.5B authorization Increased capacity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY2025)Previous Mentions (Q3 FY2025)Current Period (Q4 FY2025)Trend
AI/TechnologyBuilding digital, ERP, predictive buying roadmap Predictive buying across 25% int’l DTC; planning Next-Gen Transformation Investing in technology, data, AI & analytics; predictive buying scaling Increasing adoption
Supply Chain & TariffsDiversified sourcing; China exposure high single-digit of units Managed Red Sea/ports; minimal annual tariff impact at the time Expect tariffs to pressure 2H FY26; toolkit includes sourcing shifts, efficiencies, pricing Rising risk managed with levers
Pricing/AURAUR +10% (Q2) on lower promos and mix AUR +12% (Q3); 500 bps promo reduction AUR +9% (Q4); plan HSD in Q1 FY26; selective pricing under review Durable, moderating slightly
Product & CategoriesCore +LDD; women/outerwear/handbags +mid-teens Women/outerwear/handbags +20% High-teens in Q4; Polo Play handbag launch Sustained outperformance
Regional TrendsEurope +6%, Asia +10%, NA +3% (Q2) Europe +16%, Asia +15%, NA +7% (Q3) Europe +12%, Asia +9% (China >20%), NA +6% (Q4) Broad-based, led by EU/Asia
North America WholesalePlanned door pruning continued Return to growth; stabilization signs Stabilized; ~90 exits in FY26 planned Rationalization ongoing
Real EstateOngoing key city expansion Europe store white-space buildout Acquired Soho Polo flagship; selective ownership in iconic locations Strategic, selective
Capital Returns~375M returned YTD (Q2) ~500M YTD (Q3) FY25 total ~$625M; +10% dividend; +$1.5B buyback Increasing returns

Management Commentary

  • “We remain on offense — with a focus on driving our multiple engines of growth across lifestyle categories, geographies, and channels.” — Patrice Louvet, CEO .
  • “AUR increased 9% in the fourth quarter… supported by strong full price selling trends, reduced discounting and favorable channel and geographic mix.” — Justin Picicci, CFO .
  • “While tariffs will primarily impact our gross margins beginning in the second half of the year, we have a proven tool kit… supply chain diversification… cost efficiencies… selective pricing actions… strategic discount reductions.” — CFO .
  • “China… grew more than 20% to last year… Our assumption at this point is that China will be up low double digits in the fiscal year.” — CEO .
  • “In April, we acquired our global Polo flagship location in Soho, Manhattan… a really smart investment… and it also results in pretty meaningful year-over-year P&L benefit due to the rent saving.” — CFO .

Q&A Highlights

  • Tariffs and pricing: Management expects flat FY26 gross margin cc as AUR, mix and discount reductions offset tariff and non-cotton cost headwinds; additional pricing actions are being assessed for Fall ’25/Spring ’26, with Q1 FY26 AUR planned high-single digits .
  • North America wholesale: Stabilizing with sell-in aligned to sell-out; ~90 door exits planned in FY26 (about half Hudson’s Bay) as lower-tier distribution is pruned to elevate quality of sales .
  • Europe trajectory: Strong DTC and wholesale momentum with accretive margins; key-city ecosystem and store openings underpin continued growth, despite macro caution .
  • China: Continued double-digit growth assumed for FY26 backed by brand activations, distribution expansion, and strong consideration among younger cohorts .
  • Operating leverage: FY26 modest OM expansion to be driven by SG&A leverage as prior investments scale; longer term, modest gross margin gains plus expense leverage targeted .

Estimates Context

  • Q4 FY2025 vs S&P Global consensus: Revenue ~$1.70B vs ~$1.65B*, Adjusted EPS $2.27 vs ~$2.04*. EBITDA came in ~$205M vs ~$218M* (below). Number of estimates: ~15 for revenue and ~16 for EPS*. Values retrieved from S&P Global.
  • Implication: Top-line and adjusted EPS beats reflect mix, pricing power and lower cotton costs; EBITDA shortfall vs consensus suggests opex investments and/or mix effects despite gross margin expansion.
MetricQ4 FY2025 ConsensusQ4 FY2025 Actual
Revenue ($B)~$1.648*$1.697
Adjusted EPS ($)~$2.04*$2.27
EBITDA ($MM)~$218.4*~$205.2*

Values retrieved from S&P Global. (* S&P Global)

Key Takeaways for Investors

  • International-led comp/margin story remains intact: Europe and Asia growth, China >20% in Q4, and 200 bps adjusted GM expansion underpin earnings resilience despite macro volatility .
  • Brand elevation continues to deliver: consistent AUR growth (+9% in Q4) and lower discounting are structural, supported by marketing ROI and key-city ecosystem expansion .
  • FY2026 guide is prudent: low-single-digit cc revenue growth and flat GM reflect tariff risks in 2H; OM expansion depends on SG&A leverage and disciplined expense control .
  • Capital return stepped up: 10% dividend increase and $1.5B new buyback authorization provide downside support; strong cash/LIQ funds selective real estate ownership and tech/AI investments .
  • North America wholesale is a manageable overhang: channel pruning (~90 exits planned) should lift mix/brand equity; stabilization narrative supports medium-term margin trajectory .
  • Near-term trading setup: Positive narrative from beat-and-raise cadence into FY25 year-end, but tempered by cautious FY26 outlook and tariff overhang; watch AUR durability, China demand, and EU DTC momentum as key stock drivers in 1H FY26 .

Additional Source Documents Read

  • Q4 FY2025 earnings press release (8-K 2.02) and full exhibits –; supplemental press release –.
  • Q4 FY2025 earnings call transcript –.
  • Prior quarters for trend analysis: Q3 FY2025 (8-K + transcript) – –; Q2 FY2025 (8-K + transcript) – –.
  • Dividend press release (Mar 14, 2025) .