Ralph Lauren (NYSE:RL) executives said the company delivered “strong” third-quarter fiscal 2026 results during its earnings call, citing broad-based momentum across geographies, channels, and product categories in the key holiday period. Management emphasized that better-than-expected full-price sell-through and reduced promotional activity helped drive higher-quality sales and margin expansion, even as higher U.S. tariffs began flowing through cost of goods sold.
Holiday performance and strategic plan progress
President and CEO Patrice Louvet said the company exceeded its commitments on both revenue and profit in what he called its most important quarter of the year. He highlighted meaningfully better full-price sell-through than expected and said gross margin expanded in each region, “more than offsetting” the impact of higher U.S. tariffs as new rates began to affect product costs.
Brand marketing, customer acquisition, and cultural activations
Louvet described holiday marketing efforts including “Mountain Living” and “Timeless Gifting” campaigns and immersive pop-ups in London, Los Angeles, Tokyo, Munich, and Seoul. He said the holiday campaigns generated a combined 2.9 billion global impressions. The company also highlighted its sports presence, including unveiling Team USA uniforms for the Milan-Cortina Winter Olympics, and noted other brand activities in Asia and celebrity styling appearances.
Louvet said the company added 2.1 million new consumers to its direct-to-consumer (DTC) businesses in the quarter, on top of last year’s 1.9 million record result, driven by digital and full-price store customers. He also said social media followers rose by high single digits to more than 68 million.
In the Q&A, Louvet said Ralph Lauren’s approach is “always on” marketing in key cities with a “rolling thunder of activations,” pointing to recent and upcoming events including the Milan men’s show, the Winter Olympics opening ceremony, and a women’s collection show in New York. He added that the company has “stronger confidence than ever” in marketing return on investment and said the company is shifting toward a higher-value consumer base, “more full price, skewing younger and more women.”
Product and channel trends: core strength, growth categories, and new platforms
Louvet said core products, representing more than 70% of the business, grew low double digits in the quarter, with strength in items such as cotton cable knits, jerseys, wool cashmere, sweaters, Oxford and linen shirts, rugby and quarter-zip knit tops, and polo caps. He said children’s programs also saw healthy full-price demand.
He added that high-potential categories—including women’s apparel, outerwear, and handbags—rose “high teens,” outpacing total company growth. Management cited women’s sweaters, expanded outerwear offerings, and handbag momentum led by foundational collections and select releases.
On distribution, Louvet said global DTC comparable sales increased high single digits, led by Ralph Lauren stores and digital commerce. He also noted the launch of a Ralph Lauren TikTok Shop in the U.S., which he said made the company the first luxury fashion brand with an always-on presence on the platform.
Louvet also said the company opened 32 new owned and partner stores globally during the quarter, calling out locations including Chengdu IFC Mall, Stratford and Bishopsgate in London, New Delhi, Abu Dhabi, and Chatswood Chase in Sydney.
Financial results: revenue growth, margin expansion, and updated outlook
Chief Financial Officer Justin Picicci said results came in ahead of expectations, with a balance of revenue growth and “accelerated quality of sales” driving margin expansion. On a constant-currency basis, he reported:
- Total company revenue increased 10% in Q3, above the company’s mid-single-digit outlook.
- Regional revenue growth: Asia +22%, North America +8%, Europe +4%.
- Retail comps increased 9%, with balanced growth across digital and stores.
- Total digital ecosystem sales (owned sites plus wholesale digital accounts) grew mid-teens.
- Adjusted gross margin expanded 140 basis points to 69.8%.
- AUR increased 18%, which the CFO attributed primarily to reduced discounting and better full-price selling trends, alongside modest targeted pricing and favorable mix.
- Adjusted operating margin expanded 200 basis points to 20.7%, while operating profit rose 21%.
Picicci said gross margin expansion was driven by AUR growth, a favorable mix shift toward full-price businesses, and lower cotton costs, which more than offset higher tariffs, labor, and non-cotton material costs. He added that early-season full-price demand enabled the company to pull back further on planned holiday promotions across all regions. For Q4, the company now expects high single- to low double-digit AUR growth, with flexibility to reduce discounting further depending on selling trends.
Marketing spending rose to 8% of Q3 sales from 7.1% a year earlier. Picicci said the company is raising its full-year marketing outlook to 7.5% to 8% of sales, consistent with long-term expectations.
By segment, Picicci said North America performed above expectations, with DTC revenue up 7% and wholesale up 11%. However, he reiterated that the company still expects a decline in Q4 North America wholesale revenue due to a planned strategic reduction in off-price sales, timing of certain spring shipments shifting out of Q4 and into Q1 of fiscal 2027, and ongoing wholesale door exits and channel consolidation. He noted that the company remains cautious on the North American operating environment and referenced consolidation in the wholesale channel, including developments at Saks, while adding that the company’s net exposure to Saks this year is minimal.
In Europe, revenue rose 4% on strong prior-year comparisons, and Picicci said the company pulled back seasonal promotions more than planned, improving quality of sales amid a promotional competitive environment. He said Europe wholesale increased 8% above plan on higher reorders, while outlet trends were softer as promotions were reduced. In the Q&A, Picicci said Europe segment margin pressure in the quarter was driven by increased marketing investment.
Asia remained the strongest region, with revenue up 22% and retail comps up 20%. Picicci said China sales rose more than 30%, supported by key events such as Golden Week and Singles Day and continued growth on Douyin. Japan grew double digits, which management said enabled further discount reductions.
On the balance sheet, Picicci reported $2.3 billion in cash and short-term investments and $1.2 billion in total debt, with Q3 net inventory up 10% in constant currency. He also said the company generated about $650 million in free cash flow and returned $500 million to shareholders year to date.
Looking ahead, the company raised its fiscal 2026 outlook. Picicci said constant-currency revenue is now expected to increase high single to low double digits, up from 5% to 7% previously. The company now expects Asia to grow mid-teens, up from a prior high single- to low double-digit outlook, and expects North America full-year revenues to grow at the high end of mid-single digits. Operating margin is now expected to expand about 100 to 140 basis points in constant currency, up from prior guidance of 60 to 80 basis points, while gross margin is expected to expand about 40 to 80 basis points for the year.
For Q4, the company guided to mid-single-digit constant-currency revenue growth but expects gross and operating margin declines year over year due to higher tariffs, timing of marketing campaigns (including the Olympics and a Milan fashion show), and timing shifts, with Q4 described as a smaller, transitional quarter between seasons. Picicci said Q4 operating margin is expected to contract about 80 to 120 basis points in constant currency.
Management also discussed tariff impacts and mitigation efforts. Picicci said Q4 should be the most impacted quarter this fiscal year from a year-over-year gross margin perspective, while longer-term mitigation actions—including country-of-origin shifts, optimization, and merchandising actions—are expected to increasingly take shape through fiscal 2027. He added that tariffs are expected to be a meaningful gross margin headwind through the first half of the next fiscal year until the company begins to lap the higher cost base.
Separately, Louvet said the company welcomed Cesar Conde as a new board member, citing his experience in modern media and international expansion.
About Ralph Lauren (NYSE:RL)
Ralph Lauren Corporation (NYSE: RL) is a global designer, marketer and distributor of premium lifestyle products under the Ralph Lauren name and a portfolio of related brands. The company, founded by Ralph Lauren in 1967 and headquartered in New York City, has grown from a single line of men’s neckties into a global lifestyle business that spans apparel, accessories and home goods.
Ralph Lauren’s product assortment includes menswear, womenswear and childrenswear along with footwear, leather goods, eyewear, fragrances and home furnishings.
