Ralph Lauren Flags Weak Macro Visibility, Maintains Cautious Outlook

Ralph Lauren Corp. (NYSE:RL) stock plunged on Thursday even as the company reported stronger-than-expected results for the first quarter of fiscal 2026, driven by broad-based demand and margin expansion across geographies.

Revenue rose 14% year over year to $1.72 billion, exceeding the analyst consensus estimate of $1.64 billion. Adjusted earnings were $3.77 per diluted share, beating expectations of $3.43.

GAAP net income was $220 million, or $3.52 per diluted share, compared to $169 million, or $2.61 per share, a year earlier.

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Gross profit rose to $1.24 billion, with gross margin expanding 180 basis points to 72.3%, supported by higher average unit retail pricing, a favorable mix, and lower cotton costs.

Global direct-to-consumer comparable store sales increased 13%, with digital commerce rising sharply across all markets. Adjusted operating income was $293 million, and adjusted operating margin improved 270 basis points to 17.0%.

North America revenue increased 8% year over year to $656 million. Comparable store sales rose 12%, with a 10% increase in brick-and-mortar stores and a 19% increase in digital commerce. Operating margin was 20.7%, up 100 basis points from the prior year.

Europe revenue grew 16% to $555 million, or 10% in constant currency. Comparable store sales rose 10%, with equal gains of 10% in both physical stores and digital commerce. Operating margin up 120 basis points to 26.4%. Foreign currency benefited the region’s operating margin by 140 basis points.

Asia revenue rose 21% to $474 million, or 19% in constant currency. Comparable store sales jumped 18%, driven by a 16% increase in brick-and-mortar sales and a 35% increase in digital commerce. Operating margin expanded 330 basis points to 30.7%. Foreign currency negatively impacted the region’s margin by 80 basis points.

Ralph Lauren ended the quarter with $2.3 billion in cash and short-term investments and $1.6 billion in total debt. Operating cash flow for the quarter was $176 million. The company repurchased $250 million of Class A common stock during the period.

Outlook

For fiscal 2026, the company expects revenue to grow in the low-to-mid-single digits on a constant currency basis. Operating margin is projected to expand by 40 to 60 basis points.

The full-year tax rate is expected to be 19% to 20%.

The company continues to expect capital expenditures for fiscal 2026 of approximately 4% to 5% of revenue.

For the second quarter, revenue is expected to grow in the high single digits, with 120 to 160 basis points of operating margin expansion, both in constant currency.

During the conference call, Ralph Lauren executives added color to the second-quarter outlook, stating they expect high-single-digit AUR (average unit retail) growth, driven by selective pricing hikes in North America and Asia for the Fall ’25 collections. However, they noted a cautious outlook for fiscal year 2026 overall due to potential macroeconomic pressures across the broader North American market, and acknowledged reduced visibility into macro conditions in the second half of the year.

“While we continue to approach the current global operating environment with prudence, we are encouraged by the broad-based strength in our brand and our businesses as we execute on our long-term strategic priorities — including recruiting new and younger consumers, strengthening our core and high-potential categories, and developing our key city ecosystems in each region,” commented Patrice Louvet, President and Chief Executive Officer. 

Price Action: RL shares are trading lower by 8.29% to $277.85 at Thursday’s last check.

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