Ralph Lauren Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren second quarter fiscal year 2024 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions on how to ask a question will be given at that time. If you should require assistance during the call, please press star then zero. As a reminder, this conference is being recorded. I'd now like to turn over the conference to our host Ms. Karina Van Der Gans, please go ahead.

Good morning, and thank you for joining Ralph Lauren's second quarter fiscal 2024 conference call. With me today are Patrice Louvet, the company's president and chief executive officer, and Jane Nielsen, chief operating officer and chief financial officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller. During today's call, our financial performance will be discussed on a constant currency basis. Our reported results, including foreign currency, can be found in this morning's press release. We will also be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties, Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our Investor Relations website. With that, I will turn the call over to Patrice.

Thank you, Cori. Good morning, everyone, and thank you for joining today's call. We continue to deliver solid progress on our Next Great Chapter Accelerate Plan in the second quarter. Through an uncertain global macro environment, our iconic brand and timeless products continue to resonate with consumers all around the world. And our multiple engines of growth across categories and regions enable our teams to deliver against our strategic and financial commitments even in a choppier backdrop. Second quarter results exceeded our expectations on the top and bottom line. We were particularly encouraged by an acceleration in our retail performance with positive comps across every region and channel in the period. The strength and growing desirability of our brand is underpinned by our continued pricing power, with AUR up another 10% on top of 18% growth last year. In addition, consistent with our plan, we continue to focus on balance sheet and expense discipline. This is fueling our investments in high-impact brand moments spanning geographies and demographics, all while delivering profitability ahead of our expectations. Looking ahead, as the important holiday season gets underway, we are executing on our long-term game plan and keenly focused on what we can control. We are elevating our brands and positioning in the marketplace while staying grounded in the realities of the macro environment. With more than six consecutive years of AUR growth, a cumulative increase of over 70%, we are confident in our pricing power in the market Now, it's important to remember that AUR growth is an output of our overall elevation work that has included evolving our product categories, product mix and shopping experiences, in addition to promotional pullback. This fundamental reset in our pricing architecture gives us the flexibility to continue driving our long-term brand elevation while also reacting with agility to near-term inflationary pressures. Turning to the second quarter, our performance was guided by our three strategic pillars to drive long-term growth and value creation. These are, first, elevate and energize our lifestyle brand. Second, drive the core and expand for more. And third, win in key cities with our consumer ecosystem. Let me take you through a few highlights across each of these strategic pillars. First, on our efforts to elevate and energize our lifestyle brand. We continue to invest in our most powerful asset, our timeless, iconic lifestyle brand. The Ralph Lauren brand resonates across geographies and demographics, powerfully cutting through a wide range of cultural moments across fashion, music, gaming, sports, and more. Some highlights from the quarter included, first, September marked our return to New York Fashion Week with a rustic romantic show at the Brooklyn Navy Yard, where Ralph and our design teams presented a women's show highlighting our brand's quintessential easy elegance and relaxed refinement. Supported by our activations across 25 key markets and influential guests, from J-Lo and Cara Delevingne to Li Bingbing and Sofia Richie Grange, we drove 24 billion impressions globally, with outsized growth in our luxury perception ratings in North America. Next, we reinforced our brand leadership in the world of sports with our sponsorships of the U.S. Open, Wimbledon, and Ryder Cup. our brand showed up powerfully on the courts and green, and on celebrities and influencers enjoying sport in our iconic spectator style. We also continue to innovate in the world of gaming to engage new and younger consumers, launching our latest partnership with Fortnite. Race to Greatness immerses players in a unique experience, blending luxury fashion, gaming, and exploration. Engagement exceeded our expectations with over half a million unique visitors to the experience and the live stream activation reaching 2 million total views. In China, we celebrated the 30th anniversary of our cult classic Double RL brand with an immersive two-day event with VIC celebrity and influencer attendees featured in a motorcycle tour around Chengdu city, horseback riding, and vintage collection storytelling. Other celebrity highlights from the quarter included dressing Beyonce in her Renaissance World Tour, and Taylor Swift and Jennifer Lawrence both spotted in effortless polo looks on the streets of New York. Together, these activations are both re-engaging existing customers while also attracting new, high-value consumers to our business. we added 1.3 million new consumers to our GTC businesses in the second quarter, consistent with recent trends. And this continues to skew increasingly towards next generation under 35 consumers. We reached 55.9 million social media followers globally, a low double-digit increase to last year, with unique activations across Line, TikTok, in our recent launch on Douyin driving engagement. And our online search trends continue to significantly outpace our peers globally. Moving next to our second key initiative, drive the core and expand for more. In uncertain times, consumers continue to turn to brands they know and trust and styles that have longevity beyond one season. Timeless classics have always been our core proposition, and Ralph and our design teams continue to deliver with an unwavering focus on the quality and quiet luxury that are central to our way of living. Our iconic core products, representing about 70% of our business, grew high single digits in the second quarter, ahead of total company growth. and core penetration to sales increased by roughly 500 basis points, underscoring the importance and resilience of our icons through choppy times. Strong performance in our core was led by our iconic cable knit sweaters in cotton and cashmere, quilted jackets and vests, heritage tweed blazers, and unconstructed sports coats. Our kids' business improved sequentially this quarter, led by girls, with strength across seasonal fall sweaters, dresses, outerwear, and baby gifts. Our Corps also establishes the foundation and credibility to grow our high potential categories. These include women's, outerwear, and our emerging home business. Together, these high potential categories increase low double digits in the quarter. We continue to drive strong growth in women's, our most significant long-term opportunity, on an elevated assortment with AUR up mid-teens. Similar to men's, performance was supported by our core icons this fall, including sweaters, garment-dye shirts, versatile mid- and full-length skirts taking her from day to night, and our iconic blazers and heritage tweed and modern knit fabrications. In the second quarter, we also launched our most comprehensive women's handbag campaign to date with the introduction of our newest icon, the RL888. With a 360-degree launch across key cities, we are establishing the category in a way that is authentic to our brand with a focus on quality Italian craftsmanship and leathers expressed in Ralph Lauren's elegant aesthetic. Other special releases this quarter included our sports sponsorship collections, with US Open and Wimbledon sales significantly outperforming our expectations. Our limited edition P-Wing Fortnite sneaker boots, which is now reselling to collectors for up to four times the retail price. And in September, together with Rizzoli, we launched A Way of Living, a stunning hardcover book celebrating Ralph Lauren's signature home collections over 40 years. Looking ahead, we will continue to leverage the breadth of our brand and assortments to create excitement and desirability in addition to driving customer loyalty. On to our third key initiative, win in key cities with our consumer ecosystem. Our key city ecosystems around the world drive elevation and connection through all of our consumer channels and touchpoints. Each of these ecosystems is anchored by direct-to-consumer channels, which already represent about two-thirds of company sales. Our strong retail comps this quarter were supported by continued momentum across both core Polo products and luxury collections. And our precision engagement with consumers who have the potential for long-term loyalty and outsized lifetime value. While comps in our Ralph Lauren stores and owned digital sites were strong around the world, we were particularly encouraged by improved performance in our outlet business, where comps were also positive in every region. Key outlet actions we implemented in the first half of the year, from assortment changes to optimize staffing and highly targeted promotions appealing to our more value-oriented consumers position as well as we head into holiday. In addition to our existing fleet, we opened a select number of iconic Ralph Lauren stores in the quarter, including Marina Bay Sands in Singapore and Renovated Experiences in Brussels and Stockholm. And in North America, we're excited to build our first ever key city ecosystem in Canada, starting with Toronto, where we opened our first Ralph Lauren store at Yorkdale Center this quarter. And just a few weeks ago, we launched our Canadian digital commerce site, ralphlauren.ca, helping us deliver connected retail experiences to our consumers across the market. Globally, we opened a total of 16 new stores and concessions, focused on our top cities this quarter, with the majority again in Asia, particularly in China. Our performance in China remains a standout, with sales up more than 20% this quarter. This was ahead of our expectations, driven by strong brand momentum and high-quality new consumer recruitment. Looking ahead, we still see significant opportunities to drive our business with global Chinese consumers. And finally, touching on our enablers. In addition to our strategic priorities, our business continues to be supported by our five key enablers. I'll share a few highlights from the quarter. Within our best-in-class digital technology and analytics capabilities, we enhanced our Ralph Lauren.com digital flagship and app this quarter. This included new search capabilities and improved navigation, which helped deliver a more personalized experience and drive conversion. We also continued our early testing of generative AI. For example, leveraging the technology to create select product descriptions on our digital site. As we continue to integrate citizenship and sustainability into our business, we're excited to share that we signed a collective power purchase agreement to scale our purchasing of solar power in Europe. This initiative, created by the Fashion PAC, brings us one step closer to reaching our goal to power our direct operations with 100% renewable electricity by 2025. And just a few weeks ago, The Ralph Lauren Corporate Foundation announced our newest Ralph Lauren Center for Cancer Prevention at USC's Norris Cancer Center Hospital. This center will represent our third center in the US and our first one on the West Coast as we continue our efforts to improve access to high quality cancer screening services and treatment for underserved communities. In closing, Ralph and I are proud of our team's progress, creativity, and dedication while navigating a dynamic environment. As we enter holiday and the second half of the year, we remain focused on what we can control as we deliver on our multiple levers for growth across regions and categories. Our strengthening brand desirability, sustainable pricing power, and consistency of execution continue to differentiate Ralph Lauren through challenging times. And underpinning all of our growth opportunities is the enduring power of our iconic lifestyle brand, which continues to inspire people all over the world to step into their dreams. With that, I'll hand it over to Jane to discuss our financial results, and I'll join her at the end to answer your questions.