Ralph Lauren Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Warren Second Quarter Fiscal Year 2026 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 Vanderkins. Please go ahead.

Good morning, and thank you for joining Ralph Lauren's second quarter fiscal 2026 conference call. With me today are Patrice Louvet, the company's president and chief executive officer, and Justin Picicci, 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 adjusted 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, Corrie. Good morning, everyone, and thank you for joining today's call. More than eight years ago, we embarked on an ambitious journey of elevation across our brand, our products, and our go-to-market strategy around the world. Led by Ralph's vision of inspiring the dream of a better life, we put our consumers at the center. and we put this company on the path of healthier, more consistent, more sustainable long-term growth and value creation. In September, we were proud to introduce the latest iteration of this journey, which we are calling our next great chapter, Drive Plan. We outlined the vast opportunities still ahead for Ralph Lauren. We currently play in a total addressable premium and luxury market worth $400 billion. And we are just over $7 billion today, less than a 2% market share. Our strategy to grow our share and deliver long-term sustainable growth over the next three years and well beyond continues to be supported by multiple diversified engines. As a reminder, these include, 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. We are off to a strong start in the execution of this plan with second quarter performance outpacing our expectations across the top and bottom line. These results underscore our diversity of growth opportunities. and the broad-based momentum of our iconic brand, which is resonating across generations, cultures, and geographies. All three regions contributed to growth this quarter, including double-digit increases in retail comps and global wholesale sales. And we achieved this while continuing to elevate our brand and drive higher quality of sales. Our strong performance through the first half of this fiscal year also gives us confidence to take up our full year guidance once again, even as we remain relatively cautious on the second half of the year due to potential consumer headwinds and general volatility. While we are watching the macro environment closely, we remain well positioned to capture market share opportunities across categories and geographies. And we are firmly on offense with a focus on investing behind our brands, products, and key city ecosystems to deliver growth for the long term. Let me walk you through a few highlights from the quarter where we drove progress across our three long-term strategic pillars. Starting with our efforts to elevate and energize our lifestyle brand. As many of you heard in September, Ralph Lauren has the most loyal customers in our defined premium and luxury market. Sitting at the heart of culture, we build relationships for life independent of any single fashion trend or cycle. And by leaning into our inclusive luxury lifestyle positioning, we are engaging with consumers across the many facets of their lives. From the runway to the biggest stages in sports, music, gaming and more. And all in a way that is authentic to the core values we've embraced for 58 years. Optimism, quality, authenticity, timelessness and the easy elegance of a life well lived. Our teams delivered a powerful range of brand activations this quarter. as we successfully lapped last year's outstanding Paris Summer Olympics. Key highlights included. First, we continued to reinforce our position as one of the leading luxury apparel brands in the world of sports. We celebrated our 20th year as the official sponsor of both Wimbledon and the US Open Tennis Championships this summer. Our Wimbledon storytelling combined the elegance and cherished traditions of British heritage with Ralph Lauren's refined spectator style. Our U.S. Open campaign paid homage to the most electric main stage in tennis to our colorful, retro-inspired collection, delivering record-breaking sales around the event. And as sponsor of the U.S. team, we welcomed the Ryder Cup to Bethpage for the first time this fall. Among our many activations, we took over parts of Rockefeller Center Plaza and drove storytelling on social media with Nick Jonas and brand ambassador Billy Horschel. Together, these sports lifestyle campaigns embodied both the proud tradition of sport and the progressive spirit that propels it forward. They drove a combined 67 billion global impressions, and more than $350 million in media value. Next, we hosted our Spring 26 Women's Collection fashion show here in New York City, showcasing a balance of strength and sensuality in a modern palette of black, white, and crimson. And beyond the runway, we delivered some of the most iconic celebrity moments of the season. from Taylor Swift and Travis Kelsey choosing Ralph Lauren for their viral engagement, to the old Hollywood glamour of Selena Gomez's wedding to Benny Blanco. Our activations are also driving strong sustainable growth in new customer acquisition and retention. In the second quarter, we added 1.5 million new consumers to our DTC businesses, A mid-single-digit increase to last year, driven by digital and full-price store customers. The ongoing momentum this quarter was led by luxury buyers and with balanced growth across men, women, and younger cohorts. And we increased our social media followers by high single digits to 67 million, led by Instagram, TikTok, Douyin, and LINE. This rolling thunder approach to activations, enabled by our strong data and analytics capabilities, gives us confidence to continue our brand momentum as we look ahead. Moving to our second key initiative, drive the core and expand for more. Ralph's vision has always been about more than a tie or a polo shirt or a sweater. The heart of what we do is storytelling through our clothes and experiences. through the cinematic worlds that Ralph has created. And our unique approach to styling enables customers to step into these worlds to build the wardrobes that tell the story of their lives. From that first red polo shirt and a school picture to the striped silk polo dress in an engagement photo. This philosophy is embedded in how we drive our core products as much as it is in our high potential and complementary lifestyle categories. Starting with our core, which represents more than 70% of our business. Core product sales grew mid-teens this quarter, driven by strength in cotton cable knit, wool cashmere and cotton shaker sweaters, linen and seasonal Oxford shirts, our lightweight jackets, and our icon polo chino caps. An exciting back-to-school season also drove growth and share gains in our core children's programs, led by cable knit sweaters, quilted jackets, and Oxford shirts. Our high potential categories, including women's apparel, outerwear, and handbags, continue to be accelerators for our business. Together, these categories increase strong double digits, outpacing total company growth in the quarter. Women's apparel continued to be driven by our foundational core, along with a strong response to our seasonal styles. Highlights included our cable knit jersey and featherweight cashmere sweaters, linen shirts, our transitional city and utility barn jackets, and dresses. Momentum in our handbag business continued this quarter, driven by each of our women's labels, and led by our foundational Polo ID collection, Polo Play, which launched this past spring and included exciting pop-up shops in Korea this quarter, our women's collection Ralph Bags in seasonal regent green leather and mocha suede, and an encouraging launch for our Tasha collection, an elevated new offering in the Lauren family of handbags. Special releases this quarter included... Our limited edition Polo Ralph Lauren for Oak Bluffs collection, in partnership with Morehouse and Spelman Colleges, a powerful celebration honoring the legacy of Oak Bluffs as a cultural haven for black communities in Martha's Vineyard. Our capsules for Wimbledon, the U.S. Open, and Ryder Cup, with strong double-digit comp growth in each collection, led by our Polo Bear and Fleece Styles. and our newest Ralph's Club New York Fragrance launch featuring Usher. We will continue to leverage the unparalleled breadth of our lifestyle product offering and power of our icons as consumer lifestyles evolve. Turning to our third key initiative, win in key cities with our consumer ecosystem. We continue to thoughtfully expand our consumer ecosystems to deepen Ralph Lauren's presence in our top 30 cities around the world, delivering a cohesive, elevated brand experience across each of our channels. At the same time, we've started investing in our next 20 cities, laying the groundwork for long-term sustainable growth. Within DTC, which comprises the majority of our business, we delivered another strong quarter of comp growth across regions, Global comps increased 13% above our expectations, with double-digit growth in both our digital sites and physical stores. All three regions outperformed our expectations again in the second quarter, with double-digit growth in every geography, including North America. Asia once again led our growth, with sales up mid-teens, driven by all key markets. China grew more than 30% in the quarter, ahead of our outlook, with a strong consumer response to our brand-building activities, including our summer of sports campaigns and amplification of our New York fashion show. As we continue to reinforce our presence in our top cities, we opened 38 new owned and partner stores globally, and we recently announced that we are opening our sixth restaurant bringing our iconic Polo Bar experience to London. The opening is slated for 2028, and yes, we're already getting requests for tables. And finally, touching on our enablers. Our business continues to be supported by our five key enablers. Recent highlights include, first, as part of our focus on delivering advanced technology, AI and analytics. In September, we launched our new AI styling tool, Ask Ralph, that we developed with Microsoft. Bringing Ralph's iconic styling right to your pocket, Ask Ralph builds on our history of innovating the consumer shopping experience and immersing our consumers in the world of Ralph Lauren with cutting-edge technology. While still early, customer engagement and feedback have been encouraging. And this is an exciting step forward in our journey to test and learn new tools to better serve our consumers, drive conversion, and ultimately build lifetime value. Second, our teams and our culture drive our performance. We were proud to be named one of America's best employers for company culture by Forbes. And finally, Ralph Lauren was honored in Fast Company's 2025 Innovation by Design Awards for our unforgettable brand presence at the 2024 Summer Olympics in Paris. We look forward to building on this legacy, bringing our heritage of sport and style to life at the Milan Cortina Winter Olympics in February. In closing, Ralph and I are incredibly proud and grateful for the hard work care and dedication that our teams are delivering around the world. Together we are building on Ralph's legacy and vision with this next great chapter of growth. We remain focused on creating value through a distinct brand position that's clear, consistent, relevant and emotionally resonant. A legacy of leadership in fashion, in culture and in innovation. and a proven ability to execute with creativity, agility, and operating discipline, all underpinned by our Fortress Balance Sheet and ongoing commitment to embrace new technology and support our teams, partners, and communities. With that, I'll hand it over to Justin, and I'll join him at the end to answer your questions.