Ralph Lauren Corporation

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, Corey. Good morning, everyone, and thank you for joining today's call. We delivered another strong quarter of progress on our next great chapter drive plan. In a consumer landscape often shaped by ever-changing trends, the clarity of Ralph Lauren's values and purpose of inspiring the dream of a better life through authenticity and timeless style continues to set us apart. We stay true to who we are, and we have a proven ability to evolve with today's consumer. This is a powerful competitive advantage. and it is translating into sustained broad-based momentum and a resilient core consumer with significant opportunities ahead. In the second quarter, our top and bottom line results exceeded our expectations, enabling us to take up our full year guidance once again. This performance reflects our momentum across markets, channels and categories. Revenues increased 10%, led by double digit growth in Asia. Our retail channels also grew low double digits with similar comp growth across stores and digital, while wholesale increased at a solid mid single digit rate. Our ongoing investments behind our brand, products, and lifestyle experiences enabled us to stay on offense and continue our long-term elevation journey with further improvement in quality of sales and full price selling. At the same time, we continue to invest in our long-term capabilities such as talent and technology while accelerating cash returns to shareholders to our durable dividend and repurchases. This balance of investment and shareholder returns reflects the power of the Ralph Lauren model. Our strong balance sheet, cash flows and culture of operating discipline give us the flexibility to navigate a complex global backdrop while fueling future growth opportunities. Underpinning this model is a combination only Ralph Lauren can bring together. Authentic lifestyle authority, cultural relevance and timeless brand codes at global scale. We are building on this distinctive advantage through the three strategic pillars of our plan, which, as a reminder, 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. Starting with our efforts to elevate and energize our lifestyle brand, to our rolling thunder of activations, We are engaging with consumers across the many facets of their lives, from the inspiration of the runway to the biggest stages in sports, entertainment, and more. This enables us to deepen our connection with existing consumers around the world as we build lifetime value, while also inspiring a new generation with our cinematic storytelling and core values of optimism, quality, and Authenticity. Key highlights from the quarter included, first, we continue to strengthen our position as one of the world's leading luxury lifestyle brands in sports, elevating traditionally local events into globally relevant, exciting brand moments. At Wimbledon, we combine the heritage and elegance of the tournament with Ralph Lauren's spectator style, We activated across our top cities around the world from our Sloan Square takeover in London to our Tokyo live viewing party and Douyin live shopping event in Hong Kong and our Legends tennis exhibition match in New York Central Park with Andre Agassi, Caroline Wozniacki, Jenny Bouchard and James Blake. At the US Open, we built on our long-standing partnership with an expanded 360-degree campaign, including our vintage-inspired collection, specialty pop-ups, and influencer activations. And at the Goodwood Revival in the UK, we brought our sophistication to the classic motorsports event for the fourth year, including a preview of our Polo Bar experience ahead of our London restaurant opening slated for 2028. Together, these sports lifestyle campaigns allow us to showcase the breadth of the Ralph Lauren lifestyle while bringing consumers closer to the brand. They generated a combined 70 billion global impressions and more than $350 million in media value. Next, we immerse consumers in our vision of timeless style through our Spring 27 Women's Collection Fashion Show in New York City. along with key celebrity dressing moments including BTS at their Arirang World Tour at MetLife Stadium and at our Very Ralph documentary premiere in Seoul. And beyond the quarter, we recently hosted our first ever Polo Fest in Tokyo, bringing polo collectors, brand enthusiasts, and cultural voices together for a three-day experience as part of of our year-long celebration of 50 years in Japan. These activations are driving strong, sustainable growth in new customer acquisition and retention. In the second quarter, we added 1.7 million new customers to our DTC businesses led by Ralph Lauren Stores. We continue to drive progress across brand equity metrics. including increased awareness, purchase intent, and net promoter score. We're also driving higher lifetime value and recruiting key consumer cohorts led once again by women, luxury, and younger customers. And we increased our social media followers by mid-single digits to more than 72 million led by Instagram, Line, and Douyin. with a focus on our summer of sports and fashion show. This diversity of activations enables us to keep the brand fresh and relevant across each of our key markets, staying true to Ralph's vision while finding new ways to bring each generation into our world. And this brand momentum is translating directly into increasing desirability and demand for our products. This takes me to our second key initiative, Drive the Core and Expand for More. Ralph's vision has always been about a way of living. This quarter, our talented creative teams brought that vision to life through our enduring icons combined with seasonal newness across men's, women's, and children's. By reinforcing the core while expanding our lifestyle proposition, We are creating multiple avenues for durable growth and bringing our products to life through increasingly connected consumer ecosystems. Starting with our core, which represents more than 70% of our business, core product sales grew 10% in the second quarter. Recent highlights include our cotton cable and merino blend sweaters, linen poplin and Oxford dyed shirts, Icon Chino Caps, Sport Coats, and Fleece. For the fall 26 season, our Lishfield and Red Rocks collections for men's polo resonated particularly well with consumers. In children's, we delivered a successful back to school with our collegiate inspired next gen and New England themed Middlebury collections with strength across our sweaters, core mesh polos, sweater dresses, and expanded outerwear proposition. Our high potential categories, including women's apparel, outerwear and handbags grew low double digits for the quarter ahead of total company growth. In women's, we drove excitement through our new micro cable collared cardigan and wool rugby sweaters, corduroy shirts and polo shirt dresses. Our strong outerwear performance was driven by our lightweight Biswing and Bayport cotton windbreakers for men, and Icon windbreakers and barn jackets for women. And in handbags, we officially launched Polo Blaze, our most elevated foundational collection for polo to date, marrying equestrian-inspired details with a downtown edge. Special releases this quarter included our U.S. Open collection, inspired by the heritage of tennis, and The Spirits of New York, delivering our strongest sell-throughs around the event to date, and our collaborations with Gee's Band and Second Capsule Drop with DOPA, both part of our groundbreaking Artist in Residence series, focused on empowering and celebrating artisans within the communities that have historically inspired our designs. As we turn to holiday, We will continue to invite consumers to step into the cinematic worlds that Ralph created, with timeless, high-quality products, a compelling value proposition, and styling that only we can deliver. Turning to our third key initiative, winning key cities with our consumer ecosystem. We are creating unique lifestyle experiences to immerse consumers in the world of Ralph Lauren. Bringing together product, hospitality, and storytelling in our top 30 cities around the world while also laying the groundwork for long-term growth in our next 20 cities. Within DTC, which comprises the majority of our business, global comps increased 10%, led once again by our Ralph Lauren stores and digital commerce. By region, Asia increased 28%, driven by 24% comps and growth across all key markets. China's sales remained strong, increasing more than 35%, while Japan and Korea were also up double digits as we continued to invest behind localized brand activations and experiences. Europe delivered low single-digit growth this quarter, in line with our plan, despite industry traffic headwinds and on top of last year's strong compares. And we drove another quarter of strong results ahead of expectations in our largest region, North America, with healthy demand in both our retail and wholesale channels. With regards to our store base, we opened 22 new owned and partner stores globally this quarter as we deepened our presence in our top cities. Highlights included Seaports in Boston, including our first Ralph's Coffee location in Massachusetts, new men's and women's standalone stores in London's Sloan Square, Saint-Tropez, France, Beijing Hops in One, and Galaxy Promenade in Macau. On the digital front, we expanded our RL mobile app to Japan following our successful launch in Korea earlier this year, with early sales performance and downloads exceeding our expectations. We also grew our connected retail and clienteling capabilities across several markets in Asia this quarter, enabling our teams to serve consumers with greater personalization and consistency. 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 advanced technology, AI, and analytics, We are investing in new capabilities that help our teams move faster, create more personalized consumer experiences, and operate with greater precision. In addition to expanding our mobile app and clienteling in Asia this quarter, we continued our journey to enhance visibility on key LLMs. We also launched a test on WhatsApp Concierge, a digital assistant that allows customers to interact directly with our brand on the WhatsApp platform. And following our initial test with OpenAI earlier this year, we are further scaling advertising on the platform for holiday gifting and cultural moments. In addition, we are advancing our commitment to the communities we serve. We recently announced a new partnership with the Korean National Cancer Center Foundation to establish a new Ralph Lauren Cancer Center in Goyang are first in Asia and fifth globally, part of our broader longstanding commitment to more equitable access to cancer care. And we were proud to be recently named one of the world's best employers by Forbes, reflecting the power of the people and culture that make Ralph Lauren so special. In closing, Ralph and I are encouraged by our team's progress in the second year of our next great chapter drive plan, In the midst of an ever evolving global operating landscape. As we head into the important holiday season, our consumer remains at the center of everything we do. With that in mind, we will continue to lean into our long term elevation journey, investing in our strategic priorities to deliver sustainable growth and value creation into the future, including Developing innovative campaigns that build desirability and engagement and grow lifetime value. Creating timeless, high-quality products that offer compelling value and earn consumers trust. And winning in our top cities through unique brand experiences that immerse consumers in the world of Ralph Lauren. These diversified engines of growth and our increasingly elevated consumer base all underpinned by our iconic brand continue to drive resilience in our business model and consistency in our performance. With that, I'll hand it over to Justin and I'll join him at the end to answer your questions.

Thanks Patrice and good morning everyone. Our second quarter performance underscores our growing brand desirability around the world with results exceeding our expectations across both revenue and profitability. Bestreflex broad-based consumer demand and the strength of our diversified growth model against the dynamic operating backdrop. Revenues increased 10% ahead of our mid-single-digit outlook for the quarter, with growth across every region. Our brand and products continue to resonate with consumers globally, and full price momentum supported gross and operating margin expansion above expectations. Notably, we delivered this performance while continuing to invest in the strategic initiatives that will fuel sustainable long-term growth and value creation. This combination of second quarter outperformance and sustained brand momentum gives us confidence to raise our full-year outlook once again. But first, let me walk you through our financial highlights from the second quarter, which, as a reminder, are provided on a constant currency adjusted basis. Total Company's second quarter revenue grew 10%, driven by better-than-expected performance in both our direct-to-consumer and wholesale channels. By region, Asia led our performance, increasing 28%, followed by North America up 6% and Europe up 3%. Total Company retail comps also increased 10%, with growth across both our own digital and brick-and-mortar channels. Total company adjusted gross margin expanded 220 basis points to 70.2% ahead of our outlook. The increase was driven by AUR growth, favorable geographic mix, and lower product costs, which more than offset modest pressure from higher labor and non-cotton material costs in the quarter. AUR increased 9% ahead of our plan and on top of 12% growth last year. The increase was broad-based and reflected balanced contributions from product elevation, favorable channel and geographic mix, and selective pricing actions and lower promotional activity. For the third quarter, we are currently planning for mid-single-digit AUR growth on top of last holiday's exceptionally strong 18% increase. Our outlook continues to be supported by our ongoing brand elevation strategy, with the flexibility to further reduce discounting based on consumer demand and selling trends. Adjusted operating expenses increased 11%, or 70 basis points as the percentage of sales compared to last year, as higher marketing more than offset leverage in non-marketing expenses. Marketing increased to 8.6% of sales, up from 7.8% last year, reflecting increased investments to amplify key campaigns, including our New York fashion show and sponsorships of Wimbledon and the U.S. Open. Our multi-year progress in sustained new customer acquisition, healthy consumer metrics, and attractive returns reinforces our confidence to continue expanding our marketing programs across our top cities. We now expect marketing investment to represent approximately 8 to 8.5% of sales in fiscal 27, compared to approximately 8% previously. Even with this higher investment, second quarter adjusted operating margin expanded 140 basis points to 15.5% ahead of our plan, while operating income grew 21%. This underscores our ability to expand profitability while continuing to make investments in our brand and capabilities that support durable growth. Turning to segment performance and starting with North America, second quarter revenue grew 6% at the high end of our expectations. In North America retail, second quarter comps increased 6% on top of a double digit compare last year with balanced growth across our digital and brick and mortar channels. Digital comps increased 5% supported by solid traffic, full funnel marketing activations, and continued merchandising optimization. North America wholesale revenue grew 8% driven by healthy replenishment and seasonal orders. Results included approximately four points of benefit from planned timing shifts from the second half of the year. We continue to expect North America wholesale performance to moderate in the second half as we lack these timing benefits and accelerate our strategic reduction of off-price sales and lower-tier full-price stores. Our underlying growth in the channel remains healthy with strong full-price sellout trends and continued market share gains. Turning to Europe, Second quarter revenue increased 3%, modestly ahead of our expectations. Europe wholesale increased 4% on top of double-digit growth last year. Underlying sellout trends remain in line with our full-year outlook, and we continue to proactively manage our sell-in to align with consumer demand and maintain healthy inventories in the channel. Europe retail comps declined 1% as we lapped an exceptionally strong 10% compare last year amid a challenging macro environment. While the region continues to face pressure from weaker store traffic across several of our key markets, we are taking targeted strategic actions to drive stronger consumer engagement, increased conversion, and higher basket sizes in our stores. Looking ahead to the second half of the year, we continue to invest beyond our strongest brand and consumer opportunities in the region, including marketing activations and targeted consumer engagement, building on our growing brand desirability to support both near and long-term growth. Moving to Asia, second quarter revenue increased 28%, reflecting broad-based growth across all key markets. Retail comps grew 24% with double-digit growth across every channel. Our Asia digital ecosystem also delivered double-digit growth, with strong contributions from our own digital commerce sites. By market, China continued to lead our performance, with sales up more than 35% in the quarter, driven by healthy comps and high-quality new customer recruitment. Japan and Korea also delivered strong double-digit growth, supported by localized brand activations and sustained consumer engagement. Our full funnel marketing activations throughout the region are building deeper connections with consumers, and we continue to see substantial opportunity to build awareness, deepen engagement, and expand our presence across key markets where our luxury lifestyle positioning continues to resonate. Moving to the balance sheet. Our fortress balance sheet and strong cash flow generation continue to provide meaningful strategic flexibility, enabling us to invest through periods of volatility, pursue compelling growth opportunities, and return capital to our shareholders, all while maintaining prudent financial discipline. During the second quarter, We repurchased approximately $250 million in shares, bringing our year-to-date repurchases to $500 million and completing our buyback plans for fiscal 27. And we remain on track to return over $2 billion to shareholders, including through dividends and repurchases, over our three-year drive plan. We ended the period with $1.8 billion in cash and short-term investments and $1.2 billion in total debt. We continue to manage inventories closely against demand in each of our regions. Second quarter net inventory decreased 8% in constant currency, reflecting last year's elevated tariff-related inventory base. Excluding the impact of tariffs, net inventory declined approximately 2%. As we enter the holiday season, our inventories remain healthy, current, and well-positioned to support demand across geographies and channels while preserving flexibility. Looking ahead, our outlook for fiscal 27 remains based on our best current assessment of the operating environment, including the geopolitical backdrop, foreign currency dynamics, and broader macroeconomic conditions. For fiscal 27, We now expect constant currency revenue growth of mid to high single digits on a 52-week comparable basis, centered around 6% to 7%, up from our prior outlook of 5% to 6%. This increase largely reflects our better-than-expected second quarter results, along with a modestly stronger outlook for the second half, supported by our continued brand momentum. As previously discussed, we continue to expect first-half growth to be stronger than second-half growth, reflecting the timing of this year's marketing activations and other investments, the timing of planned wholesale shipment shifts and strategic off-price reductions, and more challenging year-over-year comparisons in certain of our key markets. Our outlook continues to assume healthy underlying growth in the second half, in line with our long-term plan. Foreign currency is now expected to negatively impact revenue growth by approximately 40 to 60 basis points this year, based on current exchange rates. As a reminder, fiscal 27 includes a 53rd week, which is expected to add approximately one point to revenue growth and slightly benefit operating margin. By region for fiscal 27, we now expect North America revenue to grow approximately low to mid single digits, up from low single digits previously. We are encouraged by our strong first half performance in the region and the continued momentum across our direct-to-consumer and full-price wholesale channels. We still expect this solid underlying growth to be partly offset by accelerated strategic actions to improve quality of sales and exit lower tier doors, notably in the back half of the year, as we further elevate and strengthen our long-term position in the marketplace. We now expect Europe revenue to grow approximately low single digits, compared to low to mid single digits previously. This outlook reflects positive underlying growth, partly offset by increased pressure on consumer traffic and broader macroeconomic volatility in the second half of the year. We remain focused on driving high-quality near-term results while continuing to invest behind long-term brand elevation and margin expansion. And we now expect Asia revenue to increase low teens, up from our prior outlook of high single to low double digits. driven by our stronger than expected first half results along with ongoing brand momentum across our key markets in the region. We now expect full year operating margin to expand approximately 80 to 100 basis points in constant currency, up from our prior guidance of 60 to 80 basis points, largely driven by our better than expected second quarter results. We are also raising our full year gross margin outlook to approximately 80 to 100 basis points of expansion, compared to our prior guidance of 50 to 70 basis points. This reflects our stronger than expected Q2 results, along with our updated view on US tariffs, which assumes the prevailing rate of approximately 10% through December, followed by a return to reciprocal rates in the high teens in our fiscal fourth quarter. We continue to expect both gross and operating margin expansion to be weighted towards the first half of the fiscal year. reflecting normalizing AUR growth and the timing of key marketing activations, as well as our previously disclosed timing shifts in wholesale shipments. Our guidance continues to exclude the benefit of tariff refunds, which are not included in our adjusted non-GAAP results. As part of our long-term capital allocation strategy, related proceeds received will be primarily reinvested in the business, as well as directed toward initiatives that strengthen and advance are purpose and values. Foreign currency is now expected to benefit gross margin by approximately 10 to 30 basis points and have a roughly neutral impact on operating margin in fiscal 27. For the third quarter, we expect constant currency revenue to increase approximately low to mid single digits centered around three to 4%. This outlook includes approximately one point of negative impact from planned wholesale timing shifts and strategic off-price reductions in the quarter, with underlying growth of roughly mid single digits. Foreign currency is expected to negatively impact revenues by approximately 50 to 100 basis points. We expect operating margin to expand approximately 50 to 70 basis points in constant currency. with gross margin expansion more than offsetting higher marketing investments in the holiday period. Foreign currency is expected to benefit gross margin by about 20 to 40 basis points and have a roughly neutral to 20 basis point benefit to operating margin in the quarter. We expect our third quarter tax rate to be in the range of 23 to 24%, while the full year tax rate is still expected to be in the range of 21 to 22%. In closing, our teams continue to deliver against both our near-term commitments and long-term strategic priorities. This quarter's results demonstrate the strength of our diversified growth model, the benefits of our elevation strategy, and the discipline with which we are investing for the future, underscoring the enduring relevance of Ralph's timeless vision around the world. While the external environment remains dynamic, we are focused on what we can control. continuing to drive brand and product desirability, enhancing quality of sales, operating with discipline, and investing behind high return growth opportunities. Together, these actions position us well to deliver on our fiscal 27 commitments while strengthening the foundation for durable long-term value creation for all of our stakeholders. With that, let's open up the call for your questions.