Ralph Lauren (RL) Q1 Revenue Rises 14%

Ralph Lauren (RL -6.43%), the luxury brand known for its polo shirts and timeless apparel, released its results on August 7, 2025. The company posted GAAP revenue of $1,719 million and non-GAAP earnings per share (EPS) of $3.77, both narrowly missing analysts’ estimates of $1,739 million (GAAP revenue) and $3.79 (non-GAAP EPS), respectively. Despite the small shortfall, the quarter was strong, with sales (GAAP) growing 13.7% over the prior year and notable expansion in both adjusted gross and operating margins. The period also saw healthy international momentum, though a marked inventory build and concerns about future U.S. demand are on the radar as the company heads further into the fiscal year.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q4 2025 earnings report.

Inside Ralph Lauren’s Business and Strategy

Ralph Lauren designs, markets, and sells high-end apparel, accessories, and home products. Its core offerings span men's, women's, and children’s clothing, as well as outerwear, fragrances, footwear, and home goods. The brand has built its reputation on classic American style and luxury, blending tradition with modern design to attract a global customer base.

Recent years have seen a sharpened focus on several areas: brand elevation, digital transformation, supply chain resilience, and worldwide growth. Key to success are sustained investments in the desirability of the brand, digital platforms, broadened global reach—especially in Asia and Europe—and ongoing supply chain optimization. The company also prioritizes sustainable design under its “Timeless by Design” program, aiming to preserve brand equity while appealing to shifting consumer values and habits.

Quarterly Highlights: What Drove the Results

This quarter stood out for significant international expansion and higher profitability, with Europe revenue up 16% and China revenue increasing over 20%. Revenue grew 14% on a reported (GAAP) basis, led by Asia and Europe. Asia’s sales surged 21% as reported, with China revenue was up more than 30% year-over-year. Comparable store sales in Asia increased 18%, driven by a 35% rise in digital commerce in Asia and steady brick‑and‑mortar store growth. Europe followed with a 16% revenue jump on a reported (GAAP) basis, strong retail and wholesale channels, and solid digital engagement. North America’s growth lagged but remained positive at 8% (GAAP). Retail comp sales in North America grew 12%, with digital commerce comparable store sales in North America were up 19%.

Margins improved meaningfully across the business. Gross margin (GAAP) rose 1.8 percentage points, reaching 72.3%. This margin—showing how much of every dollar in sales is left after paying for goods sold—was lifted by higher average unit retail prices (AUR), reduced promotional activity, and a favorable product and geographic mix. Adjusted operating margin also expanded, up 2.7 percentage points to 17.0%, reflecting tight expense management and robust full‑price demand even as marketing spending increased.

Digital commerce was a major success story. Online sales climbed sharply in Asia (+35%), but also advanced in North America digital commerce (+19%) (constant currency) and Europe revenue increased 11% on a reported and constant currency basis for the fiscal year. Ralph Lauren added 1.4 million new direct‑to‑consumer customers, with its total social media following reached nearly 66 million—a high single-digit increase over last year. The company continued to benefit from popular marketing activations, such as fashion events in Shanghai and Milan, and product launches like the Spring ’25 Hamptons line and Polo Play handbags.

There were some watchpoints. Inventory rose 18% (GAAP). Management described these inventories as “well-positioned to global demand,” but the increase outpaced revenue growth. Cash from operations (GAAP) declined versus the prior year, in part due to increased capital expenditures—including the acquisition of its Prince Street flagship retail location in New York. On the capital return side, Ralph Lauren repurchased $250 million in Class A shares and raised its quarterly dividend by 10% to $0.9125 per share, continuing an established trend of returning value to shareholders.

Looking Forward: Guidance and What to Watch

Management raised its outlook. It now expects revenue to increase by a low‑ to mid‑single‑digit percentage rate in constant currency, higher than previous guidance, and operating margin is expected to expand by 40 to 60 basis points in constant currency. For the upcoming quarter, it expects high single-digit revenue growth in constant currency for the upcoming quarter. Management also projects operating margin expansion of 120 to 160 basis points in constant currency for the following quarter.

However, leadership remains cautious about potential headwinds in the second half of the year. Key risks include new and higher tariffs, ongoing inflation, and possible declines in U.S. consumer confidence. Tariffs are likely to put pressure on gross margin beginning in the back half of the fiscal year, though management says it will respond with selective pricing and tighter expense control. Investors should watch inventory trends, North America’s revenue and margin, cash flow generation, the response to tariffs, and the pace of international growth, especially in fast-moving Asia. The quarterly dividend was raised 10% to $0.9125 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.