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RL Q2 Earnings Beat Estimates on Strong Asia Sales, Margins Rise
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Key Takeaways
Ralph Lauren's Q2 adjusted EPS rose 22.4% to $4.64, beating estimates, while revenues grew 9.1% to $2.19B.
Asia revenues surged 28.2%, led by strong China demand, while global comparable store sales increased 10%.
RL raised its fiscal 2027 revenue growth outlook to 6-7% and projects 80-100 basis points of margin expansion.
Ralph Lauren Corporation (RL - Free Report) delivered better-than-expected second-quarter fiscal 2027 results, with adjusted earnings of $4.64 per share, up 22.4% year over year and beating the Zacks Consensus Estimate of $4.27 by 8.7%. Revenues increased 9.1% to $2.19 billion, topping the consensus estimate of $2.14 billion by 2.3%. In constant currency, revenues rose 9.6%.
Ralph Lauren Corporation Price, Consensus and EPS Surprise
Results benefited from strong demand across regions, higher full-price selling and margin expansion. Global direct-to-consumer comparable store sales increased 10%, supported by growth across digital and brick-and-mortar channels.
This Zacks Rank #2 (Buy) stock has risen 10.8% in the past six months compared with the industry's 13.5% growth.
Image Source: Zacks Investment Research
RL Expands Growth Across Key Markets
Ralph Lauren's revenue growth was driven by strength across its geographic segments, with Asia leading performance. Asia revenues increased 28.2% year over year to $571.3 million on a reported basis, while constant-currency revenues rose 28.1%. Comparable store sales in Asia increased 24%, including a 31% gain in digital commerce and a 23% increase in brick-and-mortar stores.
North America revenues rose 6.4% to $885.6 million, supported by comparable store sales growth of 6%. Digital commerce increased 5%, while brick-and-mortar stores advanced 6%. North America wholesale revenues increased 8%, benefiting from earlier shipment timing.
Europe revenues grew 1.1% to $696 million, with constant-currency growth of 2.5%. Comparable store sales declined 1%, as a 9% increase in digital commerce was offset by a 4% decline in brick-and-mortar stores.
Ralph Lauren Sees Strong Brand and Consumer Momentum
Ralph Lauren continued to benefit from brand momentum and customer acquisition during the quarter. The company added 1.7 million new consumers to its direct-to-consumer businesses, while its social media following exceeded 72 million.
Average unit retail increased 9%, reflecting strong full-price selling and favorable geographic and channel mix. RL's core business grew 10%, while high-potential categories, including Women's Apparel, Outerwear and Handbags, recorded low-double-digit constant-currency growth.
China remained a significant growth contributor, with revenues increasing more than 35%. RL also expanded its global presence by opening 22 new owned and partnered stores during the quarter.
RL Improves Margins in Q2 Despite Higher Operating Costs
Ralph Lauren reported gross profit of $1.63 billion, with gross margin expanding 620 basis points year over year to 74.2%. Reported gross margin benefited primarily from tariff refunds received during the quarter.
Adjusted gross margin expanded 250 basis points to 70.5%, supported by higher average unit retail, favorable geographic mix and lower product costs.
Adjusted operating income increased 21.8% year over year to $344.6 million, while adjusted operating margin expanded 160 basis points to 15.7%. Adjusted operating expenses increased 10.9% to $1.20 billion, reflecting continued investments in marketing and long-term growth initiatives.
Ralph Lauren Delivers Growth Across Sales Channels
Ralph Lauren's retail channel remained a key contributor to growth, with revenues increasing 11.8% year over year to $1.41 billion from $1.26 billion. The performance reflected continued strength in its global direct-to-consumer business.
Wholesale revenues improved 5.4% to $739.4 million from $701.8 million in the prior-year quarter. Licensing revenues declined 9% to $40.4 million from $44.4 million.
The company ended the quarter with 606 directly operated stores globally compared with 582 a year earlier. Its licensed partner store network increased to 145 stores from 127.
RL Maintains Financial Strength and Inventory Discipline
Ralph Lauren ended the second quarter of fiscal 2027 with $1.82 billion in cash and short-term investments and $1.24 billion in total debt. Inventory stood at $1.15 billion, down 8.7% from the prior-year period.
The company generated $618.2 million in operating cash flow during the first six months of fiscal 2027, compared with $229.3 million a year earlier. Capital expenditures totaled $114.2 million.
RL repurchased approximately $250 million of Class A common stock during the quarter, bringing fiscal year-to-date repurchases to $500 million and completing its planned fiscal 2027 buybacks.
Ralph Lauren Raises FY27 Outlook
RL raised its fiscal 2027 outlook following stronger-than-expected first-half results. The company now expects constant-currency revenue growth of approximately 6-7% on a 52-week comparable basis, up from its previous outlook of 5-6%.
Ralph Lauren also increased its adjusted operating margin expansion forecast to approximately 80-100 basis points in constant currency. Foreign currency is expected to reduce full-year revenue growth by 40-60 basis points.
For the third quarter, RL expects constant-currency revenue growth of approximately 3-4%, with operating margin expansion of 50-70 basis points. Foreign currency is anticipated to hurt revenue growth by 50-100 basis points.
The company continues to expect a fiscal 2027 tax rate of 21-22%, while capital expenditures are projected at 4-5% of revenues.
Other Stocks to Consider
Some other top-ranked stocks have been discussed below:
Vince Holding Corp. (VNCE - Free Report) provides luxury apparel and accessories in the United States and internationally. It operates through Vince Wholesale and Vince Direct-to-Consumer segments. At present, the company sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VNCE’s current fiscal-year sales and earnings implies growth of 16% and 175%, respectively, from the year-ago reported figures. VNCE has delivered a trailing four-quarter earnings surprise of 561.4%, on average.
The Crocs, Inc. (CROX - Free Report) designs, develops, manufactures, markets, distributes and sells casual lifestyle footwear and accessories for men, women, and kids. At present, CROX flaunts a Zacks Rank of 1.
The Zacks Consensus Estimate for CROX’s current fiscal-year sales and earnings implies growth of 3.4% and 16.9%, respectively, from the year-ago figures. CROX delivered a trailing four-quarter earnings surprise of 10.9%, on average.
V.F. Corporation (VFC - Free Report) offers branded apparel, footwear and accessories for men, women and children in the Americas, Europe and the Asia-Pacific. VFC currently sports a Zacks Rank of 1.
The Zacks Consensus Estimate for VFC’s current fiscal-year sales implies a decline of 0.9%, while the same for earnings implies growth of 43.9% from the year-ago figures. VFC delivered a trailing four-quarter negative earnings surprise of 35.5%, on average.
View the Zacks #1 Rank List
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RL Q2 Earnings Beat Estimates on Strong Asia Sales, Margins Rise
Key Takeaways
Ralph Lauren Corporation (RL - Free Report) delivered better-than-expected second-quarter fiscal 2027 results, with adjusted earnings of $4.64 per share, up 22.4% year over year and beating the Zacks Consensus Estimate of $4.27 by 8.7%. Revenues increased 9.1% to $2.19 billion, topping the consensus estimate of $2.14 billion by 2.3%. In constant currency, revenues rose 9.6%.
Ralph Lauren Corporation Price, Consensus and EPS Surprise
Ralph Lauren Corporation price-consensus-eps-surprise-chart | Ralph Lauren Corporation Quote
Results benefited from strong demand across regions, higher full-price selling and margin expansion. Global direct-to-consumer comparable store sales increased 10%, supported by growth across digital and brick-and-mortar channels.
This Zacks Rank #2 (Buy) stock has risen 10.8% in the past six months compared with the industry's 13.5% growth.
Image Source: Zacks Investment Research
RL Expands Growth Across Key Markets
Ralph Lauren's revenue growth was driven by strength across its geographic segments, with Asia leading performance. Asia revenues increased 28.2% year over year to $571.3 million on a reported basis, while constant-currency revenues rose 28.1%. Comparable store sales in Asia increased 24%, including a 31% gain in digital commerce and a 23% increase in brick-and-mortar stores.
North America revenues rose 6.4% to $885.6 million, supported by comparable store sales growth of 6%. Digital commerce increased 5%, while brick-and-mortar stores advanced 6%. North America wholesale revenues increased 8%, benefiting from earlier shipment timing.
Europe revenues grew 1.1% to $696 million, with constant-currency growth of 2.5%. Comparable store sales declined 1%, as a 9% increase in digital commerce was offset by a 4% decline in brick-and-mortar stores.
Ralph Lauren Sees Strong Brand and Consumer Momentum
Ralph Lauren continued to benefit from brand momentum and customer acquisition during the quarter. The company added 1.7 million new consumers to its direct-to-consumer businesses, while its social media following exceeded 72 million.
Average unit retail increased 9%, reflecting strong full-price selling and favorable geographic and channel mix. RL's core business grew 10%, while high-potential categories, including Women's Apparel, Outerwear and Handbags, recorded low-double-digit constant-currency growth.
China remained a significant growth contributor, with revenues increasing more than 35%. RL also expanded its global presence by opening 22 new owned and partnered stores during the quarter.
RL Improves Margins in Q2 Despite Higher Operating Costs
Ralph Lauren reported gross profit of $1.63 billion, with gross margin expanding 620 basis points year over year to 74.2%. Reported gross margin benefited primarily from tariff refunds received during the quarter.
Adjusted gross margin expanded 250 basis points to 70.5%, supported by higher average unit retail, favorable geographic mix and lower product costs.
Adjusted operating income increased 21.8% year over year to $344.6 million, while adjusted operating margin expanded 160 basis points to 15.7%. Adjusted operating expenses increased 10.9% to $1.20 billion, reflecting continued investments in marketing and long-term growth initiatives.
Ralph Lauren Delivers Growth Across Sales Channels
Ralph Lauren's retail channel remained a key contributor to growth, with revenues increasing 11.8% year over year to $1.41 billion from $1.26 billion. The performance reflected continued strength in its global direct-to-consumer business.
Wholesale revenues improved 5.4% to $739.4 million from $701.8 million in the prior-year quarter. Licensing revenues declined 9% to $40.4 million from $44.4 million.
The company ended the quarter with 606 directly operated stores globally compared with 582 a year earlier. Its licensed partner store network increased to 145 stores from 127.
RL Maintains Financial Strength and Inventory Discipline
Ralph Lauren ended the second quarter of fiscal 2027 with $1.82 billion in cash and short-term investments and $1.24 billion in total debt. Inventory stood at $1.15 billion, down 8.7% from the prior-year period.
The company generated $618.2 million in operating cash flow during the first six months of fiscal 2027, compared with $229.3 million a year earlier. Capital expenditures totaled $114.2 million.
RL repurchased approximately $250 million of Class A common stock during the quarter, bringing fiscal year-to-date repurchases to $500 million and completing its planned fiscal 2027 buybacks.
Ralph Lauren Raises FY27 Outlook
RL raised its fiscal 2027 outlook following stronger-than-expected first-half results. The company now expects constant-currency revenue growth of approximately 6-7% on a 52-week comparable basis, up from its previous outlook of 5-6%.
Ralph Lauren also increased its adjusted operating margin expansion forecast to approximately 80-100 basis points in constant currency. Foreign currency is expected to reduce full-year revenue growth by 40-60 basis points.
For the third quarter, RL expects constant-currency revenue growth of approximately 3-4%, with operating margin expansion of 50-70 basis points. Foreign currency is anticipated to hurt revenue growth by 50-100 basis points.
The company continues to expect a fiscal 2027 tax rate of 21-22%, while capital expenditures are projected at 4-5% of revenues.
Other Stocks to Consider
Some other top-ranked stocks have been discussed below:
Vince Holding Corp. (VNCE - Free Report) provides luxury apparel and accessories in the United States and internationally. It operates through Vince Wholesale and Vince Direct-to-Consumer segments. At present, the company sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VNCE’s current fiscal-year sales and earnings implies growth of 16% and 175%, respectively, from the year-ago reported figures. VNCE has delivered a trailing four-quarter earnings surprise of 561.4%, on average.
The Crocs, Inc. (CROX - Free Report) designs, develops, manufactures, markets, distributes and sells casual lifestyle footwear and accessories for men, women, and kids. At present, CROX flaunts a Zacks Rank of 1.
The Zacks Consensus Estimate for CROX’s current fiscal-year sales and earnings implies growth of 3.4% and 16.9%, respectively, from the year-ago figures. CROX delivered a trailing four-quarter earnings surprise of 10.9%, on average.
V.F. Corporation (VFC - Free Report) offers branded apparel, footwear and accessories for men, women and children in the Americas, Europe and the Asia-Pacific. VFC currently sports a Zacks Rank of 1.
The Zacks Consensus Estimate for VFC’s current fiscal-year sales implies a decline of 0.9%, while the same for earnings implies growth of 43.9% from the year-ago figures. VFC delivered a trailing four-quarter negative earnings surprise of 35.5%, on average.