Ralph Lauren Q1 Earnings Beat on Strong Demand and Margin Growth

Ralph Lauren Corporation RL delivered better-than-expected first-quarter fiscal 2027 results, with adjusted earnings of $4.59 per share, up 22% year over year and ahead of the Zacks Consensus Estimate of $4.30 by 6.7%. Revenues increased 14% to $1.96 billion, topping the consensus estimate of $1.88 billion by 4.4%. In constant-currency, revenues increased 13%.

Results benefited from broad-based geographic strength, higher full-price selling and double-digit comparable store sales growth. Global comparable store sales increased 12% in constant currency, supported by digital and brick-and-mortar retail momentum.

Following the earnings release, Ralph Lauren's shares have increased more than 5% during the trading session. This Zacks Rank #3 (Hold) stock has risen 16.2% in the past six months against the industry's 1.8% drop.

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RL Expands Growth Across Key Markets

Ralph Lauren’s revenue growth was driven by strength across regions, with Asia leading performance. Asia revenues increased 24% year over year to $589.3 million on a reported basis, while constant-currency revenues rose 25%. Comparable store sales in Asia increased 23%, including a 32% gain in digital commerce and a 22% increase in brick-and-mortar stores.

North America revenues rose 13% to $740.3 million, supported by retail comparable store sales growth of 9%. Digital commerce increased 8%, while brick-and-mortar stores advanced 10%. Europe revenues grew 7% to $594.4 million, with constant-currency growth of 5%.

Ralph Lauren Sees Strong Consumer Engagement

Ralph Lauren continued to benefit from brand momentum and product strength during the quarter. The company added 1.5 million new consumers in its direct-to-consumer businesses, while total social media followers increased to more than 70 million.

The company’s direct-to-consumer network saw average unit retail increase 15%, reflecting product elevation and strong full-price selling trends. Management highlighted continued momentum in core offerings and high-potential categories, including Women’s Apparel, Outerwear and Handbags.

RL Improves Margins Despite Cost Pressures

RL strengthened profitability as gross margin expanded to 73.7%, up 140 basis points from the prior-year quarter. Gross margin improvement was driven by higher average unit retail, favorable channel and geographic mix shifts, which more than offset tariff pressure and other product costs.

Adjusted operating income increased 24.9% year over year to $365.9 million, while adjusted operating margin expanded 170 basis points year over year to 18.7%. The improvement reflected gross margin gains, even as operating expenses increased 14% year over year.

Ralph Lauren Delivers Channel-Based Revenue Gains

Ralph Lauren’s retail channel remained a key contributor to growth, with retail revenues increasing 16.7% year over year to $1.4 billion. Wholesale revenues also improved 14.7% to $554.7 million from $483.5 million, while licensing revenues increased 4.1% to $35.8 million.

The Zacks Consensus Estimate for revenues is pegged at $1.3 billion for Retail, $514 million for Wholesale and $34.4 million for Licensing.

The company continued expanding its global store presence, opening 22 new owned and partnered stores during the quarter. Ralph Lauren ended the period with 600 directly operated stores globally compared with 569 a year earlier.

Ralph Lauren Maintains Financial Flexibility

Ralph Lauren ended the first quarter of fiscal 2027 with $1.9 billion in cash and short-term investments and $1.2 billion in total debt. Inventory stood at $1.2 billion, down 5% from the prior-year period, reflecting disciplined inventory management.

The company generated $339.3 million in operating cash flow during the quarter and returned more than $300 million to shareholders through dividends and share repurchases. RL repurchased approximately $250 million of Class A common stock during the period.

RL Raises Fiscal 2027 Outlook

RL raised its fiscal 2027 outlook following stronger-than-expected first-quarter results. The company now expects constant-currency revenue growth of approximately 5-6% on a 52-week comparable basis, up from its previous outlook centered around 4-5%. Gross and operating margin expansion is likely to be stronger in the first half. Foreign currency is expected to have a roughly neutral impact on gross and operating margins in the fiscal year.

The company also increased its adjusted operating margin expansion forecast to approximately 60-80 basis points in constant currency. For the second quarter, RL expects constant-currency revenue growth of about 5-6% and operating margin expansion of approximately 80-100 basis points. Foreign currency is likely to hurt revenues by approximately 100-150 basis points.

Key Picks in the Consumer Discretionary Space

Duluth Holdings Inc. DLTH, which deals in casual wear, workwear and accessories for men and women, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

Duluth Holdings delivered a trailing four-quarter earnings surprise of 107.5%, on average. The Zacks Consensus Estimate for DLTH’s current financial-year EPS indicates a rise of 39.5% from the year-ago number. 

Columbia Sportswear Company COLM, which engages in the sourcing, marketing and distribution of outdoor and active lifestyle apparel, footwear, accessories and equipment, currently carries a Zacks Rank #2 (Buy).

COLM delivered a trailing four-quarter earnings surprise of 36%, on average. The Zacks Consensus Estimate for Columbia Sportswear’s current financial-year sales indicates growth of 2.1% from the year-ago number. 

Crocs, Inc. CROX, which is a leading footwear company, currently carries a Zacks Rank of 2. CROX delivered a trailing four-quarter earnings surprise of 13.6%, on average. 

The Zacks Consensus Estimate for Crocs’ current financial-year EPS indicates a rise of 10.8% from the year-ago number.  

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This article originally published on Zacks Investment Research (zacks.com).

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