The operator welcomes participants to the Ralph Lauren First Quarter and Fiscal Year 2025 Earnings Call and gives instructions for the question-and-answer session. Corinna Van der Ghinst, Patrice Louvet, and Justin Picicci will be speaking on the call. The financial performance will be discussed on a constant-currency adjusted basis and forward-looking statements will be made. The company's actual results may differ from these statements due to risks and uncertainties. Non-GAAP measures can be found on the Investor Relations Web site. Patrice Louvet thanks everyone for joining the call.

The second paragraph discusses the company's strong performance in the first quarter of their Next Great Chapter: Accelerate plan, driven by their iconic brand and diversified growth engines. The company also continues to invest in strategic priorities, such as marketing and digital capabilities, to drive long-term sustainable growth. The three strategic pillars of the plan are also highlighted, including elevating the brand, expanding the core, and winning in key cities with their consumer ecosystem. The company's recent activations and social media following demonstrate their strong presence in global culture.

The company had a successful quarter with various campaigns, including a women's collection runway show in New York City, a summer polo campaign, a Purple Label presentation in Milan, and a partnership with Team U.S.A. for the 2024 Paris Olympics. These events drove high PR impressions and sales growth, showcasing the brand's effortless luxury and American style.

In the first quarter, the company saw strong growth in new customer acquisition and engagement, driven by their partnerships with Wimbledon and their DTC businesses. They also saw an increase in net promoter scores and online search, as well as a significant increase in social media followers. The company's second key initiative is to drive their core products and expand into newer categories. They saw low single-digit growth in their core products, with highlights including linen styles and newly launched products. High-potential categories such as Women's Apparel, Outerwear, and Handbags also saw mid single-digit growth.

In the Women's category, top sellers included cable knit sweaters, linen and oxford shirts, Polos, and shirt dresses. The Polo ID collection in handbags drove strong growth and new customer recruitment, with Jennifer Lawrence sporting a yellow Polo ID bag. The Wimbledon and Summer Olympics collections were also successful. The company's key initiative is to win in key cities through their consumer ecosystem, which includes direct-to-consumer channels such as stores and digital commerce sites. In the first quarter, they saw solid growth in both brick-and-mortar stores and digital channels, and opened new stores in top cities, particularly in Asia. The recently renovated Chicago flagship now includes a Ralph's Coffee shop, part of the company's hospitality business that engages with over 3 million consumers annually.

The company saw growth in Asia, Europe, and North America, with strong momentum in China. Their ecosystem expansion is focused on six key city clusters. The company's five key enablers, including sustainability and diversity initiatives, have been successful. The team is encouraged by the solid start to the fiscal year and is successfully combining the founder's vision with a data-driven approach to grow the brand globally. They are also focused on shifting towards direct-to-consumer sales and improving their supply chain to better serve consumers.

The company had a strong start to the fall season, with a solid first quarter performance that exceeded expectations. The CFO, Justin Picicci, expressed confidence in the company's ability to deliver on its strategic and financial objectives, leveraging its timeless brand and global momentum. Revenue growth of 3% was driven by direct-to-consumer channels and international businesses, and retail comps grew 5% with balanced growth in brick-and-mortar and digital channels. The company also saw a strong expansion in adjusted gross margin, driven by favorable mix shifts, AUR growth, and lower cotton costs.

In the first quarter, AUR increased 6% and adjusted operating expenses grew 4%, primarily due to planned marketing investments. The adjusted operating margin also expanded. In North America, retail comps grew 1%, but digital comps declined 4%. Wholesale revenues decreased 13% due to reduced sales of excess product and timing shifts. Excluding these shifts, full price sales declined in line with sellout trends.

The company's AUR at wholesale increased slightly and they expect North America wholesale declines to moderate in the future. They also plan to exit 45 department store doors this year and saw growth in all key markets in Europe except for the U.K. Retail sales in Europe were strong, driven by brand elevation and lower discount rates. In Asia, revenue and retail comps increased in all markets.

China sales for the company increased by low double-digits, with a strong performance during the 618 holiday sales. The company expects low teens growth in China for the year. Sales in Japan also increased, supported by marketing campaigns and a rebound in tourist spending. The company's strong balance sheet and cash flows allow for strategic investments and returns to shareholders. The company ended the quarter with $1.8 billion in cash and $1.1 billion in total debt. Net inventory decreased by 13% compared to last year. The company's outlook takes into account geopolitical and macroeconomic factors, such as inflation and supply chain disruptions. For fiscal '25, the company expects a low single-digit increase in revenue.

The company's outlook for the year includes stronger growth in direct-to-consumer sales and caution around the North America wholesale channel. Foreign currency is expected to negatively impact revenue growth, and the company plans to take price increases in Japan to offset this. The first and third quarters are expected to trend below the full-year outlook due to planned timing of wholesale receipts and other factors such as a shorter holiday selling window and potential impacts from the U.S. presidential election. The company still expects operating margin to expand and gross margin to improve, driven by international and full price DTC businesses, AUR growth, and favorable cotton costs. The company has successfully renegotiated its annual freight contracts, but expects incremental headwinds from higher spot rates, non-cotton material costs, and labor in the second half of the year.

The company is keeping a close eye on the potential for additional tariffs from China, but they are well-prepared due to diversification and near-shoring. They expect revenues to increase in the second quarter, with a focus on DTC channels, but foreign currency may have a negative impact. Operating margin is expected to expand in constant currency, but marketing expenses will increase due to key campaigns. The company expects a slight leverage in operating expenses, and foreign currency will have a negative impact on gross and operating margin. The fiscal '25 tax rate is expected to be lower than previously estimated.

Ralph Lauren's vision of inspiring a better life is still relevant today and resonates with consumers and employees. Despite challenges in the operating environment, the company's iconic brand and multiple drivers of growth continue to support its business. The company remains committed to its Next Great Chapter plan and investing in strategic priorities to create long-term value. During the earnings call, Patrice Louvet answers questions about consumer trends and the sustainability of growth in Europe, particularly in the D2C and wholesale channels.

The paragraph discusses the recent marketing activations at Ralph Lauren, such as fashion shows and presence at various events, and how they have positively impacted the brand's consumer response. Despite macro pressures on the consumer, the company's core consumer is responding well to these activations. This is due to the timeless products and elevated go-to-market strategy, particularly in China and Europe, which has helped Ralph Lauren to stand out in a volatile market.

The company is encouraged by the consistently strong performance of their Ralph Lauren stores in North America and attributes it to their teams executing with agility. They have a proven, diversified strategy and are focused on driving brand desirability and leveraging multiple drivers of growth. In Europe, they saw growth in all markets except the UK and a strong DTC comp. They did not participate in promotional activities and saw quality of sale gains. They also have a tailwind from tourism, but domestic demand is what drives their business. They are monitoring the macros, including the UK, Southern Europe, and FX, and are aware of ongoing issues in the Middle East and Red Sea.

Justin Picicci, the new CEO, is optimistic about the company's growth in Europe despite the volatile environment. He is proud of the work their European teams are doing and believes they are showing up in an elevated and engaging way. The company maintains its full-year guidance, even though Q1 came in ahead of expectations. Picicci is confident in their ability to deliver on their plan, even if the consumer environment gets tougher. In terms of modeling, North America wholesale for 2Q and the full-year should be considered on a year-over-year basis.

The company is pleased with their ability to maintain their full-year guidance, despite potential challenges in the global macro and consumer backdrop. They will continue to rely on their strong brand, products, diversification, flexible supply chain, and strong balance sheet. They are cautiously optimistic about wholesale trends in North America, but overall demand remains soft.

In Q1, North America wholesale revenue was affected by full-price shipment timing shifts and off-price reductions. However, underlying full-price sell-in was in line with spring seasonal trends. The company expects sell-in to stabilize in the second quarter and remain focused on driving growth in top doors, digital, and upper-tier businesses. International performance was strong in Europe and Asia, and the brand's elevation strategy is ongoing. The company also sees potential for SG&A leverage in the future.

The company's international presence is currently where their brand is most elevated, with strong performance in markets like Shanghai, London, and Munich. They will continue to consistently elevate their storytelling, product offering, and consumer experience, both online and in-store. The company's focus on IT and driving AUR has been a through line in their 57-year history. The company's momentum is broad-based, with strong performance in Japan, China, Korea, Australia, and Europe. The company's key priority is to bring consumers along on their elevation journey while maintaining competitive value. They also aim to achieve the same level of elevation in North America.

The company is working towards improving their performance in North America, which has been lower due to historical activities and over-distribution of the brand. They are seeing strong sales in full price stores and are focused on providing a unique consumer experience. In terms of SG&A, they expect some leverage in the second half of the fiscal year due to wholesale stabilization and timing of marketing activities. They also plan to scale key investments in talent, service, and DTC growth. They expect a balanced contribution to profitability between gross profit expansion and SG&A leverage in the future.

Justin Picicci, responding to a question from John Kernan, discusses the strong gross margin expansion in Q1 and the drivers behind it. He mentions factors such as favorable product mix, channel and geographic mix, and AUR growth. He also notes that inflation moderation will have less of an impact on AUR growth, but they expect it to continue in the mid-single digits. Additionally, they will see the benefits of time cost recapture in the second half of this year and next year.

The speaker discusses the current headwinds facing the company, including uncertainty in freight rates and the negative impact of FX. However, they feel well-positioned with durable gross margin drivers in the future. In response to a question about customer price sensitivity, the speaker notes that their full-price business is performing well, with strong gross margin expansion and a focus on quality of sales. They also mention seeing reductions in the off-price channel and targeting higher-quality, less price-sensitive consumers. There is a subset of value-oriented customers who are still feeling pressure, but the company has a tactical plan to convert them.

The company has been successful in targeting value-oriented consumers with their compelling price value, product propositions, and personalized communications. Despite challenges in the macro environment, they have seen an increase in AUR in Q1. They have been working on elevating their brand in the wholesale market and will continue to focus on their top 100 doors and digital. They will also be closing 45 lower-tier doors this fiscal year.

The impact of closing doors in North America will be minimal for the company. They plan to close 150 doors in the future, but are still seeing growth in their businesses and channels. There is a focus on high potential categories such as women's apparel, outerwear, and handbags, which grew mid-single digits in the quarter and outpaced total company growth. The company is optimistic about the progress made in these categories and has a positive outlook for the rest of the year.

The company is excited about their growth potential in the women's apparel, outerwear, and handbag market. They have seen continued momentum and double-digit growth in women's apparel, driven by foundational and timeless items. They are also pleased with their performance in outerwear, with a focus on lightweight options for year-round wear. The company sees potential for further growth in both categories and is building capabilities to compete in the market.

The speaker discusses the importance of handbags as a category for their company, noting the fragmented market and the potential for growth. They mention the success of their Polo ID handbag and the continued evolution of their foundational collections. They also mention the strength of their Lauren business and the positive response to their RL888 bag. They state that their high potential categories are expected to outperform the trend of the Polo company, and that even capturing a fraction of the market could have significant long-term potential for the company. The next question asks about the performance of their retail channel, specifically in regards to full price versus outlet stores.

In response to a question about the expansion of full price stores and the impact of lower cotton prices on gross margin, Patrice Louvet, CEO of Ralph Lauren, defers to Justin Picicci, the company's Chief Financial Officer. Justin explains that the company saw solid growth in brick-and-mortar stores in the first quarter, with full price stores performing particularly well. He also mentions the benefit of lower cotton prices, which is expected to have a positive impact on gross margin over the next two years. However, he notes that the impact will be back-weighted towards the second half of the year.

The speaker discusses the company's focus on growing its digital business and its success in Q1, with international sales leading the growth. They also mention their efforts to improve digital sales in North America, which were down in the quarter due to softer traffic trends. The company has implemented interventions to improve growth in this area.

The company has made investments in digital commerce and consumer technology to improve the consumer experience. They are focusing on site speed, curating their offerings, and refining personalized communications. They plan to leverage their success in Europe and Asia to improve performance in North America. They expect to see improvement in the second half of the fiscal year. The call has ended.

This summary was generated with AI and may contain some inaccuracies.