The paragraph introduces Ralph Lauren's Second Quarter Fiscal Year 2025 Earnings Call. The operator welcomes participants, noting it will be a listen-only mode initially with questions allowed later. The call is being recorded and hosted by Corinna Van der Ghinst, with key speakers including Patrice Louvet, President and CEO, and Justin Picicci, CFO. The financial performance will be discussed on a constant currency adjusted basis, with reported results available in a press release. Forward-looking statements will be made, and actual results may differ due to risks detailed in SEC filings. Patrice Louvet thanks participants and begins the discussions.

In the second quarter, the company delivered strong performance, driven by its diversified growth strategy and improved brand desirability. Despite a challenging global environment, it exceeded expectations in topline growth and margins, allowing reinvestment in brand building and strategic initiatives. The retail business, particularly, showed double-digit growth, reflecting the brand's pricing power and reduced discounting. The company also emphasized disciplined expense management to strengthen its balance sheet, supporting investment in priorities while exceeding profitability expectations. This success boosts confidence in their full-year outlook. The firm continues progress on three strategic pillars: elevating the lifestyle brand, expanding core offerings, and strengthening the consumer ecosystem.

The paragraph highlights Ralph Lauren's successful brand presence and initiatives in the second quarter, emphasizing its role as the official outfitter for Team USA at the 2024 Paris Olympics and the Wimbledon Championships. The brand achieved significant visibility during the Olympics, with appearances by celebrities and athletes like Beyonce and Billie Eilish. Ralph Lauren also sponsored the U.S. Open, showcasing retro-inspired uniforms. These sports-related campaigns generated over 142 billion PR impressions worldwide, enhancing brand awareness and desirability. Additionally, the paragraph mentions the brand's participation in New York Fashion Week with a Spring 2025 runway show in the Hamptons.

The article discusses the success and growth strategies of Ralph Lauren, highlighting a recent event that generated significant publicity and online engagement with over 33 billion PR impressions and 205 million views. The brand has successfully attracted 1.5 million new customers in the second quarter, primarily younger, higher-value demographics. This growth is reflected in increased global brand consideration, Net Promoter Scores, and social media followers. Focusing on their core products, which make up over 70% of the business, Ralph Lauren reported sales growth that outpaced overall company performance. The brand is leveraging its iconic products, like Polo shirts and cashmere sweaters, while also exploring new opportunities, such as handbags, to achieve long-term potential.

The article discusses Ralph Lauren's recent success, highlighting strong growth in their Polo original label and high-potential categories like women's apparel, outerwear, and handbags. Polo Women's, in particular, performed well with expanded collections and collaborations. The brand also launched the Pink Pony collection, supporting cancer prevention. The company is focusing on key city ecosystems worldwide, showing accelerated growth in their direct-to-consumer segment, primarily through brick-and-mortar stores and expansion in Asia, with 25 new stores opened globally.

The paragraph highlights the company's store openings in various locations and strong growth in different regions, particularly in Asia and Europe. Notably, North America returned to growth due to robust direct-to-consumer sales and normalized wholesale trends. China experienced revenue growth driven by new customer acquisition and store expansions, with the brand focusing on domestic consumers. Despite China's current 8% share of total sales, the company sees long-term potential and is cautiously expanding in key city clusters. The company's progress in sustainability is emphasized, including a significant reduction in greenhouse gas emissions and the use of sustainable materials. The leadership is motivated by the team's achievements in the first half of the fiscal year.

The paragraph highlights the company's strong start to fiscal 2025, with second-quarter results surpassing expectations across key metrics. Revenue growth was driven by better performance in the direct-to-consumer channel, with gross and operating margins exceeding projections. This allowed the company to counteract supply chain disruptions and invest further in brand building and digital strategies. All regions contributed to operating margin expansion despite a challenging global environment. Encouraged by this progress, the company is raising its full-year outlook. The second quarter saw a 6% revenue growth, primarily led by direct-to-consumer channels, with retail comparisons growing by 10% due to increased full-price sales penetration across regions.

The company experienced significant growth in its digital ecosystem and improved its adjusted gross margin to 67.1%, driven by favorable sales shifts, AUR growth, and lower costs. AUR increased by 10% in the second quarter, surpassing expectations due to reduced discounting and positive consumer response to new offerings. Despite a 7% growth in adjusted operating expenses, driven by marketing investments, the overall operating margin improved to 11.7%. In North America, second quarter revenues grew by 3%, with retail momentum outweighing a planned decline in wholesale. Marketing efforts were focused on key campaigns, with expected reduced spending in the latter half of the fiscal year.

The article discusses the financial performance of a retail business, highlighting a 9% increase in brick-and-mortar sales, while digital sales saw a 2% decline due to investments in targeted marketing and site enhancements. Despite a 3% decrease in total North America wholesale revenues, wholesale AUR increased due to well-managed inventories. The company plans to exit 45 department store locations, aiming to refine brand presence. In Europe, second quarter revenues rose by 6%, with strong growth in both retail and digital channels, especially in France and Germany. The company achieved high brand consideration scores in France, particularly among women and younger consumers, supported by marketing efforts tied to summer sports events, including the Olympics.

The paragraph discusses the performance of Europe and Asia wholesale segments for a company. In Europe, wholesale growth was slightly below expectations due to strategic sales reductions and receipt timing shifts caused by Red Sea disruptions. Underlying growth would have been higher without these impacts. Future growth is expected to improve, aided by positive trends and receipt shifts. In Asia, revenue increased by 10%, exceeding outlooks, with Japan and China showing strong performance driven by marketing, full-price selling, and tourism. The company maintains a strong balance sheet, with $1.7 billion in cash and short-term investments and $1.1 billion in debt, enabling strategic investments and shareholder returns.

The company generated about $300 million in free cash this fiscal year, allowing for $375 million in dividends and share repurchases while continuing long-term investments. Net inventory decreased by 6%, aligning with plans, and supply improved despite disruptions, such as a port strike. The supply chain was adjusted to mitigate these issues. The company aims to align inventories with revenue growth by the end of fiscal 2025 and anticipates a 3% to 4% increase in constant currency revenues, up from a previous estimate. Growth is expected in direct-to-consumer and international markets, with foreign currency volatility’s impact on revenue growth reduced due to better Asian FX rates.

The paragraph discusses the expected impacts on revenue and margins for the fiscal year. It highlights challenges in Q3, such as a shorter holiday selling window and shifts in sale dates in North America, with offsets from earlier European Boxing Day sales. Q4 will be affected by a late Easter, but positive underlying trends should support growth in Q3 and Q4 comps. The company projects operating margin expansion to 13.6%-13.8% and gross margin growth driven by favorable business shifts, increased average unit retail prices, and reduced cotton costs, despite some cost headwinds. Additionally, foreign currency is anticipated to have a slight negative impact on fiscal 2025 margins but benefit Q3 revenue marginally. Revenue growth for Q3 is projected at 3%-4% in constant currency, particularly from direct-to-consumer channels, with improvements in wholesale alignment in North America and Europe.

The paragraph discusses Ralph Lauren's financial and operational outlook, projecting an expansion in third-quarter operating margins by 100 to 140 basis points due to gross margin growth. Marketing expenses are expected to remain consistent with the previous year for the third quarter but decrease in the fourth quarter. Foreign currency impact is expected to be neutral, and a tax rate of 22% is anticipated for the third quarter. Capital expenditure is projected to be between $250 million and $300 million. The company is optimistic about its performance in a challenging global market, highlighting Ralph Lauren as a strong and authentic brand with potential for growth in core and emerging categories. The CEO expresses commitment to expanding the brand's vision across generations and geographies. The paragraph concludes with the opening of a Q&A session, where Matthew Boss from J.P. Morgan asks about the company's international growth, particularly in Europe and China, and the sustainability of this momentum.

In the paragraph, Patrice Louvet discusses the company's successful strategies leading to robust operating margins and strong brand performance internationally, despite challenging conditions. He attributes this success to three main factors: a unique and timeless brand supported by continuous marketing efforts, products that appeal across different geographies and generations, and core products making up a significant portion of the business. These elements are driving consumer engagement and demand, resulting in positive financial results and increased guidance.

The paragraph discusses Ralph Lauren's competitive advantages, including its diverse lifestyle portfolio and effective market strategies, particularly in China, Europe, and North America, where there's strong growth in key cities and brick-and-mortar stores. The company is focused on maintaining momentum and executing its multi-lever strategy effectively. Justin Picicci addresses margin targets, stating that they are on track for a fiscal 2025 target of 15% and will continue to focus on margin expansion and strategic investments for long-term growth, including potential investments in marketing.

The paragraph discusses Ralph Lauren's strategies for maintaining and enhancing pricing power. Justin Picicci cites the brand's long-term investments in brand elevation as key to this pricing power, which will continue through the holiday season and beyond. The company plans for mid-single-digit Average Unit Retail (AUR) growth, shifting away from recent like-for-like pricing used to counteract inflation. Ralph Lauren's strategy includes focusing on high-end products, category opportunities, and quality marketing. Additionally, strategic changes in geographic and channel distribution are expected to support AUR growth, particularly through expanding high-quality, full-price offerings globally.

The paragraph discusses Ralph Lauren's strategy to focus on acquiring high-value customers who shop at full price, allowing them to reduce reliance on promotions and discounts. This approach has positively impacted their average unit retail and gross margins over the years. The company notes strong performance in their North American full-price stores, driven by increased traffic and a favorable sales mix, particularly from women's products. Promotional discounts have decreased, reinforcing the full-price strategy. The company is also expanding with new store openings globally and is optimistic about growth opportunities.

The paragraph discusses Ralph Lauren's retail strategy and recent performance. The company is on track to meet its goal of opening 15 to 20 new full-price stores in North America, with the next one in San Francisco. They are seeing profitability across their North American stores and globally. Michael Binetti from Evercore ISI asks about U.S. wholesale performance, which was down 3% in the quarter. He inquires if it could turn positive this year and about initial 2025 orders. He also questions about SG&A (selling, general and administrative expenses), noting it remained flat despite revenue growth. Justin Picicci responds positively about North America wholesale, noting alignment between sell-in and sell-out figures, and highlights strong performance in upper-tier distribution, key city doors, and digital channels.

The paragraph discusses the company's financial and strategic approach for the fiscal year, focusing on stabilizing growth and leveraging Selling, General and Administrative (SG&A) expenses. The company aims for single-digit growth stabilization in the year's latter half and is experiencing SG&A leverage, even after accounting for marketing expenses. Despite higher expenses due to events like the Olympics and fashion shows, these are seen as valuable brand investments. The company increased its profitability guidance and expects marketing expenses to normalize in the fourth quarter. There's confidence in expense management and reinvestment decisions, contributing to both immediate and long-term growth, with plans for leverage in revenue growth through wholesale stabilization and Direct-to-Consumer (DTC) growth.

The paragraph discusses the consistent global success and resonance of Ralph Lauren's core and high-potential product categories, such as Polo shirts and cable knit sweaters, across major cities like Tokyo, Seoul, Shanghai, and Milan. Despite economic uncertainties, consumers are gravitating towards trusted brands and product categories, benefiting Ralph Lauren due to its established credibility. The success is not a short-term trend but the result of Ralph Lauren's strategy to focus on core products first and then expand. The women's category, particularly driven by Polo Women's, has seen significant growth, with products like Polo Caps and bear sweaters being popular worldwide.

The paragraph discusses the company's strategic shift from a seasonal to a year-round outerwear business, resulting in strong growth. It highlights the success of the Polo ID handbag collection with younger consumers and appreciates the consistent performance across regions, particularly noting North America's return to growth. The company's diversified growth model is emphasized, detailing global sourcing strategies that reduced dependence on China to a high single-digit percentage of global production. This diversification and strong global partnerships have been advantageous, especially during the pandemic.

In the paragraph, the speaker discusses their company's recent performance and outlook. They express satisfaction with strong comp store sales in North America, highlighting growth in both full-price and outlet stores, primarily driven by increased traffic and improved conversion rates. In Europe, performance exceeded expectations, but specific drivers are not detailed. Looking forward, while the speaker anticipates continued strength in direct-to-consumer (DTC) sales, they note potential moderations in growth due to a compressed holiday period and a shift in end-of-season outlet sales in the third quarter.

The paragraph discusses the company's positive performance in Europe, particularly over the first half of the year, with solid growth in all key markets except the U.K. They are optimistic about their trend growth and have increased their guidance, targeting low-to-mid-single-digit growth, with direct-to-consumer (DTC) performance at the higher end and wholesale at the lower end. The company attributes this success to strong execution and improving brand perception. The discussion shifts to North America, where the company plans to reduce promotional activity and increase average unit retail (AUR) prices, maintaining stable like-for-like pricing in the near future.

The paragraph discusses the company's pricing and promotional strategies. They plan to stay flexible with pricing due to changing costs and currency fluctuations, particularly in Japan. Their strategy is to reduce promotions and focus on maintaining excitement and engagement with consumers by highlighting the value of their products. However, defining an optimal promotional level is challenging due to competition. The company's recent performance gives them confidence in continuing this strategy. The conversation then transitions to a question about Average Unit Retail (AUR) expectations, with an implication that unit velocity might become positive, indicating potential growth.

The paragraph discusses the impacts of holiday shifts on revenue projections for the second half of the year. Justin Picicci explains that holiday schedule changes will have less than a 1-point net headwind on Q3 revenue but will provide about a 1-point net benefit to Q4 revenue. Despite these factors, strong underlying trends are expected for the second half of the year. Regarding unit and average unit retail (AUR) growth, the company anticipates moderation from Q2 levels, but still expects low-to-mid single-digit AUR growth. The company is focused on increasing unit growth in certain markets and product categories, even as AUR growth slows down. The gap between AUR growth and total unit growth is expected to narrow over time.

The paragraph discusses Patrice Louvet's positive outlook for Ralph Lauren's growth in China, highlighting the company's successful momentum over 17 consecutive quarters, including a 13% growth in the past quarter. Louvet emphasizes the drivers of this growth, such as new customer acquisition, store expansion, and engagement on platforms like Douyin. The company remains focused on key cities and is excited about new full-price stores, like the recently opened one in Shenzhen, as well as opportunities to showcase products like Polo Women. Despite current macroeconomic conditions, Ralph Lauren considers China, currently 8% of its total operations, a significant area for future growth.

The company plans to open 70 stores in Asia this year, focusing on strategic locations, particularly in China, to build the brand long-term. They emphasize disciplined expansion rather than short-term gains. Despite a volatile environment, they are optimistic about growth opportunities in China and other regions like Europe and North America, aligning with their diversified growth strategy. The discussion then shifts to Europe, where John Kernan from TD Cowen congratulates the company on its growth. Patrice Louvet highlights the strong performance in Europe's direct-to-consumer (DTC) sector, both in physical stores and online, indicating consistent growth beyond just one quarter.

The paragraph discusses a company's strategy for store expansion, noting they are significantly underpenetrated compared to competitors. They see ongoing growth opportunities in key cities, including London, and plan to open more stores, with a target of opening 40 to 50 full-price stores, either owned or partnered. They have already opened 44 new stores since fiscal year 2022 and plan around 20 more this fiscal year, with 14 recently opened in Europe. The company is selective about store locations and consumer engagement and is optimistic about growth in the EMEA region. They express gratitude for their teams' efforts and look forward to future earnings discussions.

The paragraph conveys a holiday message from Ralph, Justin, and the Ralph Lauren team, wishing everyone happy holidays and advising them to take care. The operator then concludes the conference call, thanking participants and informing them they can disconnect.

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