The paragraph is an introduction to the Ralph Lauren Corporation's Fourth Quarter Fiscal Year 2025 Earnings Call. The call is in a listen-only mode initially, but a question and answer session will follow. Karina Vanderkins, the host, introduces the key participants, including Patrice Louvet, the President and CEO, and Justin Padicci, the CFO. The discussion will focus on the company's financial performance on a constant currency adjusted basis, with the acknowledgment that forward-looking statements will be made, which are subject to risks and uncertainties detailed in SEC filings. The call will then be turned over to Patrice Louvet.

In the final year of their Accelerate plan, Ralph Lauren Corporation has successfully met its strategic and financial goals, reflecting the company's core values of quality and authenticity. Their brand's desirability has driven growth across various geographies, channels, and product categories. They reported strong fourth-quarter results, surpassing expectations, with an 8% increase in annual revenue and a 24% growth in adjusted operating profits. The international markets of Europe and Asia have become significant revenue segments, and the company continues to focus on long-term strategic investments and shareholder returns.

The paragraph discusses the company's strategic focus and resilience amidst a challenging global operating environment as they approach fiscal 2026. Despite uncertainties like tariffs and shifting consumer behavior, the company is well-prepared due to its established brand, diverse product portfolio, flexible expenses, and strong supply chain and balance sheet. The company plans to continue its offensive strategy, focusing on long-term growth through increased investments in brand desirability, market presence, and technology. The company is making progress in its strategic objectives to elevate its lifestyle brand, core business, and presence in key cities. Their marketing efforts, which integrate fashion, sports, and culture, aim to create impactful, emotionally resonant experiences globally.

In the fourth quarter, notable highlights included Ralph Lauren's Global Spring 2025 Hamptons campaign, spanning digital experiences and fashion events worldwide, including a significant event in Shanghai. The brand's sports sponsorships, such as the Australian Open and the lead-up to the Milano Cortina 2026 Winter Olympics, generated substantial revenue. Ralph Lauren's collections were prominently featured on celebrities during major events, contributing to robust growth in customer acquisition, particularly among young, less price-sensitive women. Social media engagement also saw a notable increase. The brand aims to continue expanding its reach and influence into fiscal year 2026 by maintaining its commitment to quality and style in its offerings.

The paragraph discusses how the company is managing inflationary pressures while maintaining focus on delivering value to consumers. Despite challenges, the company has achieved consistent average unit retail (AUR) growth by investing in brand and product quality, optimizing product mix, reducing discounts, and strategic pricing. Core products, which are crucial in uncertain times, saw growth, with notable sales increases in items like sweaters, outerwear, linen offerings, and high-potential categories such as women's apparel and handbags. Handbag sales, led by the Polo ID collection and the new Polo Play line, performed exceptionally well, surpassing expectations and growing significantly.

The paragraph highlights Ralph Lauren Corporation's strategy to enhance its presence in key cities by developing consumer ecosystems through owned and partner stores, digital flagships, and selective wholesale. The company achieved a 13% increase in comparable sales, driven by growth in digital channels and new store openings in top cities, notably in Asia and Europe. Significant store openings included a return to San Francisco, and new locations in Beijing and London. Europe and Asia experienced double-digit growth, with North America showing mid-single-digit growth. The use of predictive buying across 25% of international DTC businesses has improved inventory efficiency and consumer service.

The paragraph discusses the opening of the Ralph Lauren Center for Cancer Prevention at USC Norris, marking the first such center on the West Coast and the third in the U.S., funded by the Ralph Lauren Corporate Foundation to support underserved communities. It highlights Ralph Lauren as the first fashion designer to receive the U.S. Presidential Medal of Freedom for cultural contributions. The company expresses pride in its team's dedication and financial performance in fiscal year 2025, emphasizing a strong brand, diversified growth, and a solid balance sheet. Looking ahead to fiscal 2026, the focus remains on brand momentum and strategic priorities amidst a challenging global environment. Justin Padicci, speaking next, notes the corporation's success in fiscal 2025 and exceeding fourth-quarter expectations, with contributions from all regions to revenue growth and margin expansion, aligning with their long-term strategic goals.

The company reported a strong financial performance, generating $1 billion in free cash flow and distributing $625 million to shareholders through dividends and repurchases. The Board authorized a 10% dividend increase and an additional $1.5 billion for share repurchases. Fourth-quarter revenue grew by 10%, surpassing expectations, with Europe, Asia, and North America showing sales increases of 16%, 13%, and 6% respectively. Comp sales rose 13%, driven by growth in digital and physical sales channels. The gross margin improved by 260 basis points to 69.2%, thanks to increased average unit retail (AUR) prices, a favorable sales mix, and reduced cotton costs.

The paragraph discusses the company's financial performance and strategic outlook. It anticipates high single-digit AUR growth in early fiscal 2026 due to brand elevation efforts. Adjusted operating expenses rose to 58.1% of sales, driven by increased marketing investments, which reached 7.3% of sales for the year. Fourth-quarter adjusted operating margin improved by 240 basis points to 11.1%, with a 40% rise in operating profit, surpassing expectations. In North America, fourth-quarter revenue increased 6%, fueled by strong sales in both direct-to-consumer and wholesale channels. Retail and digital sales showed significant growth, with wholesale revenue up 2% and a slight AUR increase. Despite positive trends, the company remains cautious about fiscal 2026 due to potential macroeconomic challenges. It also completed the exit of 60 department stores this year and plans to leave about 90 more in fiscal 2026, half of which are related to Hudson's Bay.

In the fourth quarter, the company saw significant revenue growth in Europe and Asia, with a 16% increase in Europe, fueled by double-digit retail and wholesale growth, particularly in Germany, France, Italy, and the UK. Retail and digital channels performed strongly, and wholesale growth was supported by reorder trends and timing shifts. In Asia, revenue rose 13%, led by notable growth in China and Japan, driven by strong digital and in-store sales and successful brand activations, including events like the Lunar New Year in China.

The balance sheet for Ralph Lauren Corporation shows $2.1 billion in cash and short-term investments and $1.1 billion in total debt. Inventory increased by 5% due to higher global demand and a shift in Easter's timing. The company is strategically managing its balance sheet to navigate industry volatility and support long-term growth, including investments in marketing, store upgrades, and selective real estate acquisitions, like their new Polo flagship in Manhattan. They aim for DTC-led growth but acknowledge potential challenges from tariffs, inflation, and other economic factors. For fiscal 2026, they expect low single-digit revenue growth, mainly from their Asia and Europe markets.

The company anticipates strong performance in the first half of the year, particularly Q1, with mid-single-digit revenue growth expected. No change in business trends is seen from Q4 into Q1, but caution is advised for the year's second half due to various macroeconomic factors, including tariffs and declining consumer confidence. Operating margins are expected to improve slightly, with flat gross margins anticipated despite tariff impacts. Plans are in place for additional pricing strategies in 2025 and beyond to mitigate tariff effects. The company is managing cost pressures through supply chain diversification, supplier partnerships for efficiency, and selective pricing strategies to maintain consumer value.

The company is navigating tariff challenges with increased agility and a stronger focus on an international, less price-sensitive customer base, which now constitutes 57% of total revenues. Gross margins have improved by 700 basis points since pre-pandemic levels, due to disciplined inventory management and expense flexibility. For fiscal 2026, freight impacts are expected to be neutral, and foreign currency effects minimal. In the first quarter, revenues are projected to grow in high single digits and operating margins to increase by 150-200 basis points in constant currency. The expected tax rate is 20-21% for the first quarter and 20-22% for fiscal 2026. Capital expenditures will be 4-5% of sales, supporting recent acquisitions and ongoing projects in technology and transformation. The company attributes its success to its team's execution and adherence to Ralph's vision of inspiring a better future.

The company remains focused on delivering its strategic priorities despite a changing global environment. In the Q&A session, Matthew Boss from JPMorgan asks about the health of the consumer and any strategic changes due to uncertain conditions. Patrice Louvet emphasizes the success and resilience of their strategy across different environments, highlighting strong brand momentum, market growth potential, and a robust business model. The strategy remains relevant and broadly unchanged, with more updates expected at Investor Day.

The article emphasizes the company's strategy of investing in its brand to boost desirability and value perception across generations. Despite global economic uncertainties, the brand continues to perform well in various international markets like Milan, Munich, Shanghai, Melbourne, and New York. The company is focusing on agility and seizing opportunities rather than playing defense. While acknowledging the pressures on consumers due to geopolitical and economic factors, the brand's core consumer base remains resilient, and full-price sales are growing. The company is cautiously optimistic as it navigates the current fiscal year, maintaining a balance between aggressive strategies and prudent resource allocation.

In the paragraph, Justin Padicci addresses a question about fiscal year planning and the company's outlook. He explains that while the business is experiencing strong momentum globally, with particularly strong growth in Asia and Europe, they are taking a cautious approach in North America due to macroeconomic factors and cost inflation affecting consumer spending, especially in the year's second half. The Q1 guide anticipates positive growth, but they are mindful of consumer sentiment and the impact of rising prices. If conditions improve, they may capitalize on higher demand. In response to Jay Sole's question about pricing strategy for fiscal 2026, Justin emphasizes the company's strong position to handle cost challenges and highlights their strategic focus on elevating the brand and increasing average unit retail (AUR), which has grown significantly over eight years.

The paragraph discusses a company's strategy to handle various economic challenges, such as FX headwinds and recent tariff announcements, by implementing several measures. These include diversifying the global supply chain to reduce production costs, collaborating with supply chain partners for cost efficiencies, leveraging AI for better inventory planning, and considering selective pricing and discount reductions. As a result of diversification, no single country accounts for more than 20% of production. The company aims to maintain high quality, provide value to consumers, and expects the Average Unit Retail (AUR) for Q1 to increase in the high single digits compared to last year. They plan to remain adaptable for the rest of the year using a range of strategies.

In the paragraph, Justin Padicci discusses the company's approach to pricing and managing potential cost headwinds. He highlights that the company is on a long-term brand elevation journey, emphasizing Average Unit Retail (AUR) growth driven by factors like product and channel mix, discount reductions, and targeted pricing strategies. Despite the fluid situation with tariffs, the company expects high single-digit AUR growth in Q1, similar to past quarters, with minimal impact from tariffs or related actions. Justin assures that the company has the flexibility to use various tools, including pricing, to offset potential costs, as demonstrated during past challenges like inflation and freight costs. Proactive pricing adjustments were made for the fall of 2025.

The paragraph discusses the company's strategy and financial outlook, with a focus on customer value through the Elevation Board and reassessing opportunities as the situation changes. Justin Padicci outlines expected revenue growth by region, with high growth in Asia, moderate growth in Europe, and a decline in North America. Dana Telsey asks about marketing spend and product categories, with Patrice Louvet responding that marketing expenses have increased to a record 7.3% of revenue and will remain at that level to support diverse marketing activities. Additionally, Louvet addresses questions on product performance in women’s outerwear and handbags, and mentions real estate plans, highlighting interest in SoHo.

The paragraph discusses the company's strategy to continue expanding its marketing investments and overall profitability, focusing on high-potential categories like women's apparel, outerwear, and handbags. The company sees significant potential in these markets and aims to build on its core strengths, which performed well recently. It also highlights its principles of capital allocation, which remain consistent, emphasizing investment in opportunities with strong returns on investment. The company is invested in strategic real estate acquisitions, such as the purchase of an iconic location in New York City, which supports its long-term presence and growth strategy in key markets.

The article discusses a business strategy focused on future-proofing by investing in key city ecosystems and being selective with real estate opportunities to enhance long-term growth. Patrice Louvet highlights the importance of strategic resource allocation in iconic locations. The conversation then shifts to a Q&A session where Justin Padicci responds to Ike Borja from Wells Fargo, discussing the stabilization and growth of the US wholesale channel. Padicci expresses optimism about the sequential improvements and alignment of sell-in and sell-out, noting positive market shares and strong brand positioning.

The paragraph discusses a company's strategic approach to refining its distribution by targeting less price-sensitive consumers and focusing on full-price channels. The speaker notes that despite macroeconomic factors affecting consumer sentiment in the U.S., the company's outlook for fiscal 2026 accounts for some price elasticity due to industry-wide price increases. They emphasize their strategy of enhancing their top-tier distribution and digital presence while pruning lower tiers. They also highlight strong performance in Europe, particularly in Direct-to-Consumer (DTC) channels, and note that Europe is their highest margin region with significant growth potential in categories like women's products.

The paragraph discusses the company's strong performance in Q4 and continued growth in Q1 across key markets and channels, driven by effective marketing and customer acquisition strategies. The company is optimistic about future growth in Europe, despite geopolitical tensions and economic uncertainties like inflation. Their global "key city eco strategy" is effective, especially in Europe, exemplified by successful marketing and the opening of new stores. They have been opening 40 to 50 new stores across EMEA, slightly ahead of their planned schedule.

The article discusses the company's expansion plans and recent performance. They plan to open ten new owned stores and 25 partner stores in a region where their presence was previously limited. The focus has been on enhancing their full-price offerings, reducing dependence on wholesale, and boosting direct-to-consumer and digital engagement, particularly in Europe, which led to double-digit growth despite challenging conditions. In response to a question about China's performance, Patrice Louvet highlights that China experienced a 20% growth this quarter, continuing a trend of strong performance driven by effective consumer engagement and marketing efforts. Laurent Vasilescu also inquires about the gross margin and its relation to tariffs, although further details are not provided in the summary.

The paragraph discusses the significant growth and marketing strategies of a brand in China. The company's awareness, luxury perception, and consideration among younger demographics are increasing. They've accelerated marketing activities, notably a documentary showing and a fashion show in Shanghai, and have expanded their store presence with success. China comprises 9% of the company's total revenue, and there's optimistic growth potential. They aim for low double-digit growth in the fiscal year, focusing on consumer recruitment and footprint expansion. Despite cost challenges, they're maintaining gross margins with strategies like AUR growth and discount reduction.

The paragraph discusses the company's approach to managing operating margins amidst cost inflation and other financial challenges. Despite current pressures, the company has successfully achieved its three-year commitment to a 15% operating margin target ahead of schedule, with further expansion anticipated. The focus will remain on balancing margin growth with strategic investments for long-term growth. For the current year, the company expects modest operating margin expansion, driven by leveraging selling, general and administrative (SG&A) expenses as they benefit from past investments.

The paragraph outlines the company's strategy for driving profitability and top-line growth through 2026, focusing on three main drivers: average unit retail (AUR) expansion, unit growth, and new consumer recruiting. The company highlights a strong correlation between new consumer recruitment and top-line growth. They are committed to an "elevation strategy" involving enhancements in product mix, channel and geographic mix, and reduced promotional activities, which bolsters consumer and luxury perception. Additionally, by improving storytelling, product offerings, and customer engagement, they aim to enhance value perception, thereby supporting AUR growth.

The paragraph discusses the Ralph Lauren Corporation's strategies and outlook regarding their Average Unit Retail (AUR) growth, particularly highlighting opportunities in China. The company is committed to maintaining their AUR expansion by focusing on storytelling, product, and shopping experiences. The conversation shifts to addressing potential consumer pushback outside the U.S. regarding the brand's Americana image amid political tensions. While there is some domestic caution, CEO Patrice Louvet notes that there are currently no significant concerns about international anti-American sentiment affecting the brand's momentum.

The company, founded by Ralph, is built on universal values like optimism, authenticity, timelessness, elegance, and family, which have a global appeal. Despite concerns about anti-American sentiment, the company has not encountered any issues and continues to engage consumers effectively. They are monitoring the situation and preparing for their first quarter earnings call in August. The call concludes with a message of thanks and well-wishing from the speaker, and the operator informs listeners they may disconnect.

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