Fashion brand Ralph Lauren (NYSE:RL) announced better-than-expected revenue in Q1 CY2025, with sales up 8.3% year on year to $1.70 billion. Guidance for next quarter’s revenue was optimistic at $1.63 billion at the midpoint, 2.3% above analysts’ estimates. Its non-GAAP profit of $2.27 per share was 11.3% above analysts’ consensus estimates.
Revenue: $1.70 billion vs analyst estimates of $1.65 billion (8.3% year-on-year growth, 3.2% beat)
Adjusted EPS: $2.27 vs analyst estimates of $2.04 (11.3% beat)
Adjusted EBITDA: $210 million vs analyst estimates of $218.4 million (12.4% margin, 3.9% miss)
Revenue Guidance for Q2 CY2025 is $1.63 billion at the midpoint, above analyst estimates of $1.59 billion
Operating Margin: 9.1%, up from 6.9% in the same quarter last year
Free Cash Flow Margin: 2.5%, down from 5.2% in the same quarter last year
Constant Currency Revenue rose 10% year on year (2.9% in the same quarter last year)
Market Capitalization: $16.92 billion
"Our strong performance in the third and final year of our Next Great Chapter: Accelerate plan underscores the growing desirability of our brand and our team's powerful execution as we navigated a dynamic global operating environment," said Patrice Louvet, President and Chief Executive Officer.
Company Overview
Originally founded as a necktie company, Ralph Lauren (NYSE:RL) is an iconic American fashion brand known for its classic and sophisticated style.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Ralph Lauren’s sales grew at a weak 2.8% compounded annual growth rate over the last five years. This was below our standards and is a rough starting point for our analysis.
Ralph Lauren Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Ralph Lauren’s annualized revenue growth of 4.8% over the last two years is above its five-year trend, but we were still disappointed by the results.
Ralph Lauren Year-On-Year Revenue Growth
We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 5% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Ralph Lauren has properly hedged its foreign currency exposure.
Ralph Lauren Constant Currency Revenue Growth
This quarter, Ralph Lauren reported year-on-year revenue growth of 8.3%, and its $1.70 billion of revenue exceeded Wall Street’s estimates by 3.2%. Company management is currently guiding for a 7.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months, similar to its two-year rate. This projection is underwhelming and indicates its products and services will face some demand challenges.
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Operating Margin
Ralph Lauren’s operating margin has been trending up over the last 12 months and averaged 12.3% over the last two years. Its profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.
Ralph Lauren Trailing 12-Month Operating Margin (GAAP)
This quarter, Ralph Lauren generated an operating profit margin of 9.1%, up 2.3 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Ralph Lauren’s EPS grew at a solid 13.7% compounded annual growth rate over the last five years, higher than its 2.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Ralph Lauren Trailing 12-Month EPS (Non-GAAP)
In Q1, Ralph Lauren reported EPS at $2.27, up from $1.71 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Ralph Lauren’s full-year EPS of $12.33 to grow 9.2%.
Key Takeaways from Ralph Lauren’s Q1 Results
We enjoyed seeing Ralph Lauren beat analysts’ constant currency revenue expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its EBITDA missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 3.1% to $283 immediately following the results.
