Ralph Lauren Corp. charged past profit and sales projections in its fiscal fourth quarter — and while the company forecast continued expansion this year, waning consumer confidence is expected to slow the growth rate.
“The consumer is pressured from a sentiment standpoint in the key markets,” Patrice Louvet, president and chief executive officer, told WWD on Thursday. “You look at U.S. data, you look at U.K. data, you look at China data, the consumer sentiment is clearly challenged.”
The company has been steadily elevating its positioning and prices for about eight years, building a base that weathered the pandemic and its aftermath and is now being buffeted by U.S. President Donald Trump’s trade war.
The core Ralph Lauren customer is holding up, for now.
“We have not seen so far a change in behavior and engagement with our core consumer and are encouraged by the momentum that we have and this around the world,” Louvet said. “What we expect is that at some point this negative consumer sentiment is going to translate into purchasing behavior.”
Over the last fiscal year, Ralph Laruen’s revenues rose 7 percent to $7.1 billion — an increase of 8 percent in constant currencies.
But this year, the company is projecting that to slow to a low-single-digit increase in constant currencies. That points to a significant slowdown in the fall since high-single-digit growth is expected to continue for the first fiscal quarter.
Wall Street analysts saw that guidance as cautious — and Louvet is, just a tiny bit, tiptoeing into the year given the unusually uncertain environment.
“The way companies in the U.S. are going to be dealing with the tariffs is through pricing,” Louvet said. “So it’s likely that in the back half, which for us starts in September, the consumer will feel incremental inflationary pressure. That’s our current forecast. Things could change meaningfully. There could be a continued disconnect between consumer sentiment and consumer purchasing pattern. And then obviously there’s still uncertainty in terms of what the final situation will be on tariffs and that will impact different companies’ strategy.”
For now, the company is still working with plenty of momentum.
Fourth-quarter net income increased 42 percent to $129 million, or $2.03 a diluted share, from $90.7 million, or $1.38, a year earlier.
Excluding restructuring and other changes, adjusted earnings rose to $2.27 — 23 cents ahead of the $2.04 analysts had penciled in, according to Yahoo Finance.
Revenues for the quarter ended March 29 rose 8.3 percent to $1.7 billion from $1.6 billion a year earlier — stronger than the 5.1 percent expansion analysts forecast.
Revenues in North America increased 6 percent to $705 million while Europe rose 12 percent to $526 million and Asia was up 9 percent to $432 million, with China up 20 percent in constant currencies.
Shares of Ralph Lauren company rose 1.3 percent to close at $277.42 on Thursday, leaving it with a market capitalization of $17.1 billion.
Ralph Lauren brand is many things — classic, preppy — but it also leans on a certain consistency that shines through both with its fashions and its positioning on Wall Street. The company ended the year with $2.1 billion in cash and $1.1 billion in total debt.
Investors expect Ralph Lauren to win and it has continued to win.
“We remain bullish on Ralph Lauren following strong [fourth-quarter] results and conservative ‘reverse hockey stick’ guidance that sets up nicely for beats-and-raises in the year ahead,” said Tom Nikic, an analyst at Needham, in a research note to clients.
“With solid brand heat globally, proven pricing power to offset tariffs — eight straight years of AUR growth— and a stellar balance sheet…we think Ralph Lauren can drive high-quality, double-digit EPS growth in the coming years, with upside to fiscal 2026 guidance,” Nikic said.
Ralph Lauren just wrapped its three-year Next Great Chapter: Accelerate strategic plan and Louvet said it beat or met “all the key commitments we made externally.”
The company plans to lay out its vision for the next three years during an investor day in September.
But expect Louvet, who became CEO of Ralph Lauren in 2017, to continue pushing the brand forward.
“This company is on offense,” he said. “We want to fuel our momentum, we want to continue to recruit more consumers and continue to build scale.”
At the same time, the CEO said the company was being prudent in how it allocates resources while also continuing to develop its corporate agility.
“We live in an uncertain world,” Louvet said. “That will continue for many, many years because of just the era that we are in. And it’s important for us to continue to be nimble in touch with reality and agile, which I think the teams have done a very good job on them thus far.”
Less than 10 percent of the company’s production is made in China and bound for the U.S., which is helping it avoid the worst of Trump’s tariffs.
But when it comes to tariffs, Louvet said Ralph Lauren is used to the pressure.
“Cost headwinds are not a new phenomenon for us, and we’ve been dealing with that — if you remember, the cotton cost went through the roof. And cotton is 80 percent of our input costs. Obviously that was a material effect on our profitability. Then we had to deal with freight cost headwinds,” he said.
“We have a proven toolkit to deal with all types of cost headwinds,” he said, pointing to the company’s diversified supply chain, its relationships with strategic suppliers and its pullback from promotions.
Now it just remains to be seen how much of that toolkit Ralph Lauren is going to have to use this year.
