Ralph Lauren Q3 Sales Climb 12% to $2.4B on 22% Asia Surge
Ralph Lauren’s third-quarter revenue rose 12% to $2.4 billion (10% constant currency), driven by 22% Asia growth, 8% North America gains, and 12% Europe expansion, topping estimates. Gross margin expanded 150bps to 69.9% and average unit retail jumped 18%, boosted by strong holiday demand for Polo and leather handbags.
1. Q3 Earnings Beat but Shares Retreat on Margin Outlook
Ralph Lauren reported third-quarter fiscal 2026 earnings per diluted share of $5.82 on a reported basis and $6.22 on an adjusted basis, representing a 25% and 29% increase year-over-year, respectively. Revenue rose 12% to $2.4 billion on a reported basis and 10% in constant currency. Despite surpassing consensus earnings and revenue estimates, shares declined nearly 7% in early trading as investors focused on projected margin pressure in the fourth quarter driven by higher U.S. tariffs and anticipated product cost increases.
2. Segment Performance and Geographic Highlights
North America revenue climbed 8% to $1.1 billion, with comparable store sales up 7% and wholesale revenue advancing 11%. Europe delivered 12% growth to $676 million reported and 4% in constant currency, while Asia led all regions with 22% growth to $620 million in both reported and constant currency. Operating margins expanded most in Asia, up 490 basis points to 31.8%, followed by North America, up 70 basis points to 27.1%. Europe operating margin contracted by 150 basis points to 26.4%, partially offset by a 40-basis-point favorable currency impact.
3. Gross Profit, Operating Expenses and Cash Position
Gross margin widened 150 basis points year-over-year to 69.9%, benefiting from high-teens average unit retail price growth, favorable product mix and lower cotton costs. Operating expenses rose 12% to $1.2 billion on a reported basis, with the adjusted expense rate improving to 49.0% from 49.7% a year ago. The balance sheet remained robust with $2.3 billion in cash and short-term investments against $1.2 billion in debt. Inventory increased 15% to $1.1 billion as the company stocked for the upcoming season.
4. Raised Full-Year Guidance on Revenue and Margin Expansion
Ralph Lauren lifted its full-year fiscal 2026 outlook, now targeting high-single to low-double-digit constant-currency revenue growth and operating margin expansion of 100 to 140 basis points. The revised guidance reflects stronger holiday performance, with over 2.1 million new direct-to-consumer customers acquired in the quarter and digital commerce growth of 35% in Asia. Management highlighted investments in brand elevation, omnichannel capabilities and strategic partnerships as drivers of sustainable long-term value.