Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren First Quarter and Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions on how to ask a question will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn over the conference to our host, Ms. Corinna Van der Ghinst. Please go ahead.

Good morning, and thank you for joining Ralph Lauren's first quarter fiscal 2025 conference call. With me today are Patrice Louvet, the Company's President and Chief Executive Officer; and Justin Picicci, Chief Financial Officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller. During today's call, our financial performance will be discussed on a constant-currency adjusted basis. Our reported results, including foreign currency, can be found in this morning's press release. We will also be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties. Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our Investor Relations Web site. With that, I'll turn the call over to Patrice.

Thank you, Cori. Good morning everyone, and thank you for joining today's call. We started year-three of our Next Great Chapter: Accelerate plan with continued momentum, keeping us on track with our fiscal '25 and long-term strategic commitments. Our first quarter performance underscores the power and growing desirability of our iconic brand around the world with key moments that demonstrate our ability to resonate across cultures, geographies, and generations. This, combined with our diversified engines of growth and organizational agility, gives us confidence that our long-term strategy will continue to deliver, even through these dynamic times. First quarter results exceeded our expectations led by international and positive retail comps across all regions with continued momentum across consumer metrics. Performance in our global direct-to-consumer businesses and Europe wholesale more than offset planned softness in North America wholesale. At the same time, we continue to invest in our strategic priorities, including marketing, digital capabilities, and our targeted ecosystem expansion across our top cities. Fueled by our culture of operating discipline and increased efficiencies, these investments will enable us to drive long-term sustainable growth and value creation well beyond our current three-year plan. During the first quarter, we drove continued progress across our three strategic pillars. As a reminder, these include, first, elevate and energize our lifestyle brand. Second, drive the core and expand for more. And third, win in key cities with our consumer ecosystem. Let me take you through a few highlights from the first quarter. First, on our efforts to elevate and energize our lifestyle brand; from our recent activations in Milan, London, New York, and across China, to our rapidly expanding social media following, Ralph Lauren continues to be at the forefront of culture across geographies and demographics. Key campaigns from the quarter included, first, our women's collection runway…

Thanks, Patrice, and good morning, everyone. It's a privilege for me to step into the CFO role. And I am grateful for the support that Ralph, Patrice, Shin, and the Board have all showed me throughout this transition. I know I speak for the entire Ralph Lauren team when I say we remain firmly committed to delivering on our strategic and financial objectives, leveraging the power of our timeless brand, and strong momentum around the world. We had a solid start to fiscal '25 with first quarter top and bottom line results ahead of our expectations. This quarter's performance underscores the continued momentum and growing desirability of our brand as well as our multiple drivers of growth, which enabled us to deliver on our commitments even in a highly dynamic global operating environment. Our progress in Q1 also gives us confidence in reiterating the full-year outlook we introduced in May. Let's talk through our financial highlights. Which as a reminder, are provided on a constant currency basis. Total company first quarter revenue growth of 3% exceeded our guidance, led once again by our direct-to-consumer channels and international businesses. Total company retail comps grew 5% with balance growth across our brick-and-mortar and digital channels. Total digital ecosystem sales including our own sites and wholesale digital accounts, increased high single-digits. Total company adjusted gross margin expanded 210 basis points to 70.9%. This strong performance was driven by favorable mix shifts towards our full price and international businesses, AUR growth, and lower cotton costs. AUR increased 6% in the first quarter, in line with our expectations, and on top of a 15% increase last year. Our AUR growth continues to be driven by favorable product, category, channel, and geographic mix, along with reduced discounting, with minimal like-for-like pricing on moderating cost inflation. Adjusted…

[Operator Instructions] The first question comes from Michael Binetti with Evercore ISI.

Hey, guys, thanks for taking our questions here, and congrats on the nice quarter. One for Patrice, I guess, with the amount of volatility we're seeing in the marketplace here, especially in this last quarter from some of your peers that are reporting, any thought on why your consumer seems to be holding up relatively better than others in the market and do you think those trends are sustainable as you look ahead? And then I guess just to zero in on Europe for a minute, all the macro data points there, looks pretty cautious. I know you guys have made a big splash at the Olympics, but could you speak to where you're seeing some of the strongest and maybe the weaker trends in D2C comps, and it sounds like wholesale had outsized growth in the digital native retail channel with your largest partner. I'm curious how sustainable you think the wholesale trends are in Europe?

All right, good morning, Michael. Well, thanks for your double-barreled question. Let me start on the first part. Let me start by saying how exciting is the rolling thunder of the marketing activations at Ralph Lauren right now. Just to list a few of the activities that have happened over the past few months, April Fashion Show in New York, presence at Salone del Mobile, and our immense presentation in Milan, Wimbledon, the Summer Olympics obviously going on in Paris right now, then we've got the U.S. Open, then we have our show, then we have an entire program for the holiday season. So, exciting rolling thunder of activities right now, and I think it's really clear based on that, that Ralph Lauren is a powerful player, not just in fashion, but also in culture. And the consumer is responding around the world. Our net promoter scores, as we mentioned in our prepared remarks, are up 400 basis points globally. Our online search grew 25% this last quarter, outpacing our entire competitive set. And this was even before the Olympics kicked in. So, of course, we're not immune to broader macro pressures on the consumer. And, listen, we're well aware of the heightened concerns coming into the markets this week. But from a fundamentals perspective, you can see that our core consumer is responding through these activations. And really, if you look at it beyond that, what else is working? Well, first, our lifestyle portfolio of timeless products, bolstered by our core, that really continues to resonate. And consumers are investing in quality, they're investing in authenticity, and at times of uncertainty and volatility, we know consumers will lean into brands they know and trust, and Ralph Lauren is at the very top of that list. Second, our elevated go-to-market strategy across key cities; China and Europe, and I'll come back to your question on Europe, are great examples of where we are running our play and bucking the market trends. And even within North America, which has been a little slower, we're encouraged to see how consistently strong our performance in our Ralph Lauren stores has been. And then third and most importantly, our teams are executing. They're executing consistently, and they're executing with incredible agility. So, you've heard me say this before, but as a company and as a team we remain on offense, operating with agility, and focused on what we can control while, of course, staying in tune with the ongoing volatility in the environment. We have a proven, diversified strategy that we've been executing over the past five to seven years, and we're going to continue to drive our brand desirability, and leverage our multiple drivers of growth to create long-term value. And actually, Justin, as your baptism of fire, why don't you take the Europe question?

Fantastic, will do. So, we're encouraged by the consumer demand we see in Europe, and our sales grew quite nicely in Q1. We saw growth in all markets, ex the U.K., and a really strong DTC comp. We also saw the broader environment continue to be very promotional. But we did not participate in those promotions. In fact, we pared back our promotions and saw some really nice quality of sale gains in that market. On the wholesale side, our business increased on the back of really strong re-orders. Especially notable is our digital pure-plays, they really performed nicely in the quarter, and are coming of their second-half last year reset. And then taking a big step back, we do have a little bit of a tailwind from tourism, but domestic demand is really what drives our business in Europe. And we're seeing that really, really perform well. Patrice mentioned the macros, we're not immune to we're watching the U.K., we have their eye on Southern Europe. We know FX turns back into a headwind with the stronger dollar, and we know the Middle East and Red Sea situations persist. But we continue to forecast growth for the region and feel good about that outlook, cautiously optimistic in Europe.

And just to add, I'm really proud of the work our European teams are doing in a volatile context, whether that's how the brand is showing up. And having had the opportunity to see the brand in Paris recently and across European markets, we're showing up in an elevated engaging way. And the quality of execution and the touch points that we have, whether that's in our stores, online or with our whole partners, is absolutely fantastic. So, still cautious on the environment but really excited about the work that our teams are doing there.

Thank you. Next question, please.

Thank you. The next question comes from Laurent Vasilescu with BNP Paribas.

Well, good morning. Thank you very much for taking my question. Justin, it's nice to see that you maintain the full-year guide, especially in such a volatile environment right now. With Q1 coming in ahead of your outlook, can you talk about why you maintain the full-year guide? Is it just the continuation of broader caution that you called out back in May, or how confident are you that you can still deliver on this plan even if the consumer environment gets tougher from here? And then secondly, from a modeling standpoint, how should we think about North America wholesale for 2Q and the full-year on a year-over-year basis? Thank you.

Thanks, Laurent. First off, I just want to say it's great to join Patrice and you all on today's live call. I've already had the good fortune to meet many of you in my former role. And I look forward to spending more time with you in the future. So, Laurent, to your question; yes, we were pleased we're able to maintain our full-year guide on both the top and bottom line, in line with our three-year commitments, and also consistent with our general approach to guidance at this point early in the fiscal, ahead of a all-important holiday season. And coming into the year, we assumed a status quo continuation of recent customer behavior and macro trends. And with today's report, we maintain that view. And that includes caution around the global macro and consumer backdrop, wholesale channel softness in North America, and also some incremental pressures from products costs largely in the second-half of our fiscal year. But taking a step back for a second, we've been building a durable strategy for a number of years. And Ralph's really built the ultimate timeless brand. And we're facing a potentially tougher consumer backdrop. We're going to continue to lean on our brand, our really strong brand that brings with it that clear value proposition that consumers know and trust. We're going to lean on our products. Consumers rely on them for quality and authenticity. We're going to lean on our diversification in both growth drivers and also our flexible supply chain. We're going to lean on our inventories that are well-positioned and we're going to focus on our productivity. And then we have our fortress balance sheet underlying it all, which we know is a key differentiator in the industry. So, looking ahead, this year and beyond, I'd say…

Great, thank you. Next question, Angela?

Thank you. The next question comes from Matthew Boss with J.P. Morgan.

Great, thanks. And congrats on a nice quarter.

Thanks, Matt.

So, Patrice, with international outperformance across both Europe and Asia, I guess what inning do you see the brand's elevation strategy today on the international front or any changes in direct-to-consumer momentum that you've seen so far in the second quarter? And then Justin, just could you elaborate on drivers of the embedded SG&A leverage in the back-half of the year, and is the multiyear opportunity still to drive SG&A leverage?

So, thank you, Matt, for that question. I'm not sure that baseball analogies actually works for our elevation strategy because the game is never going to end. So, certainly, where we are in international is where our brand is most elevated. And you go to Shanghai, you go to London, or you go to Munich, you could see the way the brand shows up. And clearly, that's translating into strong performance. We're going to continue to consistently elevate our storytelling, our product offering, and our consumer experience, online and digital. I don't think that IT ever stops for the company. And if you look at the history of what Ralph has built over the past 57 years, I think that's been a through line that's driven all the activities and focus over that time. So, I expect us to continue to drive that. We're continuing to drive AUR, as even where we have the highest AURs in the world, in a market like China, for example, or Japan. And I have to say I'm really excited to see the momentum that we have that is so broad-based, right? Really strong Japan performance this past quarter, China still double digits in an environment that's complicated, Korea doing well, Australia doing well, and our key markets in Europe doing well, as you heard from Justin earlier. So, the elevation journey continues. The key for us as we do this is value perception, all right, is to make sure that as we elevate we're bringing the consumer along, and he and she consistently value -- sees competitive, attractive value in what we have to offer. And I think that underpins our multi-year AUR expansion. You can't just take pricing and assume the consumer will follow you. It's got to be done in the context of broad elevation. Extendedly, I think our priority right now, in addition to fueling that, is how do we drive the same level of elevation in North America? And the starting point was lower because of historical activities that was done many years back in terms of over distribution of the brand and probably over reliance on promotional activity. And so, we are working diligently to get to the same level in North America as we are around the world. And you see that play out in our full price stores here in North America with very strong comps again this quarter. And if you've had a chance to visit our stores around our key cities, you can really see the great work that our teams are doing to engage the consumer to provide a unique experience.

So, Matt, on the SG&A outlook, so our fiscal '25 guide implies about 20 bps of SG&A leverage, weighted in the second-half, really due to a couple of factors, a little bit of the wholesale stabilization, but mostly timing of market. So, if you think about our marketing activations this fiscal year, in the first-half, we've got two fashion shows, we have the Olympics, a number of key major moments. Our marketing rates are going to be a bit higher. When you saw it in the first quarter, you'll see it again in the second quarter, a bit higher. And we're leveraging in the first quarter X marketing, we expect that trend to continue as well. But on a total SG&A trend, that marketing rate is going to come down in the second-half of the fiscal year. You're also going to see us start to scale some of the key investments we've been making in the past 12-24 months, including around talent and service and some of our DTC strategic growth investments. When it comes to the multi-year opportunity to drive leverage, I think as we've seen begin this fiscal year, we're expecting a more balanced contribution profitability between our gross profit expansion and our SG&A leverage. And I think we expect that to continue on beyond fiscal '25.

Thanks. Next question, please.

Thank you. The next question comes from John Kernan with TD Cowen.

Excellent. Thanks for taking my question. Justin, nice to see the seven-handle on gross margin, what are the remaining opportunities within product margin, do you still have room for higher AURs and lower markdowns? Is there a channel shift that you'll continue to benefit from? I think DTC could push 70% of revenue this year. So, anything to help us unpack, that would be helpful.

Sure. So, John, I take a step back and I think about some really strong gross margin expansion, continued strong gross margin expansion in Q1, which continues to drive profitability and really reinforces the durability of our brand elevation strategy. And when we think about the drivers, many of them are durable and are going to continue on, right? So, we think about things like favorable product mix as we elevate our product, right? As we grow our hypo categories. All this is going to be a durable driver. We think about the favorable channel and geographic mix, right? As we shift or continue to expand DTC, you're going to see that benefit. And as we continue to outpace our growth in Asia, you're going to see that benefit in Europe, obviously helping us nicely as well. And then, when you take a step back, AUR, we're going to see AUR continue to grow on the backs of that product and marketing elevation. Less of a like-for-like price increase component as inflation moderates, but you're still going to see that solid, mid-single-digit AUR growth that you've seen this quarter and that we expect this year. And then, we had a couple of years of headwind there. We have seen that start to come through and we expect that to continue to come through as we move through this year, more weighted to the second-half. But then as we get to next year, we'll get the second tranche of that time cost recapture. And that's another sort of durable driver beyond this fiscal year. On the headwind side, I would just call out, this year, freight, we're ex-Red Sea, we feel like we're pretty well-positioned. We did a pretty good job in negotiating our annual contracts, but we do have some uncertainty there, largely in the second-half, depending on which way the spot rates go, and FX continues to be a bit of a drag. But taking a step back, we feel really well-positioned with our durable gross margin drivers in fiscal '25 and beyond.

Thank you. Next question, please.

Thank you. Next question comes from Brooke Roach with Goldman Sachs.

Good morning and thank you for taking my question. Are you seeing any signs of increased price sensitivity of your customer, especially in North America, either in your value customer or your more premium customer? And as you head into the holiday season, what strategies are you implementing to engage the value-focused customer while maintaining the quality of sales gains that you've achieved at the brand? Thank you.

Thanks for that. So, I guess when I think about the full-price performance, our full-price business is performing really, really well. Our core customer continues to be resilient, and we're seeing really good relative momentum in that business. Our brick-and-mortar comp growth continues to be led by our full-price Ralph Lauren stores. We're seeing strong gross margin expansion with strong quality of sales. We're seeing reductions in the off-price channel, which you saw come through in our wholesale numbers in North America. And our new consumer acquisition is bringing in higher-quality, less price-sensitive, higher-basket consumers. And we feel good about that business. I would say that from a value-oriented perspective, it's a subset of our consumers, smaller parts, still pressured given the current macroeconomics, but we have a playbook that we've established to convert this consumer. It's very tactical. It's targeted, compelling price value, product propositions, personalized communications, and we're seeing that connect. We're not immune to the macros, and we know they're still out there, so we're going to monitor the environment and react accordingly, but we're architecture that we've built up over the past few years to be able to continue to convert that subset of value-oriented consumers. And AUR in Q1, despite being in a really challenging environment, not only increased their total company, but increased across all of our regions. So, really pleased with the continued progress and the proof of concept in our brand elevation strategy.

Great. Next question, please.

Thank you. Next question comes from Bob Drbul with Guggenheim.

Hi. Good morning. Just on the U.S. wholesale, North American wholesale, can you spend some more time just on, like the top 100 stores? I know you're closing some additional ones. Just sort of where do you think you are in the consolidation, of the U.S. wholesale with some of the additional closures that you had this year? Thanks.

Hey, Bob. Good morning. Well, we've been on a journey of elevating our wholesale presence pretty meaningfully over the past few years in North America. Wholesale has a strategic role to play in our go-to-market model, quality wholesale, really around brand discovery. So, while we are leaning more into DTC, and as that's the majority of our business now, and that share of our total business will continue to expand. We believe in quality wholesale. Key focus areas, indeed, are our top 100 doors, digital, where we're doing particularly well. And then, listen, we continue to prune those doors that we feel do not enable us to showcase the brand in the right way. We, I think, guided that this year we'll be shutting down 45 lower-tier doors this fiscal year. Last year, we shut down 20, right? The impact is going to be relatively minimal in terms of business impact. But I think the way the brand shows up in North America, that'll help us continue to drive the elevation. Going forward, I think if you asked me for a number, we'd say we probably closed 20 doors per season, 40 doors per year for a total of 150 door exits for the future, recognizing that we've shut down thousands of doors over the past few years. So, we've got a good, healthy foundation. We're going to continue to challenge it. And what's encouraging is when we look at recent share performance in those businesses, we're growing share. And while, as you heard from Justin, obviously, that segment, and as you guys, of course, know, that channel continues to be pressured, but we're growing share in that environment. And we're excited about that, and we want to continue to fuel that. And then, in the higher-tier wholesale, actually, we're seeing very strong growth rates. So, we're quite encouraged by that as well.

And we continue to see quality of sales increase over the past couple of quarters in that channel, which also gives us a reason to believe that we've got the right growth trajectory in place in that channel.

Next question, please.

Thank you. The next question comes from Jay Sole with UBS.

Great. Thank you so much. Patrice, can you talk a little bit more about the high potential categories, women's apparel, outerwear, handbags? I think you mentioned Jennifer Lawrence carrying the Polo ID bag. You mentioned they grew mid-single digits in the quarter, outpaced total company growth. Just talk about the progress you've made over the last 90 days and what your outlook is for the rest of the year for those high-potential categories? Thank you.

Yes, we're excited about that business, Jay. So, thanks for your question. We're excited about it because we know the market, the total addressable market is quite meaningful across all three, women's apparel, outerwear, and handbags. We're excited because the consumer is telling us that our brand resonates in that space. And we're excited because our teams are building great capabilities in terms of both marketing, product offering, and go-to-market for us to be competitive there. So, if you kind of parse them out, women's apparel was the standout, right, continued momentum, double-digit growth on that business, AUR growth as well. So, we're continuing to elevate market share gain. And really, if you look at the drivers from a product standpoint, it's really foundational strategy and core, right? That's what's driving it, which makes it sustainable, right? This is not driven by fashion items, which may be hot today, but cold tomorrow. These are items that are core, that are timeless, that are authentic. So, think sweaters, think linen and polo shirts. We have very strong focus on iconic shirt dresses this quarter that's really resonating well for women. And if I go back to Matt's baseball analogy earlier, I think it does apply here. Women's were like in the second inning, all right, in terms of taking advantage of that option, because as historically, we've been more of a male-focused company. Outerwear is something we are really pleased with because we've seen strong performance and momentum in that category for many quarters and years now, with so much more to go. So, this season, we saw strength in our lightweight outerwear. I think canvas, city jacket, linen, windbreakers, denim, with outperformance across really every single channel, so, good foundation there. I think the key evolution, Jay, for us in…

Thank you. Next question, please.

Thank you. The next question comes from Dana Telsey with Telsey Advisory Group.

Hi. Good morning, everyone, and nice to see the progress. Patrice, as you think about the retail channel and full price versus outlet stores, how is the outlet store performance? What are you seeing there? And on the expansion of full price, you had some smaller footprints too. How are you thinking of the potential? And then just on the benefit of lower cotton prices, how much of a benefit is that to gross margin? How long does that continue and does it help offset any of the supply chain costs? Thank you.

Thanks, Dana. I think you're going to get an even better answer from Justin, so I want to turn it over to Justin.

Hey, Dana. Thanks for the question. We're pleased with the solid brick-and-mortar comp we put up in Q1, growth across all of our three regions. I would say, Ralph Lauren's full price stores were a standout globally, continued strong performance across all of our regions, including in North America, and driven by traffic. And of course, we get a little bit of a tourism kiss, but again, domestic consumer momentum and also some pretty tough compares. On the outlet side, comps were stable, consistent with recent quarters, with AUR growth and conversion trends also stable. In North America, you did see a little bit of a sequential slowdown just due to the negative Easter timing shift into Q4, with underlying growth consistent with Q4. And our outlook, if you look beyond the quarter, reflects a continuation of those underlying organic trends, with the one call-out being once we get to Q3, we know we have a bit of pressure with the shorter holiday selling window versus the prior year. On cotton, so just kind of quick refresher, we expect about 175 basis points of benefit over the next two years, so, '25 and fiscal '26. We are still on track to recapture our cotton cost as planned in fiscal '25. We expect to recapture about half of the 175 bps this year. And it's going to be back weighted as I mentioned previously towards the second-half of the year, because that's the way it came on to our P&L. The same way it's coming off of our P&L in terms of timing. I mean that is reflected in our gross margin guidance about 50 to 100 basis points. And we did see a modest tailwind in Q1 from that cotton benefit.

Okay. We'll go to the last question, please, Angela.

Thank you. Our final question comes from Rick Patel of Raymond James.

Good morning, and congrats on the strong execution and squeezing me in here. I was hoping if you could provide an additional color on the outlook for D2C as we think about digital versus brick-and-mortar? With consumer behavior continuing to evolve, do you see the most opportunities off your brand and capture demand more towards one channel versus the other? And also, how do we think about the shape of growth for D2C this year given some of the work you are doing on North America digital and also activations you have planned for the year? A – Justin Picicci: Sure. Thanks for the question, Rick. I would say growing our digital business is a key priority for us. I mean it's a focused point of our global elevation strategy. You are seeing nice growth on a global basis in Q1 sort of international leading that growth. And, you are seeing nice growth. And, we expect that sort of balance DTC growth between our stores and our digital network to continue as we move through the year. So, continued momentum coming out of Q1. Our North America, specifically in Q1, our total digital ecosystem sales were up low single digits, right? And that was driven by solid sell-off performance in our digital wholesale channel where we are outpacing both last year and the competitive set and also our new Ralph Lauren Canada site that we launched last fall. Our owned North America digital comps were down a bit in the quarter 4%, off of softer traffic trends. And, we are -- we know we have opportunities here. And, we are focused on improving that growth trajectory this year and beyond. And, we put in place a number of interventions to get us there. We made talent investments in digital commerce and consumer technology, really geared towards enhancing that consumer experience. We are investing in site, speed. We are curating our offering, really focusing on more core and top selling products, making sure they are available and not out of stock. We are refining our personalized communications to customers to drive traffic and conversion, and full price new customer acquisition. And we continue to build and scale on the investments that we made and will continue to make like around search platform and the Canada site that I recently mentioned. We know we can win this space. We have seen what we can do and what we are doing in Europe and in Asia. We are going to leverage on those learnings as well. And based on that and the interventions put into place, we do expect our North America owned digital performance to improve going forward, notably in the second-half of this fiscal year.

Good. Well, listen, thank you everyone for joining us today. We look forward to speaking with you on our second quarter earnings call in November. And until then, take care, and have a great day.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.