Ralph Lauren delivered a standout holiday quarter, beating expectations with double digit top line growth and fatter margins, then raised its full year outlook on the back of strong demand across North America, Europe, and Asia. Even with higher U.S. tariffs and stepped up marketing spend, the company expanded both gross and operating margin, leaning on higher prices, full price sell through and tight cost control.
Q3 Fiscal 2026 Headline Numbers
For the third quarter of fiscal 2026, net revenues rose 12% on a reported basis and 10% in constant currency, ahead of guidance and Street forecasts around $2.3 billion. Global direct to consumer comparable store sales grew high single digits, driven by balanced growth across stores and digital, while global wholesale sales increased double digits.
Gross profit reached $1.7 billion, with a gross margin of 69.9%, up 150 basis points year on year, supported by high teens average unit retail (AUR) growth, favorable product mix, and lower cotton costs, more than offsetting increased U.S. tariffs and other product costs.
Operating income was $471 million, implying a 19.6% operating margin; on an adjusted basis, operating margin improved further versus last year.
Elevation Strategy: Higher Prices, Less Promo
Across the direct to consumer network, Ralph Lauren lifted AUR by 18% in the quarter, above internal expectations. Management attributed this to “continued elevation,” strong full price selling, and lower than planned promotions, showing that higher income consumers remain willing to pay up for the brand’s core icons and newer collections.
This elevation strategy, fewer discounts, cleaner assortments, and more tightly curated distribution, has been a multi year focus and is now showing up clearly in both margin expansion and brand heat in key cities. It also gives the company more room to absorb tariff pressure and invest in its “consumer ecosystem,” from stores and digital to experiences.
Regional Performance: Asia Leads, China Rebounds
By region, North America posted solid growth, Europe continued to perform well, and Asia was the standout. Asia revenues grew 22% in the quarter, with China up more than 30%, reflecting improved traffic, local activations, and a healthier inventory position versus prior years.
Asia’s operating income reached $197 million, with an operating margin of 31.8%, up 490 basis points year on year, helped by mix, AUR, and operating leverage, with FX adding a small tailwind. That profitability profile underscores why the region remains central to Ralph Lauren’s long term growth algorithm.
Balance Sheet And Cash Returns
The company ended the quarter with about $2.3 billion in cash and short term investments and roughly $1.2 billion in total debt, maintaining a strong balance sheet. Inventories were described as well positioned, with reported balances up in the mid teens but aligned with growth, elevation, and earlier receipts.
Through the first nine months of fiscal 2026, Ralph Lauren returned approximately $500 million to shareholders via dividends and Class A common stock repurchases. That ongoing capital return sits alongside continued investment in brand, technology, and key markets.
Upgraded Full Year Fiscal 2026 Outlook
On the back of the strong Q3 and holiday performance, Ralph Lauren raised its full year guidance. The company now expects fiscal 2026 revenues to grow high single to low double digits in constant currency, up from a prior 5% to 7% outlook, with FX still expected to add roughly 200 to 250 basis points to reported revenue growth.
Operating margin is now projected to expand about 100 to 140 basis points in constant currency for the year, versus 60 to 80 basis points previously, driven by further gross margin gains and operating expense leverage. FX is expected to benefit gross margin by about 20 basis points and operating margin by about 50 basis points.
For the fourth quarter, management guides to mid single digit revenue growth in constant currency, with FX adding 200 to 300 basis points, but expects operating margin to contract 80 to 120 basis points in constant currency as higher U.S. tariffs and heavier marketing spend hit a seasonally smaller revenue base.
