Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren Second Quarter Fiscal Year 2026 Earnings Call. [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 Second Quarter Fiscal 2026 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 1 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 website. With that, I will turn the call over to Patrice.

Thank you, Corey. Good morning, everyone, and thank you for joining today's call. More than 8 years ago, we embarked on an ambitious journey of elevation across our brand, our products and our go-to-market strategy around the world, led by Ralph's vision of inspiring the dream of a better life, we put our consumers at the center and we put this company on the path of healthier, more consistent more sustainable, long-term growth and value creation. In September, we were proud to introduce the latest iteration of this journey, which we are calling our Next Great Chapter: Drive plan. We outlined the vast opportunities still ahead for Ralph Lauren. We currently play in a total addressable premium and luxury market worth $400 billion. And we are just over $7 billion today, less than a 2% market share. Our strategy to grow our share and deliver long-term sustainable growth over the next 2 years and well beyond continues to be supported by multiple diversified engines. 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. We are off to a strong start in the execution of this plan, with second quarter performance outpacing our expectations across the top and bottom line. These results underscore our diversity of growth opportunities and the broad-based momentum of our iconic brand, which is resonating across generations, cultures and geographies. All 3 regions contributed to growth this quarter, including double-digit increases in retail comps and global wholesale sales. And we achieved this while continuing to elevate our brand and drive higher quality of sales. Our strong performance through the first half of this fiscal year also gives us confidence to take up our full year guidance…

Thanks, Patrice, and good morning, everyone. Our second quarter results demonstrate strong progress as we embark on our Next Great Chapter: Drive plan, showcasing our team's agility and unwavering focus on execution. Top line performance exceeded our expectations, reaching our highest Q2 revenues since we began our elevation journey more than 8 years ago. Results were driven by broad-based performance across every region and channel, highlighting our brand strength and authentic connection with consumers around the world. Gross and operating margins once again outperformed our outlook as we continue to elevate across all markets. Each of our 3 regions contributed to operating margin expansion despite the volatile global operating environment. And we achieved all of this while continuing to invest behind our strategic drivers of long-term growth. As Patrice mentioned, our strong year-to-date results and brand momentum give us confidence to raise our full year outlook, even as we maintain a relatively cautious stance into the second half, given the macroeconomic uncertainty and exceptionally strong prior year compares. But first, let me walk you through our financial highlights from the second quarter, which, as a reminder, are provided on a constant currency basis. Total company second quarter revenue growth of 14% was above our high single-digit outlook. By region, Asia and Europe led our performance, with sales increasing 16% and 15%, respectively, followed closely by North America, up 13%. Total company retail comps increased 13%, with ongoing momentum in both our own digital business and stores. Total digital ecosystem sales, including our own sites and wholesale digital accounts grew double digits, reflecting balanced growth across regions. Total company adjusted gross margin expanded 70 basis points to 67.7%. The increase was driven by AUR growth, favorable mix shift toward our full-price businesses and lower cotton costs, which more than offset tariffs,…

[Operator Instructions] The first question comes from Matt Boss with JPMorgan.

Congrats on a great quarter. Patrice, so the company continues to outperform expectations despite the caution that you've been calling out. What does your updated outlook for this year assume for health of the consumer, particularly macro assumptions that you embedded for the back half? Have you seen any change in consumer behavior in any key markets today? And then just larger picture, Patrice, if we extend the lens. Could you walk through global brand awareness for Ralph Lauren relative to only 2% market share for the brand today? And just how that supports your revenue targets longer term?

Sure. Well, thank you for your question, Matt. So on the first part of your question, we continue to see strong broad-based momentum in our business, right? Our new Next Great Chapter: Drive strategy is working, and our brand is resonating with consumers around the world. To date, we have not seen any meaningful changes in consumer behavior across our key consumer segments or markets. Demand remains healthy, and our core consumer is resilient. Especially as we continue, as you know this, to shift our recruiting towards more full price, less price sensitive, higher basket size new customers. Now from a macro perspective, as price increases take root across different sectors, we are watching closely to see how consumers will respond, and our teams are staying as agile as ever in this context. And listen, we continue to focus on our key strategic pillars and invest in spaces that we expect to successfully fuel our momentum and grow share for the long term. So first, we've implemented a rolling thunder of brand building activations to drive brand desirability and retention and more consistent engagement with consumers. I'll come back to that when we talk to your awareness question. Whether that's through our impactful fashion shows -- we had 2 this last quarter -- our inspiring sport activations or our more innovative interactions like our AI-powered Ask Ralph styling assistant. This will remain a key area of investment as we look ahead. Second, we've continued to drive a healthy balance of authentic core products that perform across macro cycles along with our high potential categories. Think women's apparel, outerwear and handbags. And both are performing well, as you heard us talk about earlier. And third, just a reminder that we still have a lot of distribution opportunities globally. Whether that's deepening…

The next question comes from Jay Sole with UBS.

Justin, the company has successfully driven 8 straight years of AUR growth. Patrice kind of touched on this a little bit, but how are you thinking about using pricing as a lever over the next few quarters before you start to lap tariffs? And how should we think about your ability to mitigate tariffs over time? And how much of your guidance of a second half deceleration is due to your general caution on a consumer slowdown versus true structural or timing shifts this year?

Thanks, Jay. Thanks for the question. Those are a few really important questions. So let me try to take them one by one and see if I can provide some helpful context here. So first on pricing. So we have a proven multiyear elevation strategy that's driven those sustained AUR gains you referenced in more than 8 years and counting. Our AUR growth has been and continues to be driven by multiple levers, right, investing in our brand, attracting more full-price customers, elevating our product mix, favorable geo, channel mix and pulling back on discounts in addition to strategic pricing actions. And as we talked at our September Investor Day, these drivers are durable into the future. And really importantly, we continue to see consumers recognize and respond to the value we're delivering. It's critical. Now for this fiscal year, we took normal course of business pricing actions for fall as we continue to elevate our brand around the world. And with the higher tariffs that were announced, we did layer in some additional modest adjustments, both for fall and for spring '26. And that's reflected in that high single-digit AUR growth guide we provided for the back half of the year. Your second question on gross margins, we still expect Q4 to be the most impacted quarter this fiscal year, consistent with our planned cadence. And it's a combination of the reciprocal tariffs and the timing shifts we made to accelerate receipts earlier in the year, and this is all happening and Q4 is our smallest revenue quarter of the year. It's a transitional quarter, right, between fall holiday and spring. So even with the year 1 tariff pressure, we're now expecting 10 to 30 bps of gross margin expansion this fiscal year, better than our initial outlook. And…

The next question comes from Brooke Roach with Goldman Sachs.

Justin, Patrice, I was hoping you could dive a little bit deeper into the strategic actions that you're taking to engage the North America value-oriented consumer this holiday season. You continue to take a little bit of a conservative approach there, but it looks like you've been outperforming your expectations to date. Wondering what the plan is for this holiday and what you're looking to do if the consumer does look to get a little bit weaker?

Sure. And thanks for the question. So just taking a step back as we enter -- or enter this fall holiday season, we saw some pretty broad-based momentum behind our brand, across markets and channels, including in North America. And we've been -- past 8-plus years, we've been through a number of different iterations of a tough environment before, right, of cost inflation, price inflation, cotton freight, pressures on the consumer. And we've navigated that pretty successfully using that diversified toolkit of levers that we talked. And the brand is positioned now better than it ever was before during any of those periods. So we know -- we have confidence that we can navigate through the macro pressures. We've got real pricing power, and we also have seen our value perception grow progressively along with AUR throughout the elevation journey. So when we think about fall holiday, a couple of words come to mind. One is flexibility, right? We've got the flexibility in our price architecture to be able to -- in a very targeted, selective way, still talk and convert those more value-oriented customers subsegments that exist in channels like wholesale and the outlets when the macro pressures sort of tighten. And we can do that without walking back our broader brand guardrails. The other word that I think about it is value. We're going to stay laser focused on making sure we're providing a compelling price value proposition to our customers. And as we kind of sharpen our marketing, as we sharpen our analytics, as we get to know the customer better and we get our segmentation more precise, we're only getting better at being able to understand that -- what's that sweet spot in terms of price value to appeal to the consumer.

And Brooke, I might add to Justin's perspective, 2 points, first on branding and the second on product offering. So our storytelling -- and you saw the range of activations this past quarter, which was very special. And obviously, it's given us momentum going into this holiday season. Our storytelling is really designed to appeal broadly, including to the more value-sensitive consumers. And what we have certainly found the past few quarters is the broad range of marketing activations from sports; to fashion presentations, to the serendipitous celebrity moments have talked to the different consumer segments that we appeal to. And then our teams here in North America are putting disproportionate emphasis now on better segmentation to make sure we're getting the right message to the right group at the right time. So I think we're gaining momentum there. There's more to come on this front. That's on the marketing branding side. On the product side, what's very interesting is across consumer segments, the strategy of both driving our core icons and our 3 high potential categories is resonating. So we're seeing that play out at the upper end echelon from a revenue standpoint of our customer base. We're also seeing that play out within our more value-sensitive consumers, which obviously makes it a lot easier to execute and gives us confidence in our ability to win during this upcoming holiday season.

The next question comes from Michael Binetti with Evercore.

Congrats on a nice quarter. Yes. I want to ask just 2. So on the AUR, look at a few metrics here. The global AUR growth rate has been very, very close to the DTC same-store sales growth rate for a while. You're implying flattish units in the first half, something near that. You consistently tell us it's really attractive new customer growth, so customers are growing units are not. Is there an opportunity for the units to help you start to outpace the AUR growth as you look at the rest of the year? And then Patrice, the Investor Day plan looks for EBIT margins, 15%, 15.5% range by fiscal '28. There's a scenario where you get to that range this year. I guess, it's a jump ball between Patrice and Justin. But in the first year of the plan, I know you clarified that 16% is in the cap. Maybe you can help us frame the long-term opportunity with a nod to the update for the second quarter upside here?

On margin, there's no jump ball. It's always Justin.

In case it was unclear. So on the AUR question, so we've been pretty -- to your point, consistently growing AUR, and you see the AUR gains with the comp gains, which really shows the quality of the revenue they are putting up and the share gains that we're getting behind them. To your point on units, we've been growing units along the course of this journey. I think earlier in the elevation journey when we had the step changes in elevation, they were slower. But now as we move through, where we've been seeing unit growth is those areas that we've really been targeting, right? So our full-price businesses, right? Our digital businesses, our markets like China, where we know we have outsized growth opportunities. On our accelerator categories like women's, like handbags, like outerwear. We've been seeing unit growth there. I think when you think about the environment from a macro perspective that we're going to go -- that we expect to go into in this sort of second half and maybe carrying into the first half of next year and we talked this a little at Investor Day. We are going to lean more into AUR versus unit growth overall as we navigate those cost inflation pressures. That all said, to your point on opportunity, there was certainly a unit growth opportunity, specifically in those areas that we've been focused on, like those areas that are further along on the elevation journey. So you'll continue to see us opportunistically focus on and grow units there. And then as the other areas of our business progress on that elevation journey, you'll see the inflection point in those facets as well. On the OI margin question in terms of opportunity, 16% plus, when you think about longer term, I…

The next question comes from Ike Boruchow with Wells Fargo.

I think this is for Justin. Wanted to kind of dig more into North America wholesale. You've been -- you've inflected the positive, I think, 3 quarters in a row now, but you kind of went low double digits this quarter, but there's an 11-point shift. And then, Justin, some of your comments on the fourth quarter kind of suggests you're going to pull back from some unproductive sales. So kind of just peeling the onion back, just how should we think about the trajectory of North America wholesale? And then I assume that shift is hurting us in the third quarter, but would love some clarity there. So kind of just looking for the trend line and how you kind of plan that channel at this point?

Sure. So listen, when you think about the underlying quality growth that we're seeing in our wholesale business, I would say, North America and in EMEA, but let's focus on North America as well as the strategic ongoing elevation work in these channels, that is quite purposefully meant to balance momentum at times, notably in North America. I mean, we're very encouraged. Our brand momentum has been strong and we've been able to deliver more outsized performance than we were expecting. I think it's fair to say through the first half of this year. And the great thing about this growth is that it's healthy, high-quality growth on an underlying basis, right? And it's reflective of the diversity of our growth driver. So it's working in retail, is carrying over and cutting through in wholesale. Women's is a great example. Women's is working really well, both from a door perspective and a comp perspective in North America wholesale, specifically at that top tier -- at the top-tier channel. So it's great to see the execution of the strategy, and it's great to see the healthy underlying growth. To your point on sort of a normalized growth expectation as we think about first half versus second half and beyond, we've always talked about sort of a stable to up type of algo for that North America wholesale business. And that's really balancing between growing in areas like top-tier doors, growing in areas like digital, growing in areas like key cities with our wholesale partners. Balancing that out with continuing to call off-price, continuing to call the lower tier distribution. So when we think about the second half specifically versus the first half, we've got some off-price reduction pressure that we know is coming that is planned for Q4. That's going to impact that business by 2, 3 points. We've also got -- we're caution embedded in our outlook around the U.S. consumer, right? Because we know as the pricing environment begins to take shape, those sort of strong reorder rates that we've been seeing in that business, there's some elasticity pressure that we're layering on top of that as we head into the second half. And then we've got the third step, which is really continued brand elevation reinvestments, which is going to partly offset some of our gross bookings. So when you think about the shape of things, there will be some expected pressure in the second half, but I think we feel good about the core of that business. And if you strip out some of the one-offs, we feel good about that sort of stable to up normalized growth organic trajectory.

The next question comes from Dana Telsey with Telsey Group.

So nice to see the progress. As you think about your retail distribution, both full price and outlet, anything different you're seeing in outlet from full-price? And with the AUR increases, how is trajectory and outlets basically globally of higher-priced product there? And just lastly, anything on the supply chain to make note of as a benefit for margin going forward?

As far as the performance is concerned across all our DTC channels, I might even expand that to ralphlauren.com, if you don't mind. We're actually seeing really nice, consistent growth. Both our full-price stores, our outlet stores and actually disproportionate growth on digital, which we're very excited about. And as I mentioned earlier to Brooke's question, what we're seeing is on marketing activations and our product offering is resonating pretty consistently across these 3 different channels. And as we get more precise on consumer understanding and consumer segmentation, we're able to better target through particularly our social media platforms to get the full potential performance across all 3. But the short answer to your question is broadly consistent performance across the 3 areas. And of course, moving forward, our expectation is to continue to expand our full-price stores, right? You saw this quarter, we opened 38 around the world. That will continue. We do not expect to expand our outlet doors. If anything, what our teams are doing around the world now is combining outlet presence, so we might have a center where we have 3 different locations. We're building that into one. And then we expect to have some closures of outlets moving forward as we look to continue to elevate our presence. And of course, we're leaning in aggressively in ralphlauren.com and our digital operations because we're seeing very strong response there.

On the supply chain piece, Dana. So our global sourcing supply chain, well positioned, strong long-standing partnerships. It's really been, as you know, a key differentiator for us over the past 8-plus years, significantly diversified. So we have been taking advantage of that diversification in terms of being nimble and agile as we navigate the ongoing cost inflation landscape. And we do also maintain alternate sourcing capabilities for all of our key products in more than 1 country of origin, right? So we've been certainly leaning into that as well as working with our supply partners to drive efficiencies in our cost of goods and broader sort of end-to-end relationships. That supply chain is also very innovative. They also continue to focus on developing and scaling new opportunities in each of our regions to mitigate what we know is a very dynamic global macroeconomic environment. So you'll see some of those mitigating actions start to ramp up as we move sort of through this year into early next year and into next year more fulsomely, and that is obviously a key lever in our mitigation toolkit when we think about cost inflation.

The next question comes from Laurent Vasilescu with BNP Paribas.

Patrice, I have to ask about China. I've seen China grew over 30% this quarter. I think that's in line with the prior quarter. Can you talk about what you're seeing there? Is there a rebound in the luxury space? Or is it idiosyncratic to Ralph? I would think that's the case, to some degree. And I think -- I know you don't guide explicitly for China, but I think you mentioned on a prior call that your expectations were for China to grow low double digits this year. How should we think about growth this year for China?

We always love to talk about China. So thank you for your question. So very pleased with the performance, again this quarter, up 30%. If you look at our run rates in China, we've been performing strongly for many years now. Why is that? While it's our strategy at play that the teams on the ground are doing a brilliant job executing, building the brand in a way that resonates with the Chinese consumer, leveraging our core items and also leading into our high-potential categories, particularly our women's apparel and handbag businesses, disproportionately performing in China. And then expanding our footprint in a very selective way across the 6 key cities, building these unique ecosystem. So the performance you saw this quarter is really the result of these actions over many years. While we are, like you, reading the headlines on the economic environment in China, I think, to use your terminology, a lot of our performance is driven by idiosyncratic elements from the Ralph Lauren mix. Now keep in mind, Laurent, market is significant, right? And we still have relatively small share. So there's a lot of business to be had even if the overall category, we're not growing. As we did guide, I think, low double digits for China, even longer term, right? So not just for this year, but over the 3-year period of our Next Great Chapter: Drive. We don't typically do that for individual markets, but we thought it was helpful for all of you just to get a sense of how we think about that market in particular. We stand by that. Listen, we gave that guidance 6 weeks ago, so it's unlikely that changed in the span of 6 weeks, but we feel very good about the balance of growth drivers and the…

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