Ralph Lauren cautioned on Thursday that tariff-related costs would pressure its margins this year and said it was bracing to see how inflation was weighing on price-sensitive consumers, sending its shares down 7 per cent.
The comments overshadowed a rise in its annual revenue forecast, which was powered by solid demand for its Polo shirts and cable-knit sweaters in North America.
“The most meaningful offset is really the incremental cost inflation from the tariffs,” CEO Patrice Louvet said on a conference call with analysts.
“The bigger unknown here today is the price sensitivity and how the consumer reacts to the broader pricing environment and how sensitive that consumer is. So that’s what we’re watching very closely as we head into the second half.”
Ralph Lauren, which sells its popular Polo Bear sweater for up to US$398 on its website, has relied on its loyal, high-income customers to fuel sales and profit growth. Its stock has gained nearly 76 per cent over the past 12 months.
Louvet said Ralph Lauren’s core consumer has remained resilient around the world as the brand has shifted toward a full-price model.
“The consumer will pay up – just not indefinitely – so brands must pivot from price hikes to product storytelling before the runway lights dim,” said Michael Ashley Schulman, chief investment officer of Running Point Capital.
Ralph Lauren’s strategy to ramp up marketing spend and product innovation, as well as reduce promotions, has helped it gain market share in its core categories such as knitwear and handbags.
“Our high potential categories, including women’s apparel, outerwear and handbags, continue to be accelerators for our business,” Louvet said.
He said highlights include the Cable-Knit jersey and Polo Bear sweaters, linen shirts, dresses, the Cotton Canvas city jacket, and a handbag collection launched earlier this spring called “Polo Play.”
The comments underline consumer preference for accessible luxury brands, similar to Tapestry, which has seen solid demand for its Coach handbags. Tapestry will report quarterly earnings next week.
Ralph Lauren’s upbeat forecast is in contrast to bigger European rivals such as Gucci-owner Kering and Dior-parent LVMH, which have seen a sales slowdown.
The company expects fiscal 2026 revenue to rise by low- to mid-single digits from last year, compared with its prior target of a low-single digit increase.
Operating margin is forecast to expand roughly 40-60 basis points after adjusting for currency fluctuations, up from its prior forecast of modest growth.
Net revenue in the first quarter came in at US$1.72 billion, exceeding expectations of US$1.66 billion, according to data compiled by LSEG.
On an adjusted basis, it earned US$3.77 per share, above estimates of US$3.50, aided by a 14 per cent jump in average unit retail in its direct-to-consumer channel.