Ralph Lauren CEO Says Marketing Has 'No Ceiling' After Spend Climbs To 8.6% Of Sales
Patrice Louvet defended the spending on the earnings call while the company trimmed its Europe outlook on weaker store traffic.
Ralph Lauren, the luxury lifestyle company behind apparel, handbags, fragrances and home goods, spent 8.6% of sales on marketing last quarter, and CEO Patrice Louvet said on the company's earnings call Thursday that "There's really no ceiling" so long as returns stay strong. On the same call, executives cut the Europe revenue outlook and cited softer store traffic.
Marketing: from 3-4% to north of 8%
Louvet told analysts that marketing has risen from 3-4% of revenue to "north of 8%," and he later said "8.6 is not the ceiling" as long as returns remain exciting. He said the spending is paired with operating margin expansion, not traded against it.
Chief Financial Officer Justin Picicci said marketing reached 8.6% of sales in the quarter, up from 7.8% a year earlier, on the New York fashion show and sponsorships of Wimbledon and the U.S. Open. The company now expects marketing at about 8% to 8.5% of sales in fiscal 2027, versus about 8% before.
Louvet pointed to 1.7 million new customers added to direct-to-consumer businesses in the quarter. For the holidays, he said media investment is up 23% from last year, global holiday experiences double from four cities to eight, and "Ralph Lauren Christmas is trending again this year."
Adjusted operating margin still rose 140 basis points to 15.5%, Picicci said, as operating income grew 21%.
Europe guidance comes down
Europe revenue is now expected to grow about low single digits, down from low to mid single digits. Europe revenue rose 3% in the quarter, while retail comparable sales fell 1% against a strong 10% comparison a year ago.
An analyst at Bank of America pressed on weaker traffic. Picicci said the outlook reflects the softer consumer and "doesn't contemplate or depend on" a near-term macro recovery. Europe has become more promotional, he said, and the company may selectively adjust the frequency, depth or duration of promotions.
Louvet said the pressure is mainly in traffic, particularly at outlets.
Raised outlook, lower shares
The company raised fiscal 2027 constant-currency revenue growth to about 6% to 7%, from 5% to 6%, after revenue grew 10% in the quarter, led by a 28% rise in Asia. Shares fell 9.23% to $374.01 in Thursday trading, for a market value of $24.6 billion.
Picicci said the company repurchased about $250 million of stock in the quarter. Third-quarter revenue is guided up about 3% to 4%, and the company will report that quarter in early February.
Louvet's own line on the pace of spending: it will continue as long as the company gets "exciting returns."
Sources
- Ralph Lauren (RL) Reports Q2 Earnings: What Key Metrics Have to Say — Yahoo Finance
- Ralph Lauren Non-GAAP EPS of $4.64 beats by $0.38, revenue of $2.19B beats by $60M (RL:NYSE) | Seeking Alpha — seekingalpha.com
- Ralph Lauren slips as weak European sales and FY27 outlook temper upbeat FQ2 (RL:NYSE) | Seeking Alpha — seekingalpha.com
- Ralph Lauren (RL) Q2 2027 Earnings Top Estimates, Outlook Raised — wwd.com
- Ralph Lauren (RL) Q2 Earnings and Revenues Surpass Estimates — Yahoo Finance
