Ralph Lauren lifts annual outlook, warns Q4 margin hit from U.S. tariffs

By Savyata Mishra

Feb 5 (Reuters) - Ralph Lauren RL.N raised annual sales and margin forecast on Thursday, but the luxury retailer's warning of margin pressure tied to U.S. tariffs in the fourth quarter sent its shares down 6.6% in early trading.

The company expects fourth-quarter margins, its smallest revenue period, to shrink about 80 to 120 basis points due to higher tariff pressure and marketing spend.

Ralph Lauren, which sources its products from regions including China, India and Vietnam, has relied on raising prices and reallocating production to regions with lower duty exposure to offset U.S. tariff pressures.

"While the consumer has proven more resilient than we initially anticipated this year, we remain somewhat cautious on the North American operating environment," CFO Justin Picicci said on an earnings call.

The company, which sells $148 striped linen shirts and $498 leather handbags, has reduced discounting, lifted full-price sales and refreshed core styles, boosting its appeal among wealthier and younger customers, including Gen Z.

Higher-income households are still splurging on luxury items, travel and restaurant meals, while lower- and middle-income consumers are strained by higher costs for rents and food as well as a softer job market.

Ralph Lauren’s exposure to high-end department store chain Saks, which filed for bankruptcy last month, "is minimal" this year, Picicci added.

Emarketer analyst Suzy Davidkhanian said "the near-term margin pressure looks more like a recalibration of expectations than a loss of confidence in the brand."

The company's revenue in the quarter ended December 27 came in at $2.41 billion, above analysts' estimates of a 7.9% rise to $2.31 billion, according to data compiled by LSEG.

It earned $6.22 per share, excluding items, compared to expectations of $5.81, aided by a 220 basis points increase in margins.

Ralph Lauren now expects fiscal 2026 revenue to rise in the high single to low double digits on currency-adjusted terms, up from its prior forecast of 5% to 7% growth.

The company raised its operating margin target to a range of 100 to 140 basis points, up from 60 to 80 basis points it forecast previously.