Ralph Lauren Corp (NYSE:RL) shares fell nearly 7% in early trading on Thursday, even after the luxury apparel maker reported fiscal third-quarter results that exceeded Wall Street expectations, as investors focused on its outlook for margin pressure in the fourth quarter.
The company raised its full-year fiscal 2026 outlook, now expecting constant-currency revenue growth in the high-single- to low-double-digit range and operating margin expansion of roughly 100 to 140 basis points.
However, it warned that Q4 operating margin is expected to contract by approximately 80 to 120 basis points on a constant-currency basis, citing higher US tariffs and increased marketing spending over a seasonally smaller revenue base.
For the quarter ended December 27, 2025, Ralph Lauren reported earnings per share of $5.82, topping the consensus estimate of $5.78.
Revenue rose 12% year over year to $2.41 billion, also above analysts’ expectations of $2.3 billion, attributed to strong holiday demand and continued spending from higher-income consumers.
The company said performance was broad-based across geographies and channels, with global direct-to-consumer comparable sales growing at a high-single-digit rate and wholesale revenue increasing by double digits. Ralph Lauren also cited stronger full-price selling and operating expense leverage, which helped drive adjusted gross and operating margin expansion.
"This holiday season, our teams delivered strong, high-quality growth across geographies and consumer segments, enabling accelerated investment in our long-term strategic priorities and brand elevation," Ralph Lauren CEO Patrice Louvet said in a statement.
Following the report, Jefferies analysts maintained a “Buy” rating on Ralph Lauren, with a price target of $425, implying upside from current levels of about $330 on Thursday. The firm noted that while Q3 results exceeded estimates, the fourth quarter guide “appears prudent.”
They highlighted that North American sales moderated sequentially but remained above expectations, while direct-to-consumer average unit retail (AUR) increased 18% from 12% in Q2, reflecting ongoing brand strength.
Asia remained strong with 20% growth, although Europe slowed to 4%. Jefferies said the premarket decline likely reflected moderation in Europe and the lower Q4 operating margin guide, which they described as “likely conservative.”
The analysts also pointed out that full-year revenue and margin guidance now exceed Street expectations.