Ralph Lauren Corporation has delivered an exceptional third-quarter performance, exceeding market expectations and demonstrating sustained demand across its global operations. This robust showing has prompted the company to revise its full-year revenue growth projections upwards, a move supported by enhanced margins and a strategic product and pricing approach. A key highlight was the 18% surge in average unit retail (AUR) within its direct-to-consumer channels, underscoring the brand's elevated market position and a successful reduction in promotional activities.
For the third fiscal quarter, Ralph Lauren announced adjusted earnings per share of $6.22, comfortably outperforming the consensus analyst estimate of $5.81. Quarterly sales reached an impressive $2.406 billion, surpassing the Street's projection of $2.313 billion. This represented a 12% increase on a reported basis and a 10% rise in constant currency, fueled by strong demand across all geographical segments. Specifically, North America revenue grew by 8% to $1.1 billion, Europe saw a 12% increase to $676 million, and Asia revenue surged by 22% to $620 million.
The company's gross profit for the quarter stood at $1.7 billion, with a gross margin of 69.9%, marking a 150 basis point improvement over the previous year. This expansion was primarily attributed to high-teen AUR growth, a favorable product mix, and reduced cotton costs. Furthermore, adjusted operating income reached $503 million, resulting in an operating margin of 20.9%, a 220 basis point increase year-over-year. Ralph Lauren concluded the third quarter with a healthy financial position, reporting $2.3 billion in cash and short-term investments, against $1.2 billion in total debt.
Looking ahead to fiscal year 2026, Ralph Lauren now anticipates revenue growth in the high single to low double digits on a constant currency basis, a significant upgrade from its previous forecast of a 5% to 7% increase. Based on current exchange rates, foreign currency is expected to contribute an additional 200 to 250 basis points to revenue growth. The company also projects an expansion of its operating margin for fiscal 2026 by approximately 100 to 140 basis points in constant currency, up from the earlier estimate of 60 to 80 basis points.
For the fourth quarter, Ralph Lauren forecasts revenues to increase by mid-single digits on a constant currency basis. However, the operating margin for this period is expected to contract by approximately 80 to 120 basis points in constant currency. This anticipated contraction is primarily due to an increase in U.S. tariffs and higher marketing expenditures aimed at supporting key global activations, which will occur against a seasonally smaller revenue base. Despite this short-term outlook for the fourth quarter, the overall financial health and strategic direction of Ralph Lauren appear strong, positioning the company for continued success in the luxury fashion market.