Fashion brand Ralph Lauren (NYSE: RL) announced better-than-expected revenue in Q4 CY2025, with sales up 12.2% year on year to $2.41 billion. Its non-GAAP profit of $6.22 per share was 7.1% above analysts’ consensus estimates.
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Ralph Lauren (RL) Q4 CY2025 Highlights:
- Revenue: $2.41 billion vs analyst estimates of $2.32 billion (12.2% year-on-year growth, 3.7% beat)
- Adjusted EPS: $6.22 vs analyst estimates of $5.81 (7.1% beat)
- Adjusted EBITDA: $530.9 million vs analyst estimates of $523.5 million (22.1% margin, 1.4% beat)
- Operating Margin: 19.6%, up from 18.2% in the same quarter last year
- Free Cash Flow Margin: 29.3%, down from 31.6% in the same quarter last year
- Constant Currency Revenue rose 10% year on year (11.2% in the same quarter last year)
- Market Capitalization: $21.51 billion
"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," said Patrice Louvet, President and Chief Executive Officer.
Company Overview
Originally founded as a necktie company, Ralph Lauren (NYSE: RL) is an iconic American fashion brand known for its classic and sophisticated style.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Ralph Lauren grew its sales at a 12.3% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Ralph Lauren’s recent performance shows its demand has slowed as its annualized revenue growth of 8.9% over the last two years was below its five-year trend. 
We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 8.5% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Ralph Lauren has properly hedged its foreign currency exposure. 
This quarter, Ralph Lauren reported year-on-year revenue growth of 12.2%, and its $2.41 billion of revenue exceeded Wall Street’s estimates by 3.7%.
Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
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Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Ralph Lauren’s operating margin has risen over the last 12 months and averaged 13.7% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports inadequate profitability for a consumer discretionary business.
In Q4, Ralph Lauren generated an operating margin profit margin of 19.6%, up 1.4 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Ralph Lauren’s EPS grew at an astounding 92.3% compounded annual growth rate over the last five years, higher than its 12.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
In Q4, Ralph Lauren reported adjusted EPS of $6.22, up from $4.82 in the same quarter last year. This print beat analysts’ estimates by 7.1%. Over the next 12 months, Wall Street expects Ralph Lauren’s full-year EPS of $16.05 to grow 4.5%.
Key Takeaways from Ralph Lauren’s Q4 Results
We were impressed by how significantly Ralph Lauren blew past analysts’ constant currency revenue expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 7.6% to $327.87 immediately following the results.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
