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Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren First Quarter Fiscal Year 2027 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Ms. Corinna Van der Ghinst. Please go ahead.

Good morning. Thank you for joining Ralph Lauren's First Quarter Fiscal 2027 Conference Call. Joining me today are Patrice Louvet, the company's President and Chief Executive Officer; and Justin Picicci, Chief Financial Officer.

After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller. During today's call, our financial performance will be discussed on a constant currency adjusted basis. Our reported results, including foreign currency can be found in this morning's press release. We will also be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook.

Forward-looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties. Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings.

To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our Investor Relations website.

And with that, I'll turn the call over to Patrice.

Thank you, Corey. Good morning, everyone, and thank you for joining today's call. We are off to a strong start in the second year of our Next Great Chapter: Drive plan. Around the world, the core brand values that Ralph envisioned when he started this company nearly 60 years ago, authenticity, quality, timeless style, are resonating powerfully across generations and geographies. And we are connecting with and engaging consumers as only Ralph Lauren can, inspiring people to step into their dream of a better life. This strengthening brand desirability across lifestyle categories, channels and regions is translating into healthy, consistent, sustainable growth and value creation for our business.

In the first quarter, our top and bottom line results exceeded our expectations, supported by our diversified drivers of growth. Revenues increased 13%, including double-digit growth in both Asia and North America and mid-single-digit growth in Europe. Performance was balanced across global DTC comps and wholesale up 12% and 13%, respectively, in constant currency. And we achieved this all while continuing to improve our quality of sales with increased full price selling and investing back into our key strategic priorities.

Notably, a rolling thunder of brand activations, new AI capabilities and expanding our key city ecosystems, along with returning cash to shareholders. With first quarter revenues and gross and operating margins ahead of the expectations we outlined in May, we have confidence in raising our full year outlook to reflect our first quarter over delivery even as we continue to take a measured approach to the macro backdrop in Europe, in particular.

Despite dynamic global operating conditions, we remain on offense based on our continued commitment to invest behind our brands, driving high-quality new customer recruitment and retention. Our strong and growing geographical presence anchored in our key cities in each region, and our strategic investments in advanced analytics, technology and AI to better serve our consumers and drive greater efficiencies in our business, all underpinned by our strong balance sheet and operating discipline.

Let me take you through a few recent highlights across the 3 strategic pillars of our plan. As a reminder, these include: first, elevate and energize our lifestyle brand; second, drive the core and expand for more and third, win in key cities with our consumer ecosystem.

Starting with our efforts to elevate and energize our lifestyle brand. At the intersection of culture, style and luxury, the Ralph Lauren brand continues to captivate new generations while deepening its connection with existing consumers around the world. Through our fashion shows, key city campaigns, celebrations of important historical moments and heritage sporting events, we are bringing the world of Ralph Lauren to life in distinct and immersive ways. We are leveraging our unique lifestyle authority to create bold innovative experiences that engage, inspire, and strengthen brand desirability.

Key highlights from the first quarter included: first, in celebration of America's 250th anniversary, we unveiled our American Icons collection of commemorative stamps with the U.S. Postal Service, making Ralph, the first designer ever invited to have this honor. The curated collection aligns with our brand's enduring creative vision, which is deeply rooted in the tapestry of American heritage, landscapes, cultures and artistry.

We also invited consumers to step into our vision of timeless style through our Spring '26 global campaign, A Sporting Life, a tribute to sophistication and sport with events in the Hamptons, Pebble Beach and beyond. Our men's Purple Label and Polo Fashion Show at our Palazzo in Milan, capturing the spirit of adventurous travel through reimagined icons, where we welcome guests, including Lewis Hamilton, Maluma, Henry Golding, Tom Hiddleston and more. Our home presentation during Salone del Mobile, also in Milan transformed Palazzo Ralph Lauren into an immersive celebration of design and craftsmanship.

And the launch of our newest book, Ralph Lauren Catwalk, which chronicles more than 50 years of our iconic womenswear shows and marking the first time an American designer has been featured in this prestigious series.

In Asia, we kicked off a year-long celebration of 50 years in Japan with the launch of our Very Ralph documentary at the Landmark Akasaka Palace, and we hosted activations around the 20th anniversary of our Omotesando flagship in Tokyo. And finally, reinforcing our leadership in the world of sports, we hosted our first ever Ralph Lauren Polo Cup in Beijing and Sydney, an elegant live Polo match seamlessly blending equestrian heritage with high fashion and the world of celebrity.

And beyond the quarter, we were proud to once again serve as the official sponsor of Wimbledon, marrying the traditions of the storied tournament with sophisticated spectator style. These activations are driving strong sustainable growth in new customer acquisition and retention.

In the first quarter, we added 1.5 million new customers to our DTC businesses, led by Ralph Lauren stores and our digital commerce sites. We continue to drive progress across brand equity metrics, including increased NPS and luxury perception scores as well as our ongoing recruitment of key consumer cohorts, including women, luxury and younger customers. And we increased our social media followers by high single digits to more than 70 million led by Instagram, LINE, Douyin and TikTok. We look forward to sharing more of our rolling thunder of activations ahead as we continue to build brand desirability across generations around the world.

Moving to our second key initiative, drive the core and expand for more. Our design teams continue to honor the heritage and enduring codes of our brand while thoughtfully evolving them for the way consumers live today, starting with our core, which represents more than 70% of our business. Core product sales grew mid-teens in the first quarter. Recent highlights include a broad range of foundational sweaters, our Linen Oxford and seersucker shirts and our iconic Chino caps. We also introduced our By the Lake children's collection, featuring versatile pieces that provide an easy transition into back-to-school, led by mini cable sweaters, windbreakers and full-zip hoodies. Our high-potential categories, including women's apparel, outerwear and handbags continued to be accelerators for our business. Together, these categories increased more than 20% for the quarter, outpacing total company growth.

In women's, we drove strong performance across cable-knit and jersey sweaters, linen shirts, shirt dresses and cotton chino pants. Our lightweight outerwear, led by our city jacket and oversized windbreaker, along with our fleece programs in both Polo graphics, are driving seasonal newness and consumer engagement. And our spring handbag campaigns continue to focus on our foundational Polo Plaque and Polo ID collections in a colorful array of pebbled leather, denim, beading and seasonal raffia, all ahead of our next foundational launch, the Polo Blaze for Fall '26.

Special releases this quarter included our Wimbledon collection, honoring our heritage of sport, sophistication and timelessness, our latest home collections, Sterling Square and Saddlebrook, inspired by Ralph's homes in New York City and Bedford and the launch of our partnership with Pebble Beach resorts, marking the destination's first and only branded retail concept. As we transition into fall, we will continue to lean into the breadth of our lifestyle product offering, both connecting with consumers around the world while driving resilience in our business.

Turning to our third key initiative, win in key cities with our consumer ecosystem. Our teams continue to set the standard for innovative consumer lifestyle experiences, bringing Ralph Lauren to life in our top 30 cities around the world while also laying the groundwork for long-term growth in our next 20 cities. Within DTC, which comprises the majority of our business, we delivered another quarter of healthy comp growth across regions. Global comps increased 12%, led by our Ralph Lauren stores and digital commerce.

By region, Asia again led our growth with sales up 25%, driven by all key markets. China sales remained strong, increasing more than 40% as we continue to build our brand. Our China performance was supported by local activations such as our Polo Cup, along with further expansion across our top 6 city clusters and on digital. Europe delivered mid-single-digit growth this quarter on top of last year's strong compares, and we continue to drive results ahead of expectations in our largest region, North America, with retail and wholesale both contributing to this quarter's 13% growth.

As we deepen our presence in our top cities, we opened 22 new owned and partner stores globally this quarter. New stores included the Grove in Los Angeles; Stanford Shopping Center in Palo Alto, our second store in the Bay Area ecosystem and first in Silicon Valley, including Ralph's Coffee, Istanbul, new Polo stores in Sydney and Perth and we renovated our highly elevated Bicester outlet outside of London, which also now includes a Ralph's Coffee.

In addition, we expanded our RL mobile app to Korea, our first market to have the app outside of North America, with strong early performance that exceeded our expectations. And finally, touching on our enablers. Our business continues to be supported by our 5 key enablers. Recent highlights include: first, as part of our focus on advanced technology, AI and analytics, we continue to drive progress in enhancing our creativity, productivity and customer engagement. This quarter, we improved user experiences on our digital commerce sites and expanded brand discoverability across key LLMs. We are also participating in select AI tests to understand evolving consumer behavior on these newer platforms. In addition, we were proud to be named one of Time Magazine's World's 100 most influential businesses of 2026, recognizing our company's legacy of style, impactful storytelling and the unique way we transcend generations.

We were also named one of the Wall Street Journal's Best Companies for the future for 2026, highlighting S&P 500 companies that are best positioned to thrive in a rapidly evolving global landscape.

In closing, Ralph and I are encouraged by our brand's continued momentum through the start of fiscal '27. With our diversified drivers of growth and increasingly elevated consumer base, our business model is resilient and delivering consistent performance. We want to thank our teams who are navigating the ever-evolving operating landscape with care and agility and to our customers, thank you for your loyalty and trust.

Looking ahead, we will continue to invest in our key strategic priorities to deliver the sustainable growth, including harnessing the power of our iconic brand, to drive desirability and lifetime value, creating timeless products with a strong value proposition that consumers love and trust and investing in brand experiences that inspire our consumers and immerse them in the world of Ralph Lauren.

With that, I'll hand it over to Justin, and I'll join him at the end to answer your questions.

Thanks, Patrice, and good morning, everyone. Our first quarter performance exceeded our expectations on both the top and bottom line, reinforcing the strength of the Ralph Lauren brand, and the resilience of our diversified global growth drivers. In the midst of a dynamic operating environment, these results underscore our disciplined operating approach and the quality of execution by our teams around the world.

Revenues were up double digits, ahead of our mid- to high single-digit outlook for the quarter, driven by broad-based performance across regions and channels and supported by healthy consumer demand. We continued on our brand elevation journey, with stronger full price selling and reduced promotional activity, driving gross and operating margins above our expectations. At the same time, we reinvested behind our key strategic priorities to support sustainable growth and long-term value creation. As Patrice mentioned, our strong first quarter results and underlying brand momentum give us confidence to raise our full year outlook even as we maintain an appropriately prudent view on Europe due to the macroeconomic uncertainty.

But first, let me walk you through our financial highlights from the first quarter, which, as a reminder, are provided on a constant currency basis. Total company first quarter revenue grew 13% on reflecting better-than-expected performance in both our direct-to-consumer and wholesale channels. By region, Asia led our performance, increasing 25% and followed by North America, up 13% and Europe, up 5%.

Total company retail comps were strong, increasing 12% with balanced contributions from our own digital and brick-and-mortar channels. Total digital ecosystem sales, including our own sites and wholesale digital accounts, grew mid-teens, driven by all regions. Total company adjusted gross margin expanded 130 basis points to 73.6%, underscoring the continued elevation of our business and investments in quality of sales. This resulted in strong AUR growth and favorable mix shift towards our full-price businesses, which more than offset incremental tariff costs and higher labor and noncotton material costs in the quarter.

AUR increased 15%, supported by healthy new customer acquisition and disciplined inventory management, enabling strong full price selling, reduced discounting and selective pricing actions, along with favorable product, channel and geographic mix. We currently expect mid- to high single-digit AUR growth in the second quarter of fiscal '27, reflecting our ongoing brand elevation strategy. Additionally, we now anticipate mid- to high single-digit AUR growth for the full year, with contributions from all regions. We expect this continued AUR growth to more than offset modest pressure from higher freight and tariff costs.

Adjusted operating expenses increased 13%, but declined 10 basis points as a percentage of sales to last year. driven by 90 basis points of leverage in nonmarketing expenses. Marketing increased to 8.2% of sales compared to 7.5% last year, supported by our investments in key brand building activations around the world this quarter, including our Spring Global Campaign and Men's Fashion Show.

We continue to view these marketing investments as critical drivers of long-term brand desirability, customer acquisition and lifetime value. And with compelling ROI behind these activities, we still expect marketing as a percentage of sales to step up to approximately 8% in fiscal '27. First quarter adjusted operating margin expanded 150 basis points to 18.5%, ahead of our plan, while operating income grew 23%.

Turning to segment performance and starting with North America. First quarter revenue grew 13%, above our expectations. In North America Retail, first quarter comps increased 9%, led by our full-price channels. Digital comps increased 8%, reflecting solid traffic trends and benefiting from merchandising optimization and our investments in full funnel marketing activations. North America wholesale revenue grew 22% and driven by strong spring sellout trends in replenishment orders, resumed shipments to a luxury wholesale account and a shift in timing of shipments from the fourth quarter of fiscal '26.

Together, the timing shifts and resumed shipments contributed approximately 15 points of growth in the quarter, demonstrating healthy underlying growth. With stronger-than-expected trends in our full-price wholesale business, we plan to accelerate our strategic reduction of off-price sales and exit of lower tier full-price stores in the back half of the year. As a result, we continue to expect stronger North America wholesale performance in the first half, followed by a more pronounced impact from the strategic reductions in the second half, which we expect to more than offset underlying full price growth and result in modest growth for full year fiscal '27.

Turning to Europe. First quarter revenue increased 5%. By market, Germany, Italy and Spain led our performance in the region. Europe retail comps were up 1% on top of a double-digit compare last year, with stronger growth in our own digital business. While store traffic was impacted by the broader macro environment, we continue to outperform market trends with increased conversion rates and basket sizes, through our ongoing brand elevation and targeted consumer engagement initiatives. Europe wholesale increased 8%, also on top of a double-digit compare last year. Results included a roughly 5-point benefit from earlier timing of shipments from the second quarter. While underlying wholesale sellout trends remain in line with our full year outlook, we are proactively managing our selling to maintain healthy inventories in the channel as we continue to take a prudent view of the broader consumer environment.

Moving to Asia. First quarter revenue increased 25% and driven by growth across all key markets. Retail comps grew 23%, with double-digit growth in every channel. Asia digital ecosystem sales also increased double digits with strong contributions from both our own digital commerce sites as well as pure plays. Our full funnel marketing activations continue to strengthen brand affinity across the region with consumers increasingly drawn to our core values, notably, authenticity, quality and timeless style.

By market, China continues to lead our growth with sales up over 40% in the quarter, driven by healthy comps and high-quality new customer recruitment. Japan and Korea also delivered double-digit growth. supported by localized brand activations and strong consumer engagement.

Moving to the balance sheet. Our fortress balance sheet and strong cash flow generation remain important competitive advantages, providing us with the flexibility to make strategic investments, pursue growth opportunities and continue delivering value to shareholders in a dynamic operating environment. During the first quarter, we returned more than $300 million to shareholders through our dividend and repurchases, ending the period with $1.9 billion in cash and short-term investments and $1.2 billion in total debt.

First quarter net inventory decreased 3% in constant currency, driven by disciplined inventory management, the timing shift of receipts in Europe, and lapping higher inventory levels in the prior year as we mitigated the impact of tariffs in North America. Inventory remains healthy across regions and channels and well positioned relative to demand.

Looking ahead, our outlook for fiscal '27 remains based on our best assessment of the current operating environment, including the geopolitical backdrop, foreign currency dynamics and broader macroeconomic trends. For fiscal '27, we expect constant currency revenue to increase mid-single digits to last year on a 52-week comparable basis, now centered around 5% to 6%, up from 4% to 5% previously, reflecting our better-than-expected first quarter results and continued brand momentum despite a volatile global operating environment.

Foreign currency is now expected to negatively impact revenue growth by approximately 50 to 100 basis points this year based on current exchange rates. As a reminder, fiscal '27 includes a 53rd week, which is expected to add approximately 1 point to revenue growth and slightly benefit operating margin.

While our core consumer base has remained resilient through the start of the year, our outlook maintains a prudent view of consumer demand in EMEA as well as modest cost headwinds from energy pricing volatility and U.S. tariffs. By region for fiscal '27, we still expect North America revenue to grow approximately low single digits. We are encouraged by our strong first quarter performance with continued momentum in our direct-to-consumer channel and healthy wholesale sellout.

We still expect this solid growth to be partly offset by accelerated strategic investments in quality of sales and lower tier door exits, notably in the back half of the year as we further elevate our long-term position in the marketplace. We continue to expect Europe revenue to increase approximately low to mid-single digits, with underlying growth tempered by ongoing uncertainty in the consumer environment from elevated energy costs and disruption to Middle East partner sales in tourism as well as lapping strong fiscal '26 compares. And we now expect Asia revenue to increase approximately high single to low double digits, up from our prior outlook of high single-digit growth, driven by our stronger-than-expected Q1 results and ongoing brand momentum and expansion opportunities across key markets in the region.

We now expect full year operating margin to expand approximately 60 to 80 basis points in constant currency, up from our prior guidance of 40 to 60 basis points, driven by our better-than-expected Q1 results. Despite the recent U.S. announcements on Section 301 tariffs, we are maintaining our assumption of approximately 10% tariff rates through the first half of this year, followed by a return to reciprocal rates in the high teens during the second half, in anticipation of additional tariffs.

At the same time, we are raising our full year gross margin outlook to roughly 50 to 70 basis points of expansion, up from our prior expectation of modest expansion, reflecting our stronger-than-expected Q1 performance. We continue to expect both gross and operating margin expansion to be weighted toward the first half of the fiscal year. supported by the timing of key marketing activations relative to the prior year as well as our current tariff assumptions, which remain subject to change.

Foreign currency is still expected to have a roughly neutral impact on gross and operating margins in fiscal '27. Our guidance continues to exclude the impact of tariff refunds, which we are not planning to include in our adjusted non-GAAP results. Consistent with our long-term capital allocation approach, we expect to reinvest any related proceeds back into our business as well as an initiative that advance our values and purpose.

For the second quarter, we expect constant currency revenue to increase approximately mid-single digits, centered around 5% to 6%. Foreign currency is expected to negatively impact revenues by approximately 100 to 150 basis points. We expect operating margin to expand approximately 80 to 100 basis points in constant currency, led by gross margin expansion. Gross margin is expected to benefit from AUR growth as well as favorable product, geographic and channel mix, all reflecting the output of our long-term brand elevation strategy. Foreign currency is expected to have a roughly neutral impact on gross and operating margins in the quarter. We expect our second quarter tax rate to be in the range of 19% to 20%, while the full year tax rate is still expected to be approximately 21% to 22%.

In closing, our teams continue to execute with focus and discipline across both our near- and long-term strategic priorities. The enduring strength of our brand rooted in Ralph's timeless vision continues to resonate with consumers around the world. deepening engagement across geographies and cultures. As we navigate a highly dynamic macro environment, we remain focused on managing industry-wide pressures through our operating discipline, strong balance sheet and organizational agility. At the same time, we are staying on offense and remain committed to investing in our brand our products, our experiences and our capabilities to better serve and create lasting connections with our customers while driving durable growth and long-term value creation.

With that, let's open up the call for your questions.

[Operator Instructions] The first question comes from Matt Boss with JPMorgan.

Congrats on another nice quarter. So Patrice, what's your confidence in sustaining brand momentum through the fiscal year and beyond despite lapping some big moments, including Olympics and Ralph Lauren Christmas. And with more luxury this year, does improvement in the broader luxury market, does that help or hurt your business? And do you need to keep expanding your marketing budget in order to compete? And then just to switch gears, Justin, could you help break down the drivers of more than 100 basis points of gross margin expansion in the first quarter? And just any structural change in the drivers of your gross margin build as we think about the second quarter or the back half of the year?

Matt, thanks for your question. So as you know, we've been on a clear brand elevation journey for nearly a decade now. and our brand equity is stronger than ever across markets and across generations. Sustaining that momentum goes well beyond marketing. It's a multipronged effort across our 3 drive pillars. And if you step back, and I know you care deeply about total addressable markets, as an $8 billion business in a more than $400 billion market, we still see significant opportunity to invest behind our brand and for long-term growth.

Our 3 pillars remain central to that strategy to seize this opportunity, right? First is building brand desirability through our distinctive cinematic storytelling. We continue to amplify evergreen platforms like Wimbledon. You may have seen the grass court that we built in Central Park recently, and we continue to launch immersive campaigns that engage women, luxury and next-gen consumers. We continue to see strong ROI from this rolling thunder of activation, and we remain comfortable with the 8% marketing investment guided for this year, knowing that as we've talked, as we continue to expand margin in the future, we do expect to continue to further invest in marketing.

Second is the unique breadth of our product portfolio. We're leveraging our lifestyle offering across core iconic products, which importantly are resonating across generations, including with the younger generations. And then we're continuing to lean into our high potential categories like women's apparel, outerwear and handbags. We're just at the beginning of this journey across these 3 businesses, right? If you look at the market shares that we've achieved across all 3, it's just the start of an exciting journey. And there, we're delivering timeless value that transcends fashion cycles.

And then third is our immersive channel experiences. We continue to build key CD ecosystems with innovative shopping experiences that deepen consumer connection, and we see that both in consumer recruiting and retention scores and support strong performance across the broad range of regions that we operate in. So all this requires disciplined execution and agility. And while the macro environment remains dynamic, we've shown that we can advance this strategy, our 3 pillars across many different operating environments successfully.

Regarding your point on the luxury market, we've built strong luxury credentials across geographies. And I think that's reflected both in our consumer base and our performance and the type of consumers that we're bringing into the Ralph Lauren family. We also occupy a very distinct space within luxury, what we call inclusive luxury spanning categories and price points across our lifestyle portfolio. And consumers continue to tell us that they see unique value in our offerings from handbags to outerwear and beyond.

I will add that a healthier luxury market would be a tailwind for us, supporting stronger traffic consideration and alignment with our elevated positioning. So looking ahead, our brand is strong. We have multiple growth drivers. We continue to invest as we perform and we remain confident in delivering growth and value creation this year and beyond.

And I'll turn it over to Justin to cover your other questions.

Thanks, Patrice. So Matt, on the drivers of the gross margin. So Q1 gross margin was ahead of expectations driven by better-than-expected AUR growth and some favorable geo and channel mix and that more than offset incremental tariffs and some nonmaterial cost pressure. Our gross margin expansion is really underpinned by structural durable drivers, and that really gives us confidence in the continued progression from here. From a quarterly cadence perspective, we still are expecting gross margin expansion to be stronger first half, and that's largely due both to our Q1 outperformance and to that tariff assumption that we're making, which is the lower prevailing tariff rate of about 10% through that relief period end of July. And then back to the reciprocal rate assumptions for the balance of year.

For Q2 specifically, we guided gross margin 80 to 100 basis points of expansion. That's really driven by AUR growth as well as favorable product geo and channel mix. On the full year, we did kick up our gross margin expansion guide up from expedition of modest expansion to 50 to 70 bps of expansion, and that's really based on that strong performance. So we feel really good about the trajectory that we're on and the durability behind the drivers.

The next question comes from Jay Sole with UBS.

Justin AUR continues to exceed your expectations. How much further do you think the Ralph Lauren brand has to go on the elevation journey from here, especially if the pricing environment becomes more challenging? And can you give us any color around recent performance or quarter-to-date trends, given mixed industry reads over the past few months? And then Patrice, I also want to just ask you if you can expand on China. You talked a lot about brand momentum, but 40% growth in China is really impressive. How should we think about the possibility of that kind of demand and that kind of growth continuing as we go through the rest of the year and into next year?

Thanks for the question, Jay. I'll kick us off. So for us, brand elevation is not a destination, it's an ongoing journey. And we're still in the early innings of unlocking the full potential of our lifestyle brand. An important context to remember here with AUR is that AUR is an outcome of our strategy. It's not an objective in and of itself, right? We're elevating across product, storytelling, the consumer experience to deliver more value to customers and their response together with our consistently strong brand metrics really reinforces the strength and success of that approach we're taking, and that includes more than 9 years of AUR growth.

But a few points are worth reinforcing here. First, we continue to demonstrate that growth and elevation. They can go hand in hand, right? It's not an either/or proposition. And we saw this in the first quarter where we again delivered strong growth in revenue, including both AUR and unit growth while at the same time, improving our quality of sales. And second, we have multiple durable drivers of AUR growth, right? These include higher full-price sell-through and lower promotions, structural favorability from consumer channel, geo and product category mix and targeted pricing always with a clear focus on value perception.

Now on the potentially more challenging pricing environment, we're certainly mindful of the backdrop. At the same time, we built flexibility into our pricing architecture. So we can make targeted market-specific adjustments when and where appropriate without compromising our brand elevation strategy or our margin objectives.

And to the question on recent performance, we typically don't comment on quarter-to-date trends. What I would say is that our second quarter guidance reflects the continued brand momentum we're seeing across channels in key markets with positive contributions from all 3 regions in the quarter, right, led by -- so for Q2, [indiscernible] is going to lead growing mid-teens, followed by North America, where we're expecting another solid quarter of mid-single-digit growth and with modest growth coming from EMEA despite a more pressured consumer environment and the strong compares in the prior year.

Now as we have reflected in our initial outlook back in May, we do continue to expect revenue and profit growth to be more weighted to the first half of the year, and that reflects wholesale shipment timing, the compares were lapping and our decision to accelerate strategic reductions in off-price sales and lower distribution in the back half of the year. So just taking a step back. We remain focused on executing our strategy, investing in our brand, strengthening our quality of sales, expanding in our top city ecosystems, deepening our connections with customers around the world. But at the same time, you'll see us remain agile, and we'll remain disciplined as we navigate this external environment just as we have over time throughout the elevation journey.

Over to Patrice.

So we're always excited to talk about China. And indeed, up 40% this last quarter. So a few things I would call out. First of all, our teams are doing an outstanding job across the market, engaging consumers, both new consumers and existing consumers. So across our 3 drive strategies, First, on the marketing and storytelling front. We're leveraging our global campaigns very effectively and they're resonating in the market.

And then we're complementing that with local activations. You heard us talk about the first ever Polo match organized in Beijing that we did recently, 74 million people live streamed that Polo match, just to give you a sense of the scale that's possible when our teams really hit a nerve with consumers. And we're seeing our brand equity ratings go from strength to strength. We're very excited about the momentum that the teams are building there from a brand standpoint. From a product standpoint, our strategy is also playing out very well there. Our core is strong and we're seeing disproportionate performance from our women's business, our handbag business, continuing to lean into that. And as I mentioned earlier, there's so much potential globally on these categories, and that applies also to the Chinese market.

And then finally, as you know, we have a very focused, disciplined key city approach for China focused on the 6 key cities that we activate, and we have a disciplined rollout plan for retail. So those strategies are evergreen for that market. As we look ahead for this fiscal year, we expect China to be around mid-teens, right? Remember, in the back half, we're going to be anniversarying some pretty high levels of performance. So I don't know that we can count on 40% every quarter. but I think mid-teens is a very -- still a very exciting number for us for this fiscal year. And then in the context of our drive strategy for the 3-year period, we guided China should be low double digits and have confidence in our ability to deliver against that.

The next question comes from Brooke Roach with Goldman Sachs.

Patrice, can you provide a bit more detail on the engagement that you're seeing with the brand in Europe and dimensionalize the impacts of the macro pressures you're seeing? How would transfers throughout the summer months and what actions do you have in place to drive resilient growth amidst the uncertainty? And then perhaps for Justin, a similar question. Is there any cadencing regarding revenues or margin delivery that we should be mindful of in this region for the rest of the year given the comparisons and the macro?

So similar to what we're seeing around the world, and we continue to see strengthening of our brand equity in the European market across the key drivers of consideration, awareness, Net Promoter Score, luxury perception. So we feel good as a group that the campaigns that we're putting in the market, the activations we're doing locally across Europe are resonating with the consumer. Now we do know that this consumer is more pressured because of what's happening in the Middle East because of consumer sentiment generally being depressed and because of inflationary pressures.

Within that context, our brand is continuing to resonate very nicely across the key markets. The markets I would call out in terms of disproportionate strength are Germany, which is actually our #1 market in Europe and Southern Europe, Italy and Spain. As you know, Brooke, we don't comment on the current quarter so I can't give you any perspective yet on what's happening during the summer, but you've heard Justin talk earlier about the trends and the momentum that we expect continuing there.

So we are continuing to invest. We are gaining market share in Europe. We see that very broadly and excited to see how the brand is just continuing to perform in line with what we expected and how we see strong returns from the different investments we have, whether that is marketing activations, Wimbledon being the latest highlight of that or a men's fashion show in Milan or Salone del Mobile activation also in Milan. We're opening stores, right? We just recently opened a beautiful store in Saint-Tropez, which is a great brand statement that will continue to drive brand elevation in that market and brand energy, so continuing to run the play, but obviously keeping an eye on and being prudent on the general consumer context.

And on the cadence point, so as just mentioned, underlying business continues to show positive high-quality growth, and we continue to expect to deliver that high-quality, low to mid-single-digit growth for the full year, and that includes the mid-single growth we delivered in Q1 and expected growth in Q2. And again, there is a bit of a first half, second half dynamic there because we know we're up against some really strong comps in the first half of this year. So we do expect improvement there as we move through the second half.

And on an operating margin perspective, we expect expansion from all 3 of our regions for the full fiscal '27, driven by higher gross margin and quality of sales in EMEA. And I think the important thing to call out there is for Q1, you did see operating margin pressure, and that was really due to the timing and the increase behind marketing, where we continue to -- to Patrice's point to invest behind our brand and our business, and we had some onetime activations that were not there in the prior year like our men showing in Milan.

The next question comes from Laurent Vasilescu with BNP Paribas.

If I heard correctly, Patrice, I think you're still expecting China to grow mid-teens for the year. I'm curious to understand a little bit more what you're seeing in terms of Q2 trends or -- I know you don't talk about quarter days, but how do you think about the evolution of China overall as the year progresses? And then I know there's a lot of focus on China, but it looks like overall, Asia is doing really well. So I'd love to get your perspective on what you're seeing in the key markets, Japan and Korea.

Auto as I mentioned earlier, our strategies in China, I think are not just for this year, but they're pretty evergreen. And clearly, our teams are doing an excellent job executing across both marketing, product offering and go to market. And it's a big market, all right. And similar to our high-potential categories, I think we're only at the very beginning of this journey. Now China before COVID was 3%. Greater China is 2% of the company today, it's 10% of the company. So really nice consistent progress, right?

If you look at the prior year performance, we've been on a strong performance run for many, many years now in China. This isn't just a 1-quarter story or a 2-quarter story. But again, I think only at the beginning of it, many of our luxury competitors have much greater China penetration than our current 10%. So we have a game plan that we're running that is working across the different sectors of our strategy.

You are right that APAC as a whole is doing quite well for us of 25% this last quarter -- and you heard, I'm sure, from Justin's remark that we actually took our guidance up on APAC specifically for the year based on the strong momentum that we're seeing across the board. Korea, has seen significant acceleration of our performance. Again, the same strategy is at play here, elevation of our brand, driving our core products in the high potential categories and also selective expansion of our footprint for those of you who are tracking, BTS who had a concert last week, I'm sure many of you were at their concert last week at MetLife actually asked to be dressed in Polo. So the whole group was dressed in Polo. We're excited about that opportunity to partner with them as they reached out to us. So that's Korea.

Japan, performing quite strongly. We're seeing good sustained momentum in Japan. We're seeing particularly strength in full price sales and a better-than-expected inbound tourist spending from China and other markets. Now we've got some exciting activations going on in Japan this year because we're celebrating our 50th anniversary in this market this fiscal year. We're celebrating the 20th anniversary of our Omotesando flagship store. So good continued momentum there.

And in general, we look at the energy that the brand has across China, because I didn't quote Southeast Asia, I didn't quote Australia, but the same dynamic is true across the board and strong confidence in the future.

The next question comes from Michael Binetti with Evercore.

Congrats on the great quarter. A couple for me real quick. On the near term, maybe just on the second quarter North America revenue guide composition, I think Justin, you said mid-singles. Can you just talk about how we get there a little -- it sounds like there's -- it sounded like maybe there's still a wholesale benefit in 2Q and then we get into some quality of sales in the back half. So it seems like you're baking in a fairly conservative DTC comp in North America. Maybe just a comment on the composition there.

And then a bit of a longer-term question. As we think back to the Analyst Day with the updated guidance today, you're now tracking to probably to the high end of your fiscal 2028 revenue guidance this year, a year ahead of time. So congrats on that, first of all. But I wonder with some of those wins under your belt and a lot of leverage coming through this quarter on the operating expense line, the nonmarketing line. Is it right -- is it smart to think maybe marketing towards the mid to high point of the 2028 guide. Do you think it makes sense to start targeting the high end of that range to continue this level of revenue performance? Any thoughts would be helpful.

Thanks, Michael. So on North America, listen, we're really encouraged by our growth in North America. So our largest region is on a really solid, high-quality growth projects. We saw strong Q1 results across channels, and we saw that broad-based brand momentum carried forward into Q2, where again, we're expecting another solid and other high-quality balanced mid-single-digit growth quarter, and we continue to have confidence in delivering that full year sort of growth expectation of low single digits. With potential opportunity against this expectation, as we continue to lean into strategic elevation investments and the brand continues to perform well, really across the entire North America ecosystem.

So we're seeing strong results in DTC, strong demand across channels, digital and in the stores. We're seeing strong results in wholesale, really solid sell-out trends, enabling us to your point, to be able to lean in and accelerate on some of our elevation initiatives. And as you've seen us do in the past, we're going to continue to leverage our ability and our agility to take advantage of incremental demand opportunities when and if they arise, right? We know we have the ability to chase into incremental demand. So Q2, I would say, is more of a continuation story, a really balanced high-quality growth story for North America.

On the sort of longer-term outlook and the marketing, I mean, you've seen us steadily increase our marketing as we move through the course of our brand elevation. Here, I think we started, it was 3.5% roughly 8% up to this year. And we feel really good about the impact that our market investors have been having as we scale them and as we diversify them. And that's been part of the ROI and the impact has been the driving force behind us continuing to take this spend up.

Now you can see that as we as we deliver on our commitments and in the case of recent quarters, over deliver are sort of 1 area to put the over delivery that we don't flow through is really behind our brand and building our brand and strengthening our brand. And that's what you see happening in marketing expense. I think we feel good about the 7.5 to 8.5 3-year guide that we laid out back in September. But as Patrice always talked about, it's not a ceiling. So we know that as we continue to see the traction impact behind our spend, this is an area that we're going to continue to focus on moving forward.

Yes. Our marketing teams are really doing a fantastic job around the world, building brand desirability, recruiting new customers. You saw the number this quarter, again, 1.5 million new customers, driving clientele and so we're strengthening value per customer. So we're getting really good returns on the increased marketing investments that we've been doing over the years. I think Justin, as you mentioned, we're comfortable with the 8% guide for this year, the range we had provided for the 3 year was 3.5% to 8.5%. Michael, I don't think there is a ceiling, right? So as we come up with new smart ideas to activate the brand to engage with consumers, we'll look at it through the lens of ROI and if there's a smart opportunity to lean in, then we will do that in parallel with continued expansion of our operating margins. .

The next question comes from Dana Telsey with Telsey Group.

Congratulations. Two things. As you think about -- I think, [ Jason ], you mentioned you had 90 basis points of leverage in nonmarketing expense -- how should we think about that going forward? Is there more opportunity? And then the other question on the strength in wholesale, with North America resuming some shipments, how do you think about that going forward? And given the more pronounced strategic reduction where should wholesale be as a percentage of the business? How do you see the growth of DTC relative to wholesale, especially given the opportunity categories have so much room?

So I'll kick it off and then Patrice and I will tag team on the wholesale sort of strategy. On expenses, our long-term philosophy remains unchanged, right? And that's to balance reinvestment in growth for the longer term, we're delivering on or exceeding as we did in Q1, our operating margin commitment. So you saw us deliver little bit of leverage in Q1. You also saw us invest in marketing up pretty meaningfully, year-over-year. So we're going to continue that balance, and we built out that muscle of operating expense leverage with our cost optimization discipline that we've created as a culture here at Ralph Lauren.

And just on the trending on the wholesale before the strategy, I'll just say that for North America wholesale, we feel really good about the health of the business. We're driving high-quality growth while at the same time, continuing to elevate our positioning in the chat. Underlying demand for healthy sell-through remains strong, and we continue to gain share across our family of brands and key accounts. So for us, driving growth while elevating in this channel is really the play here.

And then from the general strategy standpoint, go-to-market, Dana, as you know, we've got this key city approach that we're leveraging around the world, top 30 cities and then the next tranche of 20 cities that we're starting to activate. Wholesale is an important role to play, and I would qualify that as saying quality wholesale has an important role to play in that strategy because we're finding that quality wholesale is a wonderful way for brand discovery and new consumer recruiting. So we rely on it in large part for that in the context of our key city ecosystems.

Today, the split is 70-30. If you look at just geographical composition and mix, right, APAC is mostly DTC. So as APAC disproportionately grows, obviously that percentage is going to continue to increase towards DTC. But we're not obsessed with the split frankly, each part of that business has a role to play. What we're obsessed with is already engaging the consumer in the right place and are engaging with them in an elevated way, in a way that we are proud and that is financially attractive.

I have to say, having had a recent launch with one of our key wholesale partners. It's so exciting to see the strategic alignment we now have with our key department store partners, both here in the U.S. and in Europe. And it's exciting to see the breadth of our performance as we look at market share gains, men's, women's, kids, core high-potential categories. So to Justin's point, we feel we have very strong momentum there. Most of the reset is complete, although we will continue to clear the bottom because there's always a bottom, but feel good about where we are from a wholesale standpoint, both in North America and Europe now. And I think back to the percentage question, probably a little more than 70% DTC moving forward.

We will go with one more question please, Julie.

Our final question will come from Blake Anderson with Jefferies.

So I wanted to ask about Europe. I know you've discussed it on the call already. I was wondering if you could unpack a little bit more what you're seeing in terms of local demand versus tourism and anything on units or AUR in that market or traffic to your stores? And then bigger picture, I wanted to ask, has your perspective or strategy changed at all for this market in terms of your outlook, given the recent environment, I know that you've had some quality of sales initiatives you implemented more in the last few quarters to maintain that high AUR. How are you thinking about kind of the strategy there and outlook going forward in bigger picture as well?

Thanks for the question. I'll start off. So traffic, as you know, has been broadly pressured across EMEA, right? And that's really driven by the challenging macro backdrop trends varying by markets, and that includes that slowdown in tourism from the Middle East. On the plus side, our brand positioning and our brand strength remains very strong. And we've been able to offset the soft traffic with higher conversion rates, increased basket sizes as we continue to appeal to our core consumers. Our core consumer in the region remains resilient, and that's really what's driving our growth in the region.

At the same time, we put together our kind of established action plan to engage and convert those consumers that are more pressured by the macro, but for us is a smaller subset of our consumer base, but this is with targeted personalized marketing with very specific tactical product value propositions, clienteling, WeChat, et cetera. And we've seen that that circumstance before that environment before, and we ran that play before and we know that we can successfully talk to and engage these consumers during this time. We've reflected the macro challenges in our outlook for the year. And at the same time, we continue to deliver growth, we continue to invest and we continue to see the high-quality full-price growth come through in our quality of sales and in our gross margin. So when we think about the outlook for the region, we're really confident in that low to mid-single-digit growth algo that we guided because our underlying European business continues to show that positive high-quality growth.

For the longer-term strategy, Blake, Europe is around 30% of the company. We've had a really nice run in Europe now for several years with strong growth across all the markets and reset of our wholesale business there, so strong foundations. So our ambition and expectations from Europe are unchanged. We still expect to deliver mid-single digit for the full 3-year period, to Justin's point. This year, we're being a little more prudent given the consumer contact. But our longer-term ambition relative to that market and our longer-term excitement about the opportunities that we have across EMEA are unchanged.

All right. Well, listen, thank you all for joining us today. We look forward to reconnecting with all of you in early November to share our second quarter results and until then take care, and have a great day.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren Fourth Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Ms. Corey Van der Ghinst. Please go ahead.

Good morning. Thank you for joining Ralph Lauren's Fourth Quarter and Year-End Fiscal 2026 Conference Call. With me today are Patrice Louvet, the company's President and Chief Executive Officer; and Justin Picicci, Chief Financial Officer.

After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller. During today's call, our financial performance will be discussed on a constant currency adjusted basis. Our reported results, including foreign currency can be found in this morning's press release. We will also be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook.

Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties. Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings.

To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our Investor Relations website. With that, I will turn the call over to Patrice.

Thank you, Corey. Good morning, everyone, and thank you for joining today's call. As we reflect on this past year, our teams around the world executed with excellence and agility to deliver a strong first year of our Next Great Chapter drive strategic plan. We drove broad-based performance across our lifestyle categories, geographies and channels. all while continuing our long-term journey of elevating our positioning in the marketplace.

And to our customers around the world who are engaging with Ralph Lauren like never before, we want to thank you for stepping into our world and for your enduring loyalty. From your TikTok posts that feature your interpretation of a Ralph Lauren Christmas, a classic quarter-zip or Team USA gear to all of you who have waited patiently for a cup of Ralph's Coffee. We're inspired by the ways in which you're interpreting Ralph's vision and have made us a part of your everyday lives.

Our consumers' passion and unique loyalty are a testament to the power of our iconic brand and our ability to connect authentically across generations and cultures. And these deep connections are translating into healthy, consistent, sustainable growth and value creation across our business. In the first year of our Drive plan, both our top and bottom line results exceeded expectations, supported by our diversified drivers of growth and our strongest quality of sales to date.

Our reported full year revenues surpassed $8 billion for the first time, driven by growth across our retail and wholesale channels in every region. Operating margins exceeded our expectations reflecting gross margin expansion, more than offsetting the meaningful impact of tariffs and disciplined expense leverage with our cost savings used to fuel investments in our long-term strategic priorities, from our Rolling Thunder of brand activations to new AI capabilities and expanding our key city ecosystems.

This established model of balancing operating discipline and agility with investments in long-term growth, gives us the confidence to continue expanding margins, including over the remainder of our plan and longer term. And we achieved all of this while accelerating returns to shareholders, including taking up our dividend once again this year. Let me take you through a few recent highlights across the three strategic pillars of our plan.

As a reminder, these include: first, elevate and energize our Lifestyle brand; second, drive the core and expand for more; and third, win in key cities with our consumer ecosystem. Starting with our efforts to elevate and energize our lifestyle brand. We are engaging with consumers in more powerful ways than ever before, cutting through cultural moments via sports, entertainment and style.

Our advanced data and analytics are delivering brand activation insights that give us the confidence to further increase our marketing investments to support long-term sustainable growth. Key highlights from the fourth quarter included: First, we reinforced our leadership in the world of sports. As the official outfitter of Team USA since 2008, we were proud to once again participate in the world's biggest stage in sports at the 2026 Milan, Cortina Olympics and Parallel Olympics.

The spirit of the games and the athletes passion and pursuit of greatness is authentically connected to our brand values. We activated around the world and across the games with celebrities and friends of the brand, including Usher, Shaun White, Maggie Rogers, Snoop Dogg and Taylor Swift, who kicked off the opening ceremony broadcast wearing our Team USA Polo Bear Tee.

Our Olympics activations supported our new customer acquisition and elevation strategies as we achieved the #1 share of voice across social media and drove further increases in luxury perception, brand relevance and consideration. We also invited consumers to step into Ralph's vision of timeless style through our women's collection runway show in New York City, our women's Polo presentation in Paris and our first menswear show in Milan in more than 20 years.

Each of these events showcase the effortless elegance of our brand, seamlessly blending heritage with modern sensibilities. And in Asia and around the world, we welcome the year of the horse with a series of exciting Lunar New Year activations designed to deepen our connection with consumers, from our digital red envelopes on WeChat to our spectacular drone show in Shenzhen, a stunning dynamic constellation that combined our brand's heritage and spirit of optimism with a rich cultural symbolism.

Around the world, these activations are driving strong, sustainable growth in new customer acquisition and retention. In the fourth quarter, we added 1.4 million new customers to our DTC businesses, a low double-digit increase to last year, led by digital and Ralph Lauren stores. We were encouraged by our continued momentum in building brand equity this year. including increased luxury and value perception scores and our ongoing recruitment of women, luxury and younger customers.

And we increased our social media followers by high single digits to approximately 70 million led by Instagram, LINE and Douyin. Looking ahead, we remain focused on building brand desirability as we inspire people to step into their dream of a better life.

Moving to our second key initiative, Drive the Core and Expand for More. Ralph and our creative teams continue to bring his cinematic vision to life with our commitment to quality and timeless signature styling, capturing the easy elegance of a life well lived. It's not about chasing fashion cycles or trends. This philosophy shapes how we drive our core products as well as our high potential and complementary lifestyle categories, enabling us to deliver our unique form of inclusive luxury.

Starting with our core, which represents more than 70% of our business. Core product sales grew mid-teens, both fourth quarter and full year. Recent highlights include a diverse range of sweaters, linen and rugby shirts. While our seasonal Bayport cotton windbreakers, Chino and RL67 tweed jackets led the transition into spring. We also introduced our coastal Main Inspire Children's collection, delivering double-digit performance led by our core cable knit, Flag and Polo Bear sweaters and Down Jackets in Q4.

Our high-potential categories, including women's apparel, outerwear and handbags, continue to be accelerators for our business. Together, these categories increased more than 20% for both the quarter and full year, outpacing total company growth. In women's, we drove outsized performance across multiple categories from our core Cable knit and Jersey sweaters to lightweight outerwear and colorful linen shorts.

Meanwhile, playful iterations of fleece, sweatshirts and hoodies are appealing to next-generation consumers. And our oversized windbreaker was a highlight of our Polo Fashion Presentation in Paris. Our spring handbag campaigns focused on our foundational Polo Play collection, featuring bright pops of colors, stripes and seasonal new textures.

We also unveiled our newest foundational handbag family at Paris Fashion Week. The saddle inspired Polo Blaze which we are excited to launch this fall. Special releases this quarter included our Major League Baseball capsule featuring an exclusive release in Japan, ahead of the World Baseball Classic, and our Team USA collection for the Winter Olympics, reflecting the sophisticated style and bold energy of the games.

Moving into fiscal '27, we will continue to leverage the unparalleled breadth of our lifestyle product offering, both connecting with consumers around the world while driving resilience in our business. Turning to our third key initiative, win in key cities with our consumer ecosystem. From the rich backdrop of our Palazzo in Milan during Salone del Mobile to our holiday [indiscernible] Square and the cozy elegance of a dinner at the Polo Bar in New York, our teams continue to raise the bar for innovative consumer lifestyle experiences.

Through our timeless storytelling, we are bringing Ralph Lauren to life in our top 30 cities around the world while also laying the groundwork for long-term growth in our next 20 cities. Within DTC, we comprise the majority of our business, we delivered another quarter of healthy comp growth across regions. Global comps increased high teens on top of 13% growth last year, led by our Ralph Lauren stores and digital commerce.

By region, Asia once again led our growth with sales up nearly 30%, driven by all key markets. China sales accelerated to more than 50% growth as we continue to drive our brand desirability and engagement. Our China performance was supported by an exceptionally strong Lunar New Year along with further expansion across our top 6 city clusters and Andean. Europe also delivered high-quality results this quarter on top of last year's strong compares. And we're encouraged by the momentum in our largest region, North America, led by mid-teens retail comps.

As we continue to deepen our presence in our top cities, we opened 108 new owned and partner stores globally this year. New store highlights included our new emblematic store at Chengdu IFS Mall in China. Along with new stores in Vancouver, London, Munich, New Delhi, Sydney and more. We also purchased our iconic store locations in New York City, Soho, and on Boston's Newbury Street this year to reinforce our long-term presence in these key U.S. markets.

And finally, touching on our enablers. Our business continues to be supported by our five key enablers. Recent highlights include: first, as part of our focus on advanced technology, AI and analytics, we made significant progress in enhancing our creativity, productivity and customer engagement. We accelerated the iteration of [indiscernible] icons in the design process, successfully integrated automation to support teams in our global distribution centers, enabled brand discovery across Agentic search and commerce.

In addition, we were proud to be named one of Fast Company's most innovative companies of 2026, recognizing the exciting innovations across our business. From the design and storytelling efforts behind our Polo Ralph Lauren for Oak Globe's collection to how we are leveraging AI to bring our iconic styling to our consumers' fingertips with as Ralph and more. And as we focus on enabling resilient partners and communities, this quarter, we announced our expanded partnership with the Council of Fashion Designers of America, CFDA, and to provide financial support for American manufacturers who play a critical role in our global sourcing approach.

And finally, we are proud to have endowed the Ralph Lauren Corporate Foundation with a $26 million contribution to support the Foundation mission, including its work across cancer care in communities around the U.S. In housing, Ralph and I are exceptionally proud of our team's progress. And on behalf of Ralph and our leaders, I want to thank your team for your excellent execution through this first year of our Next Great Chapter drive plan.

We met or surpassed each of our financial commitments and key consumer metrics, while also continuing to invest back into our strategic growth priorities. Laying the groundwork for healthy, sustainable long-term growth and value creation well into the future. While we are in touch with dynamic global operating environment, we remain on offense. Focused on what differentiates Ralph Lauren and our ability to create value through our diverse growth drivers, including our powerful brand, our iconic core with acceleration in our high potential categories and significant geographic expansion opportunities with a focused approach on our top cities, all enabled by our talented teams proven ability to execute.

With that, I'll hand it over to Justin, and I'll join him at the end to answer your questions.

Thanks, Patrice, and good morning, everyone. We delivered strong financial performance and made meaningful progress on our Next Great Chapter Drive strategy in fiscal '26. We exceeded the expectations we laid out last May with healthy revenue growth across every region and channel. Underscoring the strength of our diversified growth drivers and further elevation of our brand, products, experiences and environments.

Gross margin also outperformed our outlook supported by our compelling value proposition and pricing power, which enabled further improvements in quality of sales, more than offsetting meaningful headwinds from tariffs as we progress through the year. And each region contributed to operating margin expansion this year as disciplined expense management enabled reinvestment in our key strategic priorities, supporting sustainable growth and long-term value creation.

This strong performance is underpinned by our key enablers, including our talented teams around the world, our advanced analytics and technology capabilities and our fortress balance sheet. Let me walk you through our financial highlights from the fourth quarter, which, as a reminder, are provided on a constant currency basis. Total company fourth quarter revenue grew 12%, ahead of our mid-single-digit outlook, driven by better-than-expected performance in both our direct-to-consumer and wholesale channels.

By region, Asia once again led our performance, increasing 28%, followed by North America, up 8% and Europe, up 6%. Total company retail comps increased 17%, accelerating from the prior quarter with double-digit growth in both our own digital and brick-and-mortar channels. Total digital ecosystem sales, including our own sites and wholesale digital accounts grew at a mid-teens rate, reflecting broad-based growth across all regions.

Total company adjusted gross margin expanded 40 basis points to 69% compared to our expectation of roughly 100 basis points of contraction this quarter. The expansion was primarily driven by stronger-than-expected AUR growth and favorable channel mix, which more than offset the planned step-up in U.S. tariff to peak levels. as well as modest headwinds from higher labor and noncotton material costs. AUR increased 16% in the fourth quarter, with approximately half of the growth driven by stronger full price selling, reduced discounting and modest targeted pricing and the remaining half attributable to favorable product, channel and geographic mix.

Looking ahead, AUR growth remains durable, and we expect continued, albeit more normalized mid-single-digit growth in fiscal '27 on top of last year's 15% increase. And in the first quarter, we expect high single-digit AUR growth with contributions from all regions. We expect this continued AUR growth to more than offset modest pressure from higher freight due to the recent increase in energy costs. Adjusted operating expenses increased 14% or 90 basis points as a percentage of sales compared to last year as higher marketing investments more than offset 60 basis points of leverage in nonmarketing expenses.

Marketing was 8.1% of fourth quarter sales compared to 6.6% last year, reflecting increased investment to support key campaigns including the Winter Olympics and our fashion presentations in Milan, New York City and Paris and to drive brand momentum into fiscal '27. For the full year, Marketing spend increased 21%, reaching 7.9% of sales aligned with our outlook of 7.5% to 8% this year.

With strong multiyear progress in new customer acquisition and healthy consumer metrics, we plan to continue growing our marketing investments above the rate of revenue growth to around 8% of sales in fiscal '27. Fourth quarter adjusted operating margin contracted 60 basis points to 9.7%, while full year operating margin expanded 140 basis points to 15.4% in constant currency, ahead of our plan.

Turning to segment performance and starting with North America, our largest region, which is firmly on a growth trajectory. Fourth quarter revenue grew 8% and exceeding both our outlook and our Next Great Chapter Drive plan targets, driven by 14% growth in our direct-to-consumer business. In North America Retail, fourth quarter comps were up 16% and led by our full-price channels. Digital comps increased 21%, supported by merchandising enhancements and full funnel marketing activations, notably around Teen USA. North America wholesale revenue was flat and ahead of plan as stronger replenishment orders and full price selling offset a strategic reduction in off-price sales and further rationalization of lower-tier wholesale doors.

While sellout trends across the broader North America wholesale channel remain healthy, we continue to plan for modest growth in fiscal '27 in the context of a dynamic macro environment and given the potential for further industry consolidation. We also expect performance to be weighted towards the first half of the fiscal year, reflecting the timing of shipments.

Turning to Europe. Fourth quarter revenue increased 6% and with balanced growth across both our direct-to-consumer and wholesale businesses. By market, Germany, the U.K., Italy and Spain led our regional performance. Europe retail comps were up 5% on top of an extremely strong 18% compared last year, led by our own digital business. Europe wholesale increased 7% and driven by better-than-expected reorders and healthy sellout trends exceeding our long-term outlook.

Looking ahead, we expect a more normalized level of wholesale growth in fiscal '27, notably as we lap strong double-digit compares in the prior year, with the strong growth expected in the first quarter. We also anticipate modest headwinds to our EMEA business more broadly due to disruptions in the Middle East, which represents a low single-digit percentage of our EMEA revenue as well as softer inbound tourism into Europe.

Moving to Asia. Fourth quarter revenue increased 28% ahead of plan with all markets contributing to growth, both the quarter and the full year. Retail comps grew 25%, with strong double-digit growth in each channel. We continue to build top-of-funnel brand awareness and purchase intent across the region through high-impact marketing activations with more to come in fiscal '27 as we celebrate our 50th anniversary in Japan.

China once again led our regional growth, with sales up more than 50% in the quarter, supported by exceptionally strong Lunar New Year performance, along with healthy comps and high-quality new customer acquisition. Asia digital ecosystem sales increased double digits in the fourth quarter. We continue to expand our elevated presence across Chinese social platforms while scaling our own digital sites in China, Japan and Korea, moving to the balance sheet. Our strong balance sheet and cash flow generation remain key enablers as we execute our strategic plan and deliver value to shareholders in a dynamic operating environment.

We ended the period with $2.1 billion in cash and short-term investments and $1.2 billion in total debt. During fiscal '26, we generated approximately $750 million in free cash flow and returned more than $700 million to shareholders through dividends and repurchases. Our Board of Directors recently approved a 10% increase in our annual dividend, reflecting our continued commitment to strong shareholder returns, while reinvesting in our business to drive high-quality growth and compelling returns on invested capital.

Fourth quarter net inventory increased 5% in constant currency with a healthy composition of current product in each region aligned with our future revenue growth outlook. Looking ahead, our initial outlook for fiscal '27 is based on our best assessment of the current operating environment, including the geopolitical backdrop, foreign currency dynamics and broader macroeconomic trends. Our guidance does not currently assume any potential impact from tariff refunds.

Based on ongoing volatility in the environment, this outlook is subject to change as macro conditions evolve. Our fiscal '27 outlook is aligned with our next great chop to drive targets. We expect full year constant currency revenue to increase mid-single digits to last year on a 52-week comparable basis, centered around 4% to 5%. Fiscal '27 includes a 53rd week, which is expected to add approximately 1 point to revenue growth. While our core consumer has remained resilient, exiting fiscal '26 and into the start of fiscal '27, our outlook reflects prudence around consumer demand as well as modest cost pressure related to recent energy price volatility.

Similar to last year, however, if the consumer is stronger than anticipated, we have built the capabilities to capture additional demand, supported by our proven supply chain agility as well as the strength and high penetration of our core and replenishment products, which continue to resonate with consumers across our markets. By region for fiscal '27, we expect North America revenue to grow approximately low single digits, aligned with our long-term targets, with continued momentum in our direct-to-consumer business and healthy wholesale sell-through, partly offset by ongoing strategic investments in quality of sales and lower tier door exits.

We expect Europe revenue to increase approximately low to mid-single digits, reflecting solid underlying growth, balanced with a measured approach to the consumer backdrop and near-term macro pressures, including elevated energy costs and disruption to Middle East partner sales in tourism as well as lapping strong fiscal '26 compares. And we expect Asia revenue to increase approximately high single digits, driven by our strong brand momentum and expansion opportunities across key markets.

We expect China to grow approximately mid-teens this year, steady ahead of our Next Great Chapter Drive targets and as we lap outsized growth of 40% in the prior year. We currently expect full year operating margin to expand in the range of 40 to 60 basis points in constant currency. With modest gross margin expansion and operating expense leverage, more than offsetting our continued brand investments, including ongoing quality of sales initiatives, strategic door exits and further distribution optimization.

The 53rd week is expected to have a slight benefit on operating margin for the full fiscal year. Foreign currency, is expected to have a relatively neutral impact on both revenue and gross and operating margins in fiscal '27. Gross and operating margin expansion are expected to be relatively stronger in the first half of the fiscal year, largely due to the benefit of a lower prevailing tariff rate of 10% for most of the period following the U.S. Supreme Court's ruling earlier this year.

Our outlook currently includes a sequential increase in tariff headwinds in the second half of fiscal '27, which assumes that rates rise above the current 10% level following the expiration of the tariff relief window. Nevertheless, we expect second half gross margins to be in line with our Drive target of modest expansion year-over-year. For the first quarter, we expect constant currency revenue to increase approximately mid- to high single digits. We expect operating margin to expand approximately 80 to 120 basis points in constant currency, led by gross margin expansion.

Gross margin is expected to benefit from AUR growth as well as product, geographic and channel mix, more than offsetting the modest impact of increased tariff costs versus the prior year. Higher marketing in the quarter is expected to be fully offset by leverage of nonmarketing operating expenses. Foreign currency is anticipated to have a relatively neutral impact on revenue and gross and operating margins in the quarter.

We expect our first quarter tax rate to be in the range of 22% to 23% and a full year fiscal 2017 tax rate of approximately 21% to 22%. Capital expenditures are expected to be in the range of approximately 4% to 5% of sales, in line with our long-term outlook. This includes traditional capital investments such as new stores, renovations and digital counters capabilities, as well as our ongoing multiyear next-generation transformation initiative. In addition, we will continue to invest in priority areas to advance our AI capabilities and scale cloud-enabled technologies that support our long-term growth and operating model.

In closing, our Next Great Chapter Drive plan is progressing well, supported by our diversified growth drivers globally and the excellent execution and agility of our teams. With top line and AUR growth as well as gross and operating margin expansion, all exceeding our expectations and more than offsetting the impact of tariffs and higher energy costs we are delivering strong returns.

At the same time, we are advancing our elevation journey, improving the quality of our sales and optimizing our distribution to enhance our product and brand experience for consumers. Together, these actions further strengthen our foundation and position us well to drive healthy, consistent and sustainable growth, reinforcing our confidence to continue investing behind our business, both now and over the long term.

With that, let's open up the call for your questions.

[Operator Instructions]. The first question comes from Matt Boss with JPMorgan.

Congrats on another nice quarter.

Thank you, Matt.

So Patrice, you exceeded expectations in the first year of this plan, what were the largest drivers? And are they sustainable in years 2 and 3 of the plan? By region, North America and Asia for next year, you've outlined in line with your 3-year targets, Europe's at the lower end. Are you seeing anything that worries you about the health of the consumer or your brand momentum in Europe?

And then for Justin, 13% global comps this year on top of 10% the year before. What's your confidence in mid-single-digit same-store sales off this higher base? Or just any areas of giveback that you would flag at all?

Sounds good. Well, thank you for your question, Matt. Look, we continue to be on offense. Our performance is the result of delivering across our multiple drivers of growth. There's no single or onetime elements that drove the outperformance. That's really the power of our diversified model. If I take the pillars one by one.

First, our brand momentum remains strong around the world, right, in every region, in every key city that we operate in. And we're very encouraged, by the way, that our teams have been able to connect authentically with consumers, whether they are completely new to the brand or whether they've been with us for decades. This depth of connection across generation, I really insist on the point that cross generation is such a differentiator for this company has enabled us to continue our shift towards a more elevated, younger, less price-sensitive consumers, including through this year as evidenced by our increased full price selling that you saw in our results, and our stronger retention.

On the second pillar, we continue to successfully tap into the breadth of our products across our lifestyle offering. That's another differentiator for us, which is the multiplicity of consumer options and solutions that we provide, allowing us to drive newness and to drive excitement through our distinct styling, while staying true to who we are, being very clear on who we are and making sure that we show up consistently around the world. This is a competitive advantage in a world of ever-changing designers and trends.

And third, we're bringing innovative lifestyle experiences to consumers through our warm and inviting retail and digital experiences that showcase unique worlds and concepts like coffee, that consumers want to step into and become a part of, and this helped drive our performance above target in every region, led by our most elevated channels. We are not to your question specifically on consumer changes. Our core consumer continues to be resilient, that is true across all 3 regions, and we're very encouraged by the underlying growth rates that we're seeing across EMEA and North America and APAC.

Now to answer the second part of your question, our company outlook is right on track with our 3-year targets. As you saw in our approach last year, when we began the year and set the plan, we always consider a number of macro drivers as we define our plan. We're feeling good, as I mentioned, about the underlying growth rates that we're seeing broadly about the resilience and breadth of our consumer recruiting, resilience of consumers around the world.

As we noted and you highlighted, we are taking a more prudent view of the Europe operating environment looking ahead given some of the energy and consumer sentiment pressures that we're seeing there. Now this being said, I'll reinforce that our brand is strong, that we have multiple diversified drivers of growth. And all of this gives us confidence in delivering on our plan as we come into this year. And as the operating environment evolves, I'm sure it will. We have a proven agility as you saw this past year to lean into opportunities.

And that on the comp question. So after a strong year 1 of revenue growth, moving into year 2, as we guided, expecting on Algo total company revenue growth, mid-single-digit growth across regions. And we feel good about that. Fiscal '27, still DTC full price-led growth. No shifts, but wanting to be mindful of is we do have some strong compares, specifically as we get into the second half of the year. But both pull forward of pumps.

And we still feel good about the longer-term sort of year-over-year expectations on revenue growth and comps that we shared at our Investor Day back in September.

The next question comes from Jay Sole with UBS.

Justin, year 1 of the Next Great Chapter Drive Plan was clearly ahead of your 3-year targets. While this year, fiscal '27 looks like it's more back to [ on auto ]. Can you just walk us through how you're thinking about investment priorities to continue driving strong momentum into the future and balancing growth investments with margin durability? And also if you can tell us how you're thinking about marketing as a percent of sales for this year, that would be helpful as well.

Absolutely. Thanks for the question. So we've successfully step changed our top line growth trajectory over the last few years of of our next great chapter journey. And importantly, our core investment priorities, they remain consistent, right? We continue to be focused on 3 key areas: First, reinforcing our iconic brand and creating authentic lasting connections with both new and with existing consumers; second, reinvesting back into our product. elevated quality, driving innovation, ensuring we're presenting a compelling value proposition to customers; and third, building out our key city ecosystems globally, including with digital and AI-enabled capabilities, to deliver that differentiated full lifestyle experience that's really unique to Ralph Lauren.

At the same time, a critical enabler of our sustainable growth is continued brand elevation. This underpins all three of the priorities I just talked about. It includes investing behind the quality of our sales. So think things like strategically reducing discounting off price, increasing full price selling, further optimizing our distribution.

Even as we lean into meaningful quality of sales enhancements this past year, if you take a look at the most significant pressures throughout the course of our elevation journey, in fiscal '26, we were able to inflect back the positive unit growth for the total company, drives healthy quality growth in our global wholesale businesses and returned North America, our largest region, to a sustainable growth trajectory, all while continuing to drive reinsured momentum across APAC and EMEA.

So taken together, this puts us at our most elevated position to date across product, brand, distribution and enables us to continue to drive that healthy sustainable growth going forward. On margins, we've demonstrated over the past several years, we can testify do that balance of reinvesting with expanding. And that remains a core focus of ours going forward. And as we guided, we expect both gross and operating margin expansion in fiscal '27 and more than offsetting modest increased pressure from freight and from potential tariffs. And we remain confident in our year-over-year margin progression that we laid out in our 3-year plan at Investor Day in September.

On the marketing investments. So if you step back, okay, you call a few years back, we were around 3.5% of revenue in marketing when we started on this journey. Now we're just a tad below 8%, I think we finished the year at 7.9%. We expect to get to 8% this fiscal year. That's what we're guiding for this fiscal year, there is no ceiling to our marketing investment as a percentage of revenue. The key driving factor here is the return on investment that we get, and I have to say our marketing teams around the world have done an excellent job expanding the portfolio of activation so that we won, continue the strong new consumer recruiting that we're doing across the board, disproportionately higher value, less price-sensitive, younger consumers; and two, continue to build retention and lifetime value it's what's so exciting about our business model is we can bring you in on a specific product, but then we have the ability to take you either by trading your across or trading you up across the very broad range of products that we have to offer.

So think 8% for this coming year. Again, we experiment around the world. We're constantly trying new things. You saw some fund activations recently with American Icon stamp collection that was designed and launched with Ralph Lauren. We have a catwalk book that summarized all the amazing the collections that Ralph and our teams have developed over the past decades. So we're going to continue to have a range of foundational elements to our plan around passion presentations.

We have 3 this last quarter, Paris, New York, Milan, sports activations. We obviously had the Olympics. Now we're coming on to Wimbledon and then the U.S. open and then cultural moments and cultural engagement. Those are the foundational elements combined with innovation, and I expect that we'll continue to expand marketing as a percentage of revenue over the years to come. But as Justin rightfully said, we will do that in concert with expansion of operating margin for the company.

The next question comes from Laurent Vasilescu with BNP Paribas.

I wanted to follow up on Europe. Justin, I think as you mentioned, the guide for low to mid-single digits. But if I heard correctly, you expect the strongest growth in the first quarter. Maybe can you unpack that a little bit more what you're seeing in that market?

And then I think you also anticipate modest headwinds for EMEA, particularly it sounds like more of inbound tourism. So I'd love to hear maybe can you quantify what your expectation is in terms of that headwind. That would be very helpful.

Thanks, Laurent. So we continue to see healthy underlying demand across our EMEA business is certainly supported by a resilient core consumer and that fiscal '27 outlook that you referenced, it reflects a more prudent view of the broader operating environment, right? But if you think about a step back, our core consumer remains resilient in all three of our regions, right, especially as we shift our customer base to be more full price and less price-sensitive quarter-over-quarter, year-over-year.

And that's including in EMEA, where we continue to drive help the underlying growth. And we expect that growth to continue in fiscal '27. So we're guiding for growth both in Q1 in that low single-digit range and on the lower end of our algo for the full year. That said, we are mindful of the macro pressures, right, the high energy prices and sediment pressures.

And we've taken these factors into account with our initial fiscal 2017 outlook, which reflects that more prudent view of the operating environment. We're also, to your point, monitoring tourism trends closely given the Middle East conflict and which we've seen soften a bit, but they do represent a very small portion of our business, Laurent.

I mean, our total Middle East business is low single digits of Europe and tourism is when you add on tourism, you're still in low single digits of Europe, even a smaller percentage of the total company. So monitoring closely, we'll continue to stay in touch with the environment that we're operating in, as always, as it evolves, and we know we have a proven agility as we saw this past year to respond if the consumer is stronger than we anticipate.

The next question comes from Michael Binetti with Evercore.

Congrats on a great quarter. Let me ask two. Patrice, category expansion. You mentioned the focus categories grew 20% in the quarter and in the year. Can you just tell us a little bit about how those contribute to the mid-single-digit growth this year? Or just bigger picture how they contributed to AUR in '26? And maybe talk a little bit about the opportunities for those categories to continue to outpace growth longer term.

And then Justin, in the fourth quarter, AUR was up 16%, D2C comps up 17%. So it implies very low unit growth. As you think about the 4% to 5% total growth this year, D2C faster than wholesale AUR, you set up mid-singles again. I'm going to ask probably for the ninth year in a row here. It seems like you're expecting units to decline in B2C, again, despite all the new customer additions, new store growth, new markets, new categories, how does the algorithm for unit growth work in your head this year, Justin?

All right. Well, you're consistent, Michael, so that's good. So regarding accelerator categories, so we coin them accelerated categories because we expect them to be accelerators to our performance. So you can -- you saw that indeed, they were accelerators for this fiscal year, fiscal year '26. We expect that to continue next fiscal year. So as we guide mid-single digits, we expect these three categories to over-deliver versus apps was super exciting is while we're building scale across the three of them, the size of price continues to be massive, right?

If you think about our women's apparel business in particular, the cost collection to Polo Women and Laurent, we have about a 1% market share. And so while we're already meaningful in terms of size, that's close to a $2 billion business. There are actually very few women's apparel brand in these price tiers of that size, we're only a 1% market share. So still significant runway and the same applies to cost and we're even earlier on the journey on handbags.

So I feel very good about the fact that these will continue to be accelerators for us. Of course, we need to execute with excellence, but that's what the teams are focused on. We have -- if you look at this coming fiscal year on handbags, we have an exciting launch with the Blaze addition to the Women's Polo collection. So in addition to Polo ID, which is now an established pillar and Polo Play, which is also becoming a foundational element of our Women's Polo Handbag presentation.

We'll be adding a third pillar with Blaze. So energized by how that will contribute to continued performance for our handbag business. On the AUR front, these categories are all AUR accretive, right? If you look at the kind of price points that we play out across both women's apparel, outerwear and handbags. So we expect -- you've seen continued strong AUR growth, I think we're on our 36th quarter of AUR growth. And obviously, mix is a key factor here, and product mix is an important element here. And so these accelerated categories will certainly contribute to that moving forward. Justin, over to you.

And on the units versus the AUR question, Michael, so our top line outlook for fiscal '27 of that mid-single-digit growth, it continues to be supported by our three diversified revenue drivers, right, high-value new consumer acquisition, durable UR growth and targeted unit growth. So there are both durable drivers and meaningful runway ahead of us for all three of these top line growth engines. On units, we did inflect, as I mentioned, the total unit growth in fiscal '26, as our elevation journey continues to progress.

And the growth in units is where you want, right, full price, high potential categories that the treat just talk, digital, China, et cetera. And it's now more than offsetting the step change elevation in those channels but still have kind of more discounted opportunities for elevation like outlets. That all said, we're on a continued elevation one. So we do expect AUR to continue to meet our growth and outpace units. We also expect units to continue to be slightly up as we think about our fiscal '27 outlook. Now we do assume some elasticity around units, largely in EMEA given the macro pressures there. But overall, we feel really good about our three diversified durable top line growth drivers, and you see it reflected in our on-algo guide.

The next question comes from Kendall Toscano with Bank of America.

So on wholesale, both North America and Europe outperformed in the fourth quarter, as you plan for more normalized growth in fiscal Curious what you're seeing today from your wholesale partners? And how much of the normalization is conservatism as opposed to a change in the underlying demand environment?

Sure. We'll probably tag team on this all. So just to step back, strategy on wholesale and wholesale is now about 30% of the company, right? So 70% DTC, 30% wholesale, primarily, as you noted, EMEA and North America. We have a 3-pronged strategy on wholesale, which is win with the luxury players. So I think the Nordstroms, Paris, La Rinascente, Blooming Dales of this world. We're seeing very strong interest from these players now in our brand. I wouldn't have said that a few years back. So we've got very good momentum and share gain there.

Second is within digital wholesale I think the big players of Orlandos of this world, the macys.com of this world where we're seeing very strong disproportionate momentum. And I think our scale and the breadth of our portfolio is certainly supporting that performance. And then third is key doors within premium wholesale, and we're really encouraged by the share progress that we're seeing across every single category which really indicates that the partnership that we have with these different department stores is working very well for us.

And what was particularly feels really good is we're aligned on the elevation strategy, which wasn't necessarily the case a few years back. So we're all rowing in the same direction, and we're seeing strong momentum across the board. I'll let Justin provide additional color.

Yes. And we are to that point, Patrice, really healthy quality growth across our wholesale businesses. So in terms of the normalized growth rate for North America, we expect that normalized rate to be in that up low single-digit range with some prudence in the near term, given the context of the dynamic macro environment and given the potential for further industry consolidations.

And I would say that our underlying kind of organic growth rate is going to continue to be partly mitigated by ongoing Brent elevation reinvestments, right, as we pull back on off-price. And as we continue to sort of call that lower level distribution. But we are guiding for North America, up low single digits on [indiscernible] fiscal '27 with both growth in DTC and wholesale, DTC on the higher side and wholesale on the lower side of that up low single-digit growth.

And then on EMEA, our outlook for fiscal '27 is really in line with that regional guide for the full year of up low to mid-single digits, reflecting a little bit of prudence on the macros and some unit elasticity for full '27 orders underlying normalized growth rate there is consistent with what we've been seeing out of that now, which is that mid-single-digit growth. And that's what we saw in fiscal '21 and for a number of consecutive quarters now.

The next question comes from Blake Anderson with Jefferies.

I wanted to ask on AURs. That continues to be really strong at double digits despite all the macro dynamics. I know your guidance is closer to mid-single digits and we've talked about AUR today. I just wanted to drill down on a bit more in the outlet channel and the opportunity there, especially at U.S. and Europe. How much opportunity is there really from continued promo optimization and you talked a bit Patrice about the product mix. So I'd be curious about that as well.

So on the -- thanks for the question. So on the sort of the AUR outlook. So yes, we expect AUR growth to remain healthy and durable as we did about fiscal '27, albeit at a more normalized level following sort of the outperformance we delivered over the past year plus, we're guiding in that sort of in that mid-single-digit sort of range.

And that does reflect growth across all of our regions and really across all other channels. And outlets has always been the channel that probably had the most runway when we started the elevation journey. It's where we've made the most progress on AUR growth and we probably still have the most opportunity as we look ahead. If you think about discount rate as an example, so many levers to assess and activate frequency, depth duration, breadth of our product is included within promotion.

So as we get sharper with product performance analytics, customer segmentation, leveraging AI, we're going to be able to get more price -- more per site and more targeted with our offers telling specifically to customers by stores, by channels. So I would say that across all of our regions, still a lot of opportunity there, and it's not just around the targeted marketing communications and product offering, but it's also about as we elevate the mix in those outlet channels that is a pretty meaningful driver of our AUR growth.

Blake, on the product mix, you're absolutely right. I think what we're doing actually in outlets is very consistent with what we're doing actually across all the channels, which is elevating the mix. So in outlook, what you'll see is more emphasis on sweaters, more emphasis on outerwear, more dedicated space on handbags, right? Better presentation of our shirts and you're going to see less of our additional big T-shirt rounders that might have historically been right smack in the middle of the section where, of course, they're still available because consumers are looking for them and interested in them, but they're no longer front and center as we focus the energy and the activation on these higher AUR categories, and we're seeing a very nice response from consumers across the world on this shift.

And if anything, Blake, I would tell you, we're surprised on the upside on the type of price points that we can actually implement within outlets. We're seeing, particularly on our women's products some of the leather outerwear, which are relatively elevated pricing, getting very, very strong response. So we are encouraged by the momentum we're seeing there. And I think that journey of mix elevation within outlets, as we change and evolve the overall experience from the consumers, we lean into clienteling as we enhance the environment is designed to be productive and effective for many years to come.

The next question comes from Bob Drbul with BTIG.

Congratulations. Great results. I guess the question I'd like to focus on is China. When you look at the trends in China, the cultural teens, can you just unpack it a bit in terms of how you see this year playing out with these strong results?

We love talking about China as part of our diversified growth driver. So first zooming out a little bit because obviously, the numbers are particularly strong this past fiscal year, up 40% total fiscal year of 51% this last quarter. If you look back past 4 years now, we've been growing at above the 20% rate in China. So this is not a one-off. This is a result of sustained implementation of our strategy and excellent execution by our teams on the ground.

The China opportunity remains a major opportunity for this company, mid and long term. If you look at the penetration of our business there and the runway that we still have ahead A few things to call out. One is consumers are really gravitating towards the core values that Ralph Lauren represents the values of authenticity of timelessness, of quality of entrepreneurship of optimism. So not only are they attracted by our products, but they want to be parts of that world.

Two is we're actually recruiting broadly across generations. So we're obviously excited about the momentum that we have within the Gen Z population, but we're seeing appeal very broadly as we had seen historically in other core markets. Three is the teams have done really nice stop balancing the global campaigns and programs that we implement and then local activation and local activation ranges from marketing to digital commerce.

You've heard us talk about our activations on Douyin. Our Women's Polo Douyin, our shop is doing incredibly well. We just opened -- reopened our Men's Polo Shop and encouraged by the initial results that we're seeing there. So I think that, combined with the focus on these 6 key cities, resisting the temptation to go too broad to go too fast. We're working really hard to pace. I know the numbers don't necessarily show that, but working really hard to pace our growth because we're in China, not just to win this year.

We were in China to win for the next 10 and 20 years and really make sure we're building the right foundations for the long term and staying close to that consumer and making sure that E&C sees both the luxury perception, the way we intended and also sees the value in what we have to offer. Looking to next fiscal year, we have guided to mid-teens for China performance and feel that that's the right number based on what we're seeing in the market and based on the plans that we have today.

We'll take one last question, please, Julie.

Our final question comes from Paul Lejuez with Citigroup.

The sponsorship of the Winter Olympics, it seems to provide nice platform for the brand. I'm curious what kind of activation you're most spoke about for this upcoming year, how that differs by region. Can you do anything tied to the World Cup? That's my first question.

And then I was just curious on the margin expansion guidance. How much of that is simply regional mix versus region versus itself margin expansion? If you could talk about the dynamics of margins within each region.

Sounds good. So yes, we were really pleased with the response we saw from consumers actually around the world on the Winter Cortina Olympic activation, and our teams did a great job, both in terms of overall campaign and also activations online. And in our stores, we were proud that in a world that's pretty crowded with a lot of brands activating the Olympics.

We have the #1 share of voice during that time. Our philosophy, Paul, on our marketing approach is diversification, right? So we have a broad range of marketing activations every year, and we have this notion of always on rolling funder of marketing activity. So as I look ahead, it's going to be really challenging, Paul, to point to one specific one because we really don't build the plan that way. But we have this coming quarter.

Well, we just had the launch of the American Icon Stan collection, which were, I think, officially launching in 2 weeks. We have a Men Show coming up in Milan pretty soon. We just had a presentation in Salone. We have Wimbledon, we have the U.S. Open. We have a women's collection show in the fall. We're celebrating our 60th next year, we are celebrating 50 years in Japan this year. We're celebrating the 40th year of our Madison Avenue store and with the Honda store in Tokyo this year.

So you're going to see continued rolling drumbeat of marketing activation. They won't mirror one for one what we've done in the prior year because that's not how we think. But we will have a program that will bring energy excitement and interest to bring in new consumers as we've been consistently quarter-on-quarter and also to continue to energize and engage our loyal customers.

And Paul, on your operating margin, all 3 regions are expected to contribute to op margin expansion in fiscal '17 including North America. And we've got opportunity on gross margin expansion with our durable AUR growth drivers as well as on our SG&A expense leverage as we start to scale some of the fixed target investments that you've seen us make over the past couple of years.

And Paul, I didn't answer your World Cup question. We're not sponsors of the World Cup. Just trying to be choiceful in terms of where we engage, but we will activate in different ways across our stores to take advantage of the energy around the World Cup.

Co-friends.

So on that, I want to thank everyone for joining today's call. We look forward to reconnecting with you in the middle of the summer early August to share our first quarter results. And until then, take care, and have a great day.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren Third Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Corinna Van Ghinst. Please go ahead.

Good morning, and thank you for joining Ralph Lauren's Third Quarter Fiscal 2026 Conference Call. With me today are Patrice Louvet, the company's President and Chief Executive Officer; and Justin Picicci, Chief Financial Officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to 1 per caller.

During today's call, our financial performance will be discussed on a constant currency adjusted basis. Our reported results, including foreign currency can be found in this morning's press release. We will also be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties, principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings.

To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to the morning's earnings release and to our SEC filings that can be found on our Investor Relations website.

With that, I will turn the call over to Patrice.

Thank you, Corri. Good morning, everyone, and thank you for joining today's call. We delivered strong third quarter results and progress on our Next Great Chapter: Drive plan this holiday. In a season defined by warm joy in the spirit of giving, Ralph Lauren's core values, a dream of a better life, time well met with family, quality and authenticity enabled us to connect deeply with consumers around the world, across generations, cultures and markets, people are stepping into our lifestyle and the iconic way of dressing. This powerful engagement with consumers is also translating to strong financial results.

In our most important quarter of the year, we exceeded our commitments on both the top and bottom line with broad-based performance across geographies, channels and product categories. Full price sell-throughs were meaningfully better than we expected this holiday as our brand experiences and products resonated around the world. This strong demand enabled us to continue driving our long-term elevation journey with improved quality of sales and gross margin expansion in each region, more than offsetting the impact of higher U.S. tariffs as we began to flow through more product under the new rates.

Our performance was also balanced across our retail and wholesale channels this holiday, reflecting our growing brand desirability and pricing power globally. This drove healthy high single-digit core along with double-digit growth in wholesale. And underpinning this momentum are our enablers that continue to support our performance. Our talented and passionate teams working tirelessly to execute on Ralph's vision. Our commitment to operational agility and a powerful balance sheet as we continue to navigate an uncertain global environment. And our focus on harnessing advanced technology, AI and analytics to better serve our consumers and drive greater efficiencies in our business.

In short, the 3-year next great cap to drive strategic plan we presented in September is off to a strong start. And are multiple drivers of growth across regions, channels, consumer cohorts and the breadth of our lifestyle product offering are delivering.

Let me take you through a few highlights from the quarter across the 3 strategic pillars of the plan. As a reminder, these include: first, Elevate & Energize Our Lifestyle brand; second, Drive The Core & Expand for More; and third, Win in Key Cities with our consumer ecosystem. Starting with our efforts to Elevate & Energize our Lifestyle brand. For nearly 60 years, Ralph has inspired people to step into their own dream of a better life. From the cozy elegance of a Ralph Lauren Christmas to optimism and adrenaline of the Olympics, we sit at the heart of culture. And over the holiday season, our teams continue to reinforce our place in culture, bringing our unique form of cinematic storytelling to a cross markets and platforms, transporting both new and existing consumers into our world.

Key highlights from the third quarter included: first, our Holiday 25 Mountain Living and Timeless Gifting campaigns translating the magic and easy elegance of Ralph Lauren around the world. We brought this to life this season through our immersive pop-up experiences in London, Los Angeles, Tokyo, Munich and Seoul, creating winter wonderlands as only Ralph can, featuring Ralph's coffee, special guest performances family photos, hand-painted denim jackets and candles and even our own Christmas tree farm. Along with a range of other activations, including our AI-powered store windows, featuring our Polo Bear and digital campaigns, our holiday campaigns drove a combined 2.9 billion global impressions.

Next, we continue to reinforce our position as 1 of the leading luxury apparel brands in the world of sports. During the quarter, we unveiled our Team USA uniforms for the Milan Cortina Winter Olympics, with special celebrations in New York City and in Milan with Vogue and EQ Italia, we are excited to feature inspiring stories that highlight the athletes dedication and perseverance to reach 1 of the greatest events on the world stage. I encourage you to check out all the looks starting with tomorrow's opening ceremony.

In the world of car racing, Lando Norris, our Polo Red fragrance Ambassador won the 2025 Formula One World Driver's Championship. And we renewed our long-standing partnership as an official sponsor of U.S. Open Tennis championships 1 of the most electric events of the year in Tennis. In Asia, we continue to build our elevated brand awareness and affinity through our very rough documentary events in Hong Kong and Singapor featuring celebrities and friends of the brand. Our Polo Originals campaign in Tokyo showcased Ralph Lauren's leadership in everyday luxury styling, uniquely blending Japanese refinement with American heritage dressing.

And finally, we outfitted an exciting group of actors and artists, including Jennifer Aniston, Rose Burn, Emily Blunt, Chase Infinity, Jesse Buckley and more for the Women in Hollywood celebration. Together, these global activations are driving strong sustainable growth in new customer acquisition and retention. In the third quarter, we added 2.1 million new consumers to our DTC businesses. on top of last year's 1.9 million record results, driven by digital and full-price store customers. We were encouraged by the strong momentum across generations led by younger next-generation consumers, women and VICs, and we increased our social media followers by high single digits to more than $68 million, led by Instagram, TikTok, Dogan and Line. This rolling thunder approach to activations enabled by our strong data and analytics capabilities gives us confidence to continue our brand momentum as we look ahead.

Moving to our second key initiative, Drive the Core & Expand for More. Ralph and our creative teams continue to deliver on his vision through timeless, high-quality products and distinctive styling that tell a story of a life well lived. Independent of any single fashion trend or cycle, this philosophy is embedded in how we drive our core products as much as it is in our high potential and complementary lifestyle categories. Starting with our core, which represents more than 70% of our business. Core product sales grew low double digits this quarter driven by strength in our cotton cable nets, Jersey, Wall Cashmere and flag sweaters, all perfect for gifting. Oxford and linen shirts rugby and quarters at knit tops and our iconic Polo camps.

Our holiday campaigns also drove healthy full price demand in our core children's programs led by our elevated sweaters and midway down jackets and knit and fleece sets. Our high-potential categories, including women's apparel, outerwear and handbags, continue to be accelerators for our business. Together, these categories increased high teens, outpacing total company growth in the quarter. In women's sweaters were a standout, ranging from our hero cable net in cotton wool and cash mirror to our beloved Polo bars and newer haves and Polo cables.

Our outerwear offering showcased our expanded range of classifications from the sporty functionality of our Apollo puffers in Candy shop colors, to more sophisticated options like our tailored wool coats and cable knit bomber jackets. Momentum in our handbag business continued to be driven by our foundational collections, Polo ID and Polo Play in core leather, seasonal sways and western details, along with our women's collection, Ralph and Ricky bags.

Special releases this quarter included Polo Ralph Lauren and [indiscernible] the fourth collaboration in our groundbreaking artists and residence program focused on empowering and celebrating artisans within the communities that have historically inspired our designs. Our team USA collection, ahead of this month's Milan Cortina Olympic Games, honoring the city's creative spirit while staying true to the enduring style that defines Ralph Lauren. And our annual Pink Pony collection supporting Ralph Lauren's long-standing commitment to cancer care and research. We will continue to leverage the unparalleled breadth of our lifestyle product offering to connect with consumers.

Turning to our third key initiative. We're in key cities with our consumer ecosystem. We continue to expand our consumer ecosystems to deepen our presence in our top 30 cities around the world. We are also laying the groundwork for long-term sustainable growth in our next 20 cities. Across each of these ecosystems, we're establishing a cohesive consistently elevated experience to allow consumers to engage with and step into the Ralph Lauren lifestyle. Within DTC, which comprises the majority of our business, we delivered another quarter of healthy comp growth across regions. Global comps increased high single digits on top of more than 12% growth last year, led by our Ralph Lauren stores and digital commerce. We were also excited to launch our Ralph Lauren TikTok shop in the U.S. this quarter, becoming the first luxury fashion brand with an always-on presence on the platform. The shop features a curated assortment, including core polo bestsellers and seasonal refreshes tailored to this platform's next-gen audience, including younger male shoppers. By region, Asia once again led our growth with sales up more than 20%, driven by all key markets.

China grew more than 30% this quarter, ahead of our outlook as we continue to strengthen and grow our elevated brand across the market. Our China performance was supported by our holiday and very Ralph campaigns, continued expansion on [indiscernible] and another outstanding Singles Day with high-quality double-digit revenue growth and strong new customer acquisition around the event. Europe and North America also delivered high-quality growth this quarter, on top of last year's strong compares. As we continue to reinforce our presence in our top cities, we opened 32 new owned and partner stores globally.

New store highlights this quarter included Chengdu IFC Mall in China, Stratford and Bishopsgate in London, New Delhi, Abu Dhabi and Chatswood Chase in Sydney. And finally, touching on our enablers -- our business continues to be supported by our 5 key enablers. Recent highlights include: first, as part of our focus on delivering advanced technology AI and analytics, Ask Ralph, the AI-powered digital shopping assistant we launched in September is providing us with powerful insights as AI drives accelerated shifts in consumer behavior. Customers are moving beyond traditional search toward rich natural language product conversations with styling and outfit discovery accounting for more than 50% of our total engagement.

In addition to driving more personalized experiences for our customers, Ask Ralph is also becoming an important resource for high-quality first-party data. Second, our teams and our culture drives our performance. We were proud to be named one of America's best companies by Forbes. And finally, it was an honor for all of us when Ralph was named the CFDA's 2025 American Womenswear Designer of the Year. It is the second time Ralph has received this award and he is the only designer to win all of the CFDA's top honors. This is a testament to our exciting women's momentum and to our brands enduring relevance. Congrats to Ralph and our creative team.

In closing, Ralph and I are proud of our team's progress and execution through the first 3 quarters of this fiscal year, including through the important holiday season. Even as we continue to navigate an uncertain global macro and geopolitical environment, we remain focused on what we can control and what's ahead for Ralph Lauren. Creating value through our powerful brand that is as relevant today with Gen Z as it is with our silver spenders, a relentless focus on driving our core while also accelerating our high-potential category opportunities, meaningful geographic white space, which we are developing with a thoughtful approach to our top cities and a proven ability to execute with creativity, agility and operating discipline.

And before I hand it over to Justin, we'd like to extend a warm welcome to our newest Board member, Cesar Conde. Cesar brings rich experience from the world of modern media, particularly with international expansion and broadening brand reach to more diverse global audiences. We're excited to have him join us. With that, I'll hand it over to Justin, and I'll join him at the end to answer your questions.

Thanks, Patrice, and good morning, everyone. This holiday quarter reinforced our strong execution against our next rate cap drive strategy. Results were ahead of our expectations with a healthy balance of revenue growth and accelerated quality of sales to deliver margin expansion ahead of plan. We continued to advance meaningfully on our long-term elevation journey, with double-digit AUR growth on better-than-expected full-price sales and solid new customer acquisition across all regions. At the same time, we further invested in our key strategic priorities to enable sustainable longer-term growth and value creation. And we achieved all of this while continuing to strengthen our balance sheet and cash flows with approximately $650 million in free cash flows and $500 million in returns to shareholders this year-to-date.

Our performance gives us increased confidence in our trajectory. And as a result, we raised our expectations for fiscal 2016, reflecting our strong execution through the first 3 quarters and a modestly improved outlook for the balance of the year. Let me walk you through our financial highlights from the terranes which, as a reminder, are provided on a constant currency basis. Total company third quarter revenue growth of 10% was above our mid-single-digit outlook even as we lap an exceptionally strong holiday performance last year. Asia led our performance, increasing 22%, followed by North America, up 8% and Europe up 4%.

Total company retail comps increased 9% and with balanced growth across our own digital business and brick-and-mortar channels. Total digital ecosystem sales, including our own sites and wholesale digital accounts, grew mid-teens, reflecting growth across all regions, led by Asia. Total company adjusted gross margin expanded 140 basis points to 69.8%. The increase was driven by AUR growth, favorable mix shift toward our full-price businesses and lower cotton costs, which more than offset the anticipated increase in U.S. tariffs flowing through cost of goods sold along with higher labor and noncotton material costs.

AUR grew 18% in the third quarter, well ahead of our plan and supported by strong full price selling trends and reduced discounting, modest targeted pricing and favorable channel and product mix. Across all 3 regions, outsized full-price consumer demand early in the season enabled us to pull back even more on planned holiday promotions this quarter. We now expect high single to low double-digit AUR growth in fourth quarter with the flexibility to further reduce discounting based on selling trends.

Adjusted operating expenses grew 9%, a 50 basis point decline as a percentage of sales to last year, reflecting leverage even as we increased marketing investments to support our expanded holiday and localized keys activations. Marketing was 8% of third quarter sales compared to 7.1% last year. With revenue growth exceeding our initial expectations for this year and strong returns on our brand activations, we are taking up our full year marketing outlook to a range of 7.5% to 8%, in line with our long-term expectations.

Our adjusted operating margin expanded 200 basis points to 20.7%, and operating profit increased 21%, both ahead of plan.

Moving to segment performance and starting with North America. Third quarter revenue grew 8%, above our expectations, with strong performance across both our DTC and wholesale businesses. Our direct-to-consumer business increased 7% with significant quality of sales gains across all channels driven by greater full price selling and lower discounts. In North America Retail, third quarter comps were up 7%, led once again by our Ralph Lauren stores. Digital comps also grew 7%, supported by our full funnel marketing activations, better in-stock positions on key products, and improved site experience.

In North America wholesale, revenue increased 11%, driven by stronger-than-expected reorders, outperformance in digital wholesale and our top premium and luxury doors, and timing of off-price sales. While we remain encouraged by our sell-out trends, our outlook continues to assume a decline in fourth quarter North America wholesale revenues. This is primarily driven by a planned strategic reduction in off-price sales, the timing of certain spring tents out of Q4 and into Q1 of fiscal '27 and our ongoing wholesale door exits and broader consolidation in the channel.

Moving to Europe. Third quarter revenue increased 4%, in line with our expectations on a very strong prior year compares representing 20% growth on a 2-year stack. By market, our performance was led by Germany, the U.K., Italy and Spain. Strong and sustained brand momentum across the region enabled a further pullback in seasonal promotions versus our initial plans, driving higher quality of sales in the quarter. This was in contrast to a highly promotional competitive environment across marks. Underlying demand for Europe remained in line with our full year outlook at the high end of mid-single-digit growth.

Europe retail comps were up slightly on top of an outsized 17% increase last year. Healthy comps in our full-price Ralph Lauren stores and digital sites were largely offset by softer outlet trends as we pulled back promotions and lapped the strong double-digit compare from the second half of last fiscal year. Our Europe digital ecosystem increased low double digits led by wholesale digital performance. Europe wholesale increased 8%, above our plan, driven by higher-than-expected reorders.

We still expect Q4 to be the most negatively impacted quarter of the year as we strategically pulled forward wholesale receipts earlier in the fiscal year, as previously discussed.

Turning to Asia. Third quarter revenue increased 22% with retail comp growth up 20%. Our teams delivered growth across every market in the region, reflecting disciplined execution, strong full-price demand and high-impact brand engagement from our very Ralph premiers to our Polo originals and regional holiday activations. Once again, China led our growth. with sales up more than 30% to last year, driven by comps and new customer recruitment with strong performance during key events like Golden Week and Singles Day and continued growth on [indiscernible].

Sales in Japan increased double digits, driven by ongoing strength in full price sales, enabling further discount reductions throughout the quarter. Asia digital ecosystem sales increased strong double digits in the third quarter. We continue to expand our presence on Chinese social platforms as well as scale our own digital sites in China, Japan and Korea. Moving to the balance sheet. Our strong balance sheet and cash flow generation provide a solid foundation for executing our long-term strategy, providing flexibility and bit uncertainty, enabling continued investment in strategic growth and delivering value to our shareholders.

We ended the period with $2.3 billion in cash and short-term investments and $1.2 billion in total debt. Third quarter net inventory increased 10% in constant currency, in line with revenue growth. Our inventories remain well positioned to meet consumer demand as we close out the holiday season and begin transitioning to spring.

Looking ahead, our outlook remains based on our best assessment of the current operating environment, geopolitical backdrop and macroeconomic trends. This includes tariffs and other inflationary pressures, supply chain disruptions and foreign currency fluctuations, among other considerations. For fiscal 2016, we now expect constant currency revenues to increase high single to low double digits, up from 5% to 7% previously. Foreign currency is still expected to benefit revenue growth by about 200 to 250 basis points this year.

With our strong third quarter results, we now expect full year North America revenues to grow at the high end of mid-single digits versus our prior outlook of a slight year-over-year increase. We continue to expect Q4 revenue growth to moderate on a sequential basis, reflecting our planned strategic reductions in off-price wholesale and later timing of spring receipts. While the consumer has proven more resilient than we initially anticipated this year, we remain somewhat cautious on the North American operating environment. due, in part, the further consolidation across the broader wholesale channel, including recent developments at Saks.

At the same time, we continue to strategically shift our business toward full price DTC and grow in our top premium and luxury department store doors. Importantly, our net exposure to Saks this year is minimal, reflecting our disciplined and proactive management of the account. We continue to expect Europe to grow at the high end of mid-single digits with the first half of the year benefiting from planned wholesale timing shifts, followed by the negative impact of those shifts, along with more challenging compares in the second half.

Despite the timing shifts, we still expect healthy underlying growth in Europe in line with our long-term plan. And we now anticipate Asia to grow mid-teens up from our prior outlook of a high single to low double-digit increase. We now expect full year operating margin to expand approximately 100 to 140 basis points in constant currency compared to our prior guidance of 60 to 80 basis points, driven by a more balanced contribution of margin expansion and expense leverage. Gross margin is now expected to expand about 40 to 80 basis points for the full year.

With further growth in AUR and favorable cotton and full-price channel mix, more than offsetting the expected sequentially increasing pressure from U.S. tariffs. Foreign currency is anticipated to benefit gross and operating margins by about 20 and 50 basis points, respectively, in fiscal 2016. For the fourth quarter, we expect constant currency revenues to increase approximately mid-single digits. This growth reflects continued strong demand, more than offsetting a planned pull forward of receipts to earlier in the fiscal year. as well as a strategic reduction of off-price sales during the quarter, as previously discussed. Foreign currency is expected to benefit revenues by approximately 200 to 300 basis points in the quarter.

We continue to expect a decline in fourth quarter gross and operating margins this year due to a combination of higher tariffs, timing of marketing campaigns, including the Olympics and our Milan Fashion Show, and previously discussed timing shifts, all within 1 of our smaller revenue quarters, with Q4 primarily serving as a transitional period between seasons.

We continue to expect tariffs to be a meaningful gross margin headwind through the first half of next fiscal year until we begin to lap the higher cost base. Despite the increased near-term input costs, we still expect gross margin expansion in each year of our drive plan with more meaningful tariff mitigation over time. We expect fourth quarter operating margin to contract approximately 80 to 120 basis points in constant currency, largely driven by a similar level of gross margin contraction. Operating expenses are expected to be roughly flat to last year as a percentage of sales due to the timing of marketing investments as planned.

Foreign currency is expected to benefit gross and operating margins by about 50 and 100 basis points, respectively, in the fourth quarter. We expect both our fourth quarter and full year tax rate to be in the range of 19% to 21%. Our CapEx outlook of approximately 4% to 5% of sales continues to reflect our investments in sustainable long-term growth. and the infrastructure required to support it. This includes investments in digital and AI capabilities, brand-enhancing new stores and renovations and our multiyear next-generation transformation initiative encompassing integrated business planning, enhanced logistics capabilities and the move to a single globally unified ERP platform.

In closing, our strong third quarter performance underscores the enduring power of our brand and its deep authentic connection with consumers around the world. Ralph's vision of inspiring the dream of a better life is more relevant than ever resonating across generations and cultures and transcending fashion trends. As we continue to navigate a volatile broader operating environment with agility, we remain confident in our ability to deliver sustainable, long-term growth. supported by the strength of our iconic brand and our multiple diversified drivers of growth across geographies, categories and channels.

With that, let's open up the call for your questions.

[Operator Instructions]

The first question comes from Matthew Boss with JPMorgan.

Congrats on another nice quarter. So Patrice, you cited record levels of new customer acquisition this quarter and continued global brand strength. As you increase the marketing budget, how are you and the team thinking about sustaining longer-term brand momentum? And then Justin, could you elaborate on the drivers of your raised outlook for the fourth quarter? And specifically, trends that you're seeing today on the ground in North America and Europe, maybe post holiday?

All right. Good morning, Matt. Thank you for your question. So you heard us say it before. Ralph is really much more like a movie director, I think Martin Scorsese or Steven Spielberg, then he is a traditional designer. And he and his talented creative design team invite really people into a cinematic world, right? So it's not just through products like our cashmere sweaters or Polo shirt, but really through cultural moments and experiences that transcend trends. that we attract and retain consumers into our prem.

So yes, we had a great holiday. But we think beyond the moment in time. And listen, whether that's Quite Luxury or Ralph Lauren Christmas or quarter zip sweaters or anything else, we're not reliant on these trends. Now that said, they rarely happen by chance, right? They reflect the work our teams deliver to weave our brand into the fabric of culture around the world. Ultimately, we've transformed our approach to marketing over the past few years.

Now it's always on in our TCs with a rolling thunder of activations. So moving past this holiday, you can see it now, right? We just finished our Milan Fashion Show Men's Fashion Show with very strong feedback, I'd say, even well beyond our expectations. Tomorrow, we have our biggest fashion show, which is the opening ceremony of the Winter Olympic games expected to be viewed by more than 2 billion people. And then next Tuesday, we have our women's collection show here in New York, and that's just part of that drug beat of marketing activations.

And we have stronger confidence than ever in our marketing ROI, which has enabled us to take up our investments meaningfully over many years and even this quarter relative to last year, as you just here Justin mentioned. So listen, the results are clear. They're healthy, they're durable. And we're fundamentally shifting our consumer base towards a higher-value consumer over time, think more full price skewing younger and more women.

Now this isn't just about marketing, right? Our consumers stay with us because we're consistently delivering what only Ralph Lauren can, the cinematic storytelling that we pair with AI-powered insights, a broad, timeless product portfolio offering superior value and our elevated go-to-market experiences across both digital and brick-and-mortar. And it's the consistent execution across all aspects of our business. That has led to -- 50% of our customers staying with us over 10 years and 25% for over 20 years.

So together, this is what's reinforcing our luxury equity and our value proposition, and it's reflected in the way our brand is resonating broadly across generations, across geographies, channels and cultures, not just today or for a trend cycle but for a lifetime. And then on the outlook for Q4, we saw continued broad-based global momentum across regions and channels beyond our brand and our business through and coming out of holiday. So we took up our Q4 outlook based on this continued momentum notably in North America, where despite a pretty volatile choppy operating environment, we continue to drive solid, high-quality, balanced growth across channels this past quarter.

Asia also really strong momentum behind our businesses across markets in that region. Now -- we do expect some moderation in Q4 growth versus the quarter we're coming off of that's driven by the timing of wholesaler sheets in North America and Europe and strategic reduction of sales in the off-price channel, as I mentioned in my prepared remarks. But underlying demand remains healthy, and our core consumer continues to be resilient and we expect a healthy solid underlying growth trend for as reflected in that mid-single-digit guide and as we head into the spring selling season in earnest.

Our next question comes from Jay Sole with UBS.

Justin, your 18% AUR growth this quarter was well ahead of your guidance of up high single digits. Could you just walk us through the drivers of your AUR increase? And are you starting to see any price resistance from consumers at these levels? And also, if you could describe where the company is in terms of full price selling today? And maybe what the ultimate opportunity is long term?

Sure. Thanks for the question. So look, we're really encouraged by the consistency of our execution and results we've been delivering over really an extended period of time under this next great chapter strategy. AUR growth is 1 important output of that long-term brand elevation strategy. So it's not the only driver of our revenue growth. And as we've talked before, our growth is and will continue to be driven by a combination of new customer acquisitions, Patrice just talked targeted unit growth and AUR expansion.

And specifically on AUR, this quarter, it builds on more than 8 years of consistent AUR growth, right? And our drivers remain durable. And we still have meaningful runway ahead of us in each of our regions. And these drivers include our investments in brand elevation and marketing to support full price customer acquisition and retention; favorable geo and channel mix with Asia and full price DTC continuing to lead our growth. an increasingly elevated product mix, and we enhance our offering, we scale our high-potential categories, reduced promotional activity as we leverage analytics to be more precise in our offers and targeted pricing focused on delivering really compelling customer value.

Now this fiscal year, [indiscernible] price demand enabled us to pull back on PMOs even more than we initially planned. across all regions, including in the third quarter. And that reduction in discounting, that was the primary driver of that AUR growth coming in at high teens for the quarter ahead of the original expectation of up by single digits. All of our other durable AUR drivers, they contributed about equally, I would say, to our growth. And importantly, we haven't experienced price resistance from our core customers. So we continue to monitor our value proposition very, very closely. And our value perception and MPS scores have both progressively increased over time in tandem with AUR.

And we're encouraged by the solid comp growth we're delivering and the share gains we're seeing across markets alongside this AUR expansion. Our focus remains on driving sustainable top line growth while continuing to shrink in our quality of sales. It's very much an end for us. It's not an either or an or. And it's all part of our longer-term plan to continue to elevate our brand and invest in our future, all while delivering healthy growth and margin expansion. And on the full price business point, full price continues to lead our business performance. And that's true really across markets, across channels, across categories.

When you think about the share of our customer base, as we add more and more new consumers to DTC, and you heard Patrice talk about the $2.1 million this quarter, they're more and more skewing towards full price. So that percentage of our total customer base continues to increase over time, and you see that not only in the customer info, but in our KPIs and our quality of sales metrics.

Our next question comes from Laurent Vasilescu with BNP Paribas.

I wanted to ask about Europe. Justin, I think you called out better performance from full-price stores versus outlets as the offset. Can you maybe quantify the spread for the audience to get to the comp and then bigger picture for the year, I think you called out Europe is guided to be up high end of mid-singles. Just want to confirm that for the audience that's on a CC basis and if so, that implies Europe could be flattish for 4Q? So I'm just curious if that's driven by conservatism or Patrice, are you -- is there anything that you want to call out for the audience on what you're seeing in Europe for this quarter?

Thanks. So our underlying growth in Europe used to be healthy and strong. And that's what we've been delivering from the region for the past several years in both Q3 and fiscal '26, I'll call for fiscal 2016. They're coming in where we expected them. right, with that full year outlook up at the high end of mid-single digits, in line with our plan and longer-term growth outlook for Europe. We're happy with the underlying growth that we're seeing in Europe.

And overall, if you look at it, from a long-term basis, we've been pretty consistent in delivering solid, high-quality growth, especially if you normalize out some of the onetime things like coveting timing shifts. Our strategy is working. And it's a great example of elevated execution and brand positioning across all channels throughout the region, strong high-quality partnerships, solid new customer acquisition.

To your point, Laurent, the full price business is leading our growth. That continues to be a trend, which in Q3, it provided us with really the strategic opportunity to lean a bit more into enhancing our quality of sales, pull back on discounts to bother comp growth, which you see come through those quality of sales in the AUR and the gross margins. and we still delivered comp growth despite being up versus a very strong baseline in the prior year, right? We're up mid- high teens in the prior year, right? This was really also an investment to drive durable growth beyond this quarter.

So there's been a little noise, timing shifts have made a bit more challenging to get a beat on the underlying trend from quarter-to-quarter. And that's why we specifically provided that full year trend in our latest guide, which continues to be steady, healthy high-quality top line growth in that mid-single-digit range, which we feel really good about. And we still feel like that's the right normalized level of growth looking ahead, and we're well on track to deliver that.

And for Q4, I would say our outlook for Europe is slightly up. But again, the underlying growth trend a bit more normalized in that mid-single-digit range because you do have some of those timing shifts that are pressuring that top line trend.

Yes. I would add, Laurent, I mean, Justin is right, there's noise in the numbers because of time and for Europe. But a few things to call out. First of all, our core consumers resilient continues to be healthy in resilient across the European market, and we saw particular strength this time in Germany and U.K., our largest markets, but also good strength in Southern Europe as well.

Second piece is the brand momentum continues to be , and we see that across the key metrics, whether that's NPS, whether that's how we're continuing to bring in new consumers into the company and into the brand over the quarter. And then third, just reiterating Justin's point, we were very choiceful in terms of interventions for Europe in Q3. We felt really good about the progress in our full-price stores. We have very strong digital performance that quarter. We have very healthy wholesale performance, and that allowed us to pull back on our promotional activities further than expected. And it's very deliberately because, listen, we're playing the long game, right?

And to Jay's earlier question on full price selling and others, that's where we're moving forward, right? And so when we see opportunities to pull back on promotional activity, we will take advantage of it in the context of a business that is quite healthy that we're very excited about, and it's got good momentum.

SP1 Our next question comes from Michael Binetti with Evercore ISI.

I wanted to maybe follow that a little bit, Justin, it sounds like in Europe, the decision was made in the Atlas to pull back a little bit. I think you said there was an investment to drive durable growth going forward after this quarter. Can we interpret that to mean that the interventions in the outlet in Europe was F3Q only? Or does that -- do you think that you want to keep doing that in fourth quarter? Is that -- do you think that starts to improve?

And then I guess, picking up a little bit, the total company operating margin is really strong here. and that was despite Europe dropping a little bit. I was surprised to see Europe segment margins down a bit given the explanation that we pulled back on promotions in the outlets. Can you just help us understand the Europe margin a little better? And if you expect that to remain a headwind for a few quarters? Or how will that roll forward?

Sure, Michael, thanks for the questions. On the last part first, the Europe, we increased our marketing investment in Europe in the quarter. So that's what's pressuring the bottom line. And again, that's been a focus of ours. We've seen really strong healthy returns out of our marketing. We've talked about having been taking up the rate at Investor Day, we talked about the 7.5% to 8.5% trend. We took up our marketing rate guide for this year to that 7.5% to range. And we're seeing really nice returns again, not just short term, but both short and longer term. return. So that's what you're seeing pressure on the margin.

In terms of sort of the way to think about the quality of sales investments in Europe and really this applies beyond Europe. This is sort of our brand elevation strategy philosophy, we're on a continuous elevation journey, right? Our focus remains on driving sustainable top line growth while continuing to strengthen our quality of sales. And when you think about sort of the strong full price selling that we saw in Q3, it gave us that strategic choice to lean in more, right, notably in the outlet channel and all over the world, right, not just in 1 region.

So when you think about going forward, we're going to continue to do the right things for the health of our long-term branded business while delivering or, in this case, over delivering on our results in the short term. We've got many quality of sales levers to lean into One of them is obviously refining our promotions and discounts. And as we get sharper with our customer information and segmentation, our analytics, and we could be more precise and targeted one-to-one with that communication, you're going to see us continue to refine our discounts and our promotions across all of our regions as we move forward. And there's runway for that refinement in all regions, not only North America but in all regions to some extent.

And if I could just provide a little more color, Michael, on Justin's comment relative to increased marketing in Europe, which we're very excited to do. Europe has a number of key cities that are not fully activated from a marketing standpoint. And the work we're doing with our teams on the ground is to expand our activation across cities. So that's where that incremental marketing is going. We're seeing really good returns. So we expect to continue to drive that as our team executes with excellence on the ground, but of course, in the context of the broader financial targets that we want to deliver.

Our next question comes from Adrienne Yih with Barclays.

Let me add my congratulations very nicely. Nice since the quarter -- the holiday quarter. My question is on the Ask Ralph, the implementation of Agentic AI. What have you learned kind of the early learnings? I mean this is the first holiday that we've really seen that really come to the forefront. What did you learn from this holiday? And how quickly can you deploy those changes? And then Justin, can you talk about whether the benefit to cotton and possibly freight perhaps in the quarter as input costs are contemplated obviously in the fourth quarter, but how should we think about that going into the early part of fiscal '27?

Thank you for your questions. Listen, we were pleased to be a leader in this space with the launch of Ask Ralph, the AI Ask Ralph. It's early days, but we are very encouraging early reads, and we're driving learnings how consumers interact with natural language search, right, that's a meaningful change. And also, this provides us with incredible access to high-quality first-party data, right, which is ultimately the goal when it comes to marketing moving forward.

So we're seeing consumers engage across many different fronts and questions as they're looking for advice on how to style themselves for different occasions for different weathers and so on. We're going to expand and add new features. So right now, you will have noticed we don't have our full brand portfolio on it yet. We're going to be adding that shortly. We're also looking to further integrated into our overall digital ecosystem. Right now, it's only available on the app in the U.S. You're going to see us expand that.

We're also going to integrate voice and filing based on images provided by users, which we don't have yet. So it's an incredible platform as a starting point with right now, I would say, a learning experimentation phase that's very promising. And this is a space where we want to continue to lead. And to some extent, if you fast forward, I think this is the precursor of our consumer agent.

Well, I mean today, it's primarily a style agent. But I think as you evolve and look ahead, you can see how as Ralph can become really the consumer agents for the customer base that we engage with. And then obviously, in parallel, right, there's also this whole development in the area of the Gentex shopping and we're tapped into that and learning about that as well to make sure that we are set up to meet the consumer where they want to engage with us and how they want to shop with us.

And on the margin question, so taking a step back for our biggest driver for gross margin was indeed a UR increase driven by that promo pullback. We did see favorable cotton tailwinds and favorable freight modestly in the quarter that benefited our gross margin. Now on the cotton side, we're still tracking to deliver that 175 bps benefit that we've called out over the 2-year period, fiscal '25 and '26. You are seeing that impact moderate as we move through fiscal '26 as we expected.

On the freight side, a little bit of favorability in the quarter, but for the fiscal expense would be roughly neutral. And I think as you think about those 2 input costs, I think looking forward, I think we're expecting a relatively neutral outlook.

Our next question comes from Blake Anderson with Jefferies LLC.

[indiscernible] Holiday wanted to ask on Q4 as well, just kind of on the margin outlook there. So I know you said the contraction on the operating margin side is mainly tariffs. I think gross margin, you just mentioned cost inflation. Just curious why you wouldn't be able to offset that with the continued AUR growth for Q4, any other conservatism or factors we should be considering? And then as we -- as you think about the ability to mitigate tariffs, next year, I think you said you're looking to be able to do that. How do we think about mitigating those tariffs in the first half of next year?

Thanks for the question. is we're feeling really good about what we've been able to deliver with our gross margin expansion. And we actually improved our Q4 outlook from our original implied guidance. And while tariffs have remained largely unchanged, we've been able to migrate the related cost inflation better than we expected. And we obviously exceeded our expectations in Q3 with that higher price selling an AUR outperformance, which drove our gross margin beat and more than offset the tower flow through the cost of goods sold, which ramped up in the third quarter as we anticipated.

We still expect to be the most impacted quarter this fiscal year in terms of year-over-year gross margin pressure, and that's consistent with our planned case, right? It's a combination of the reciprocal tariffs and the timing shifts we made to accelerate receipts earlier in the fiscal year during the pause period and this has been 1 of our smaller sort of revenue quarters of the year, the transitional quarter between seasons.

And as I mentioned, the benefit from cotton cost also moderates and it's worth noting we are up against a very, very strong gross margin baseline in Q4 of last year. But even with that year 1 tariff pressure, right, we're now expecting 40 to 80 bps of gross margin expansion this fiscal year. And we've also taken up our Q4 AUR guide to the high single to low double-digit range. Beyond this fiscal year, we still expect to expand gross margin and mitigate the cost inflation. And you'll start to see our broader beginning actions take shape, country of origin ships, optimization, merchandising actions. You'll start to see those all come into play as we move through fiscal '27.

Our next question is from Irwin Boruchow with Wells Fargo.

Justin, I just wanted to quickly clarify based on the margin guide for Q4. Are you essentially SG&A flat. So grosses are effectively flat, up 20% to down 20%. Just let me know if I'm looking at that right. And then you mentioned headwinds to start next year, but up for the annual, as you commented, relative to your algo. Are there any quarters where grosses should be negative? I'm just kind of curious the magnitude of the margin pressure from tariffs in the first half, if it's large enough to actually put to plan the gross margins down to start in the first half before inflecting?

Yes. So when you think about really, what you're seeing there is you're seeing from a gross margin perspective, you're seeing the pressure from what I just outlined sort of the peak tariffs in this transitional quarter and the timing of some of the receipt flow through. That's really the pressure there. And we always expect that to be the most pressured quarter for this fiscal year. I think as we move forward, you think about sort of the tariff sort of ramp up and ramp down period, we know we do start to lap that higher cost base once we get into sort of the mid fiscal '27.

That being said, it's fair to say that Q4 is really where we expect the peak pressure. And you can see sort of that pressure come through in the gross margin, which is pressuring the bottom line as well. still feel really good about the view we're delivering both on the top and bottom line, obviously, and we just raised both our outlooks.

Our final question comes from Brooke Roach with Goldman Sachs.

Patrice and Justin with your updated operating margin guidance for fiscal '26 of 100 to 140 basis points you're quickly achieving your fiscal '28 Investor Day targeted operating margin expansion. Do you see further operating margin expansion opportunity for the balance of the plan? And if so, can you outline the opportunity and the core drivers that we should be considering?

Listen, we feel really good about how we're tracking to deliver year 1 of the long-range plan that we shared back in September at our Investor Day. Our 3-year plan is off to a strong start. And we're not guiding beyond Q4 this fiscal year today, but we feel good about the broad-based momentum and the strength behind our brand and our business around the world. It's the healthy sustainable growth that we see across markets, categories, channels.

I think that we do expect to continue to balance margin expansion with making strategic investments to drive longer-term growth in each year of our 3-year long-term plan. beyond year 1, right? Our lens is long term, and we're building for the long term, and we want to deliver attractive, consistent performance on the top and the bottom line our approach outlined at our September Investor Day has not changed. And more to come again when we chat in May.

All right. Very good. Well, thank you all for your questions. Thank you for joining today and we look forward to reconnecting now late May to share our fourth quarter and fiscal year-end results. We're really pleased with where we are 3 quarters in. We look forward to engaging with you at the end of next quarter. And so then, take care, and have a great day.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may disconnect now.

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren Second Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn over the conference to our host, Ms. Corinna Van der Ghinst. Please go ahead.

Good morning, and thank you for joining Ralph Lauren's Second Quarter Fiscal 2026 Conference Call. With me today are Patrice Louvet, the company's President and Chief Executive Officer; and Justin Picicci, Chief Financial Officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to 1 per caller.

During today's call, our financial performance will be discussed on a constant currency adjusted basis. Our reported results, including foreign currency, can be found in this morning's press release. We will also be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements.

Our expectations contain many risks and uncertainties. Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our Investor Relations website.

With that, I will turn the call over to Patrice.

Thank you, Corey. Good morning, everyone, and thank you for joining today's call. More than 8 years ago, we embarked on an ambitious journey of elevation across our brand, our products and our go-to-market strategy around the world, led by Ralph's vision of inspiring the dream of a better life, we put our consumers at the center and we put this company on the path of healthier, more consistent more sustainable, long-term growth and value creation.

In September, we were proud to introduce the latest iteration of this journey, which we are calling our Next Great Chapter: Drive plan. We outlined the vast opportunities still ahead for Ralph Lauren. We currently play in a total addressable premium and luxury market worth $400 billion. And we are just over $7 billion today, less than a 2% market share. Our strategy to grow our share and deliver long-term sustainable growth over the next 2 years and well beyond continues to be supported by multiple diversified engines. As a reminder, these include: First, elevate and energize our lifestyle brand; second, drive the core and expand for more; and third, win in key cities with our consumer ecosystem.

We are off to a strong start in the execution of this plan, with second quarter performance outpacing our expectations across the top and bottom line. These results underscore our diversity of growth opportunities and the broad-based momentum of our iconic brand, which is resonating across generations, cultures and geographies.

All 3 regions contributed to growth this quarter, including double-digit increases in retail comps and global wholesale sales. And we achieved this while continuing to elevate our brand and drive higher quality of sales. Our strong performance through the first half of this fiscal year also gives us confidence to take up our full year guidance once again, even as we remain relatively cautious on the second half of the year due to potential consumer headwinds and general volatility. While we are watching the macro environment closely, we remain well positioned to capture market share opportunities across categories and geographies. And we are firmly on offense with a focus on investing behind our brands, products and key city ecosystems to deliver growth for the long term.

Let me walk you through a few highlights from the quarter, where we drove progress across our 3 long-term strategic pillars. Starting with our efforts to elevate and energize our lifestyle brand. As many of you heard in September, Ralph Lauren has the most loyal customers in our defined premium and luxury market. Sitting at the heart of culture, we build relationships for life, independent of any single fashion trend or cycle. And by leaning into our inclusive luxury lifestyle positioning, we are engaging with consumers across the many facets of their lives, from the runway, to the biggest stages in sports, music, gaming and more. And all in a way that is authentic to the core values we've embraced for 58 years: Optimism, quality, authenticity, timelessness and the easy elegance of a life well lived.

Our teams delivered a powerful range of brand activations this quarter, as we successfully lapped last year's outstanding Paris Summer Olympics. Key highlights included: first, we continue to reinforce our position as one of the leading luxury apparel brands in the world of sports. We celebrated our 20th year as the official sponsor of both Wimbledon and the U.S. Open tennis championships this summer. Our Wimbledon storytelling combine the elegance and cherished traditions of British heritage with Ralph Lauren's refine spectator style. Our U.S. Open campaign paid homage to the most electric main stage in tennis to our colorful retro-inspired collection, delivering record-breaking sales around the event. And as sponsor of the U.S. team, we welcomed the Ryder Cup to Bethpage for the first time this fall.

Among our many activations, we took over part of Rockefeller Center Plaza and drove storytelling on social media with Nick Jonas and brand ambassador, Billy Horschel. Together, these sports lifestyle campaigns embodied both the proud tradition of sport and the progressive spirit that propels it forward. They drove a combined 67 billion global impressions and more than $350 million in media value.

Next, we hosted our Spring '26 Women's Collection fashion show here in New York City, showcasing a balance of strength and centrality in a modern palette of black, white and crimson. And beyond the runway, we delivered some of the most iconic celebrity moments of the season, from Taylor Swift and Travis Kelce choosing Ralph Lauren for their viral engagement, to the old Hollywood glamor of Selena Gomez's wedding to Benny Blanco.

Our activations are also driving strong sustainable growth in new customer acquisition and retention. In the second quarter, we added 1.5 million new consumers to our DTC businesses, a mid-single-digit increase to last year, driven by digital and full-price store customers. The ongoing momentum this quarter was led by luxury buyers and with balanced growth across men, women and younger cohorts. And we increased our social media followers by high single digits to 67 million, led by Instagram, TikTok, Douyin and LINE. This rolling thunder approach to activations enabled by our strong data and analytics capabilities, gives us confidence to continue our brand momentum as we look ahead.

Moving to our second key initiative, Drive the Core and Expand for More. Ralph's vision has always been about more than a tie or a polo shirt or a sweater. The heart of what we do is storytelling through our clothes and experiences through the cinematic worlds that Ralph has created. And our unique approach to styling enables customers to step into these worlds to build the wardrobes that tell the story of their lives, from that first red polo shirt in a school picture, to the striped silk polo dress in an engagement photo. This philosophy is embedded in how we drive our core products, as much as it is in our high potential and complementary lifestyle categories.

Starting with our core, which represents more than 70% of our business. Core product sales grew mid-teens this quarter, driven by strength in cotton, cable-knit, wool, cashmere and cotton shaker sweaters, linen and seasonal Oxford shirts, our lightweight jackets and our Icon Polo Chino caps. An exciting back-to-school season also drove growth and share gains in our core children's programs, led by cable-knit sweaters, quilted jackets and Oxford shirts. Our high-potential categories, including women's apparel, outerwear and handbags, continue to be accelerators for our business. Together, these categories increased strong double digits, outpacing total company growth in the quarter.

Women's apparel continued to be driven by our foundational core, along with a strong response to our seasonal styles. Highlights included our cable-knit jersey and featherweight cashmere sweaters, linen shirts, our transitional city and utility barn jackets and dresses. Momentum in our handbag business continued this quarter, driven by each of our women's labels and led by our foundational Polo ID collection; Polo Play, which launched this past spring and included exciting pop-up shops in Korea this quarter; our women's collection Ralph bags in seasonal region green leather and mocha suede; and an encouraging launch for our Tasha Collection, an elevated new offering in the Lauren family of handbags.

Special releases this quarter included our limited edition Polo Ralph Lauren for Oak Bluffs Collection in partnership with Morehouse and Spelman Colleges, a powerful celebration honoring the legacy of Oak Bluffs as a cultural haven for black communities in Martha's Vineyard. Our capsules for Wimbledon, the U.S. Open and Ryder Cup, with strong double-digit comp growth in each collection, led by our Polo Bear and Free Styles. And our newest Ralph's Club New York fragrance launch featuring Usher. We will continue to leverage the unparalleled breadth of our lifestyle product offering and power of our icons as consumer lifestyles evolve.

Turning to our third key initiative, Win in Key Cities with our Consumer Ecosystem. We continue to thoughtfully expand our consumer ecosystems to deepen Ralph Lauren's presence in our top 30 cities around the world, delivering a cohesive, elevated brand experience across each of our channels. At the same time, we've started investing in our next 20 cities, laying the groundwork for long-term sustainable growth. Within DTC, which comprises the majority of our business, we delivered another strong quarter of comp growth across regions. Global comps increased 13%, above our expectations, with double-digit growth in both our digital sites and physical stores. All 3 regions outperformed our expectations again in the second quarter, with double-digit growth in every geography, including North America.

Asia once again led our growth, with sales up mid-teens, driven by all key markets. China grew more than 30% in the quarter, ahead of our outlook with a strong consumer response to our brand building activities, including our Summer of Sports campaigns and amplification of our New York Fashion Show. As we continue to reinforce our presence in our top cities, we opened 38 new owned and partner stores globally. And we recently announced that we are opening our sixth restaurant, bringing our iconic Polo Bar experience to London. The opening is slated for 2028. And yes, we're already getting requests for tables.

And finally, touching on our enablers. Our business continues to be supported by our 5 key enablers. Recent highlights include: first, as part of our focus on delivering advanced technology, AI and analytics. In September, we launched our new AI styling tool, Ask Ralph, that we developed with Microsoft, bringing Ralph's iconic styling right to your pocket. Ask Ralph builds on our history of innovating the consumer shopping experience and immersing our consumers in the world of Ralph Lauren with cutting-edge technology. While still early, customer engagement and feedback have been encouraging. And this is an exciting step forward in our journey to test and learn new tools to better serve our consumers, drive conversion and ultimately build lifetime value.

Second, our teams and our culture drive our performance. We were proud to be named one of America's Best Employers for Company Culture by Forbes. And finally, Ralph Lauren was honored in Fast Company's 2025 Innovation by Design Awards for our unforgettable brand presence at the 2024 Summer Olympics in Paris. We look forward to building on this legacy, bringing our heritage of sport and style to life at the Milano Cortina Winter Olympics in February.

In closing, Ralph and I are incredibly proud and grateful for the hard work, care and dedication that our teams are delivering around the world. Together, we are building on Ralph's legacy and vision with this next great chapter of growth. We remain focused on creating value through a distinct brand position that's clear, consistent, relevant and emotionally resonant. A legacy of leadership in fashion, in culture and in innovation and a proven ability to execute with creativity, agility and operating discipline, all underpinned by our fortress balance sheet and ongoing commitment to embrace new technology and support our teams, partners and communities.

With that, I'll hand it over to Justin, and I'll join him at the end to answer your questions.

Thanks, Patrice, and good morning, everyone. Our second quarter results demonstrate strong progress as we embark on our Next Great Chapter: Drive plan, showcasing our team's agility and unwavering focus on execution.

Top line performance exceeded our expectations, reaching our highest Q2 revenues since we began our elevation journey more than 8 years ago. Results were driven by broad-based performance across every region and channel, highlighting our brand strength and authentic connection with consumers around the world. Gross and operating margins once again outperformed our outlook as we continue to elevate across all markets. Each of our 3 regions contributed to operating margin expansion despite the volatile global operating environment. And we achieved all of this while continuing to invest behind our strategic drivers of long-term growth. As Patrice mentioned, our strong year-to-date results and brand momentum give us confidence to raise our full year outlook, even as we maintain a relatively cautious stance into the second half, given the macroeconomic uncertainty and exceptionally strong prior year compares.

But first, let me walk you through our financial highlights from the second quarter, which, as a reminder, are provided on a constant currency basis. Total company second quarter revenue growth of 14% was above our high single-digit outlook. By region, Asia and Europe led our performance, with sales increasing 16% and 15%, respectively, followed closely by North America, up 13%. Total company retail comps increased 13%, with ongoing momentum in both our own digital business and stores. Total digital ecosystem sales, including our own sites and wholesale digital accounts grew double digits, reflecting balanced growth across regions. Total company adjusted gross margin expanded 70 basis points to 67.7%. The increase was driven by AUR growth, favorable mix shift toward our full-price businesses and lower cotton costs, which more than offset tariffs, labor and non-cotton material costs. AUR increased 12% in the second quarter, supported by strong full-price selling trends, reduced discounting, modest targeted pricing growth and favorable product mix.

We currently expect high single-digit AUR growth for the second half of fiscal '26 based on similar drivers. Adjusted operating expenses increased 11%, reflecting a 130 basis point decline as a percentage of sales to last year. We delivered leverage across key expense categories, including rent, marketing and selling on better-than-expected sales. Second quarter marketing investments grew 2% to last year. As a percentage of sales, marketing normalized at 7.8% compared to last year's 8.7%, which included our Paris Olympic activations. We now expect marketing as a percentage of sales to be approximately 7.5% in fiscal '26, in line with our long-range plan.

Second quarter adjusted operating margin expanded 210 basis points to 13.5%, with adjusted operating income increasing 34%.

Moving to segment performance and starting with North America. Second quarter revenue increased 13%, above our expectations with balanced growth across our direct-to-consumer and wholesale businesses. In North America Retail, second quarter comps were up 13%, led once again by our Ralph Lauren stores. Digital comps grew 15%, supported by our strategy of full funnel activations, which drove higher quality of sales. In North America wholesale, revenue also increased 13%, driven by strong performance in digital wholesale and our top premium and luxury doors as well as stronger-than-expected replenishment. We are encouraged by our recent sellout trends, but maintain a more measured outlook for the second half of fiscal '26 based on further strategic reductions in off-price sales in the fourth quarter and potential near-term macro pressures across the broader channel. We still plan to exit 90 to 100 wholesale doors in fiscal '26 with approximately half of these related to Hudson's Bay.

Moving to Europe. Second quarter revenue increased 15%, exceeding our expectations. Growth was driven by continued momentum across both our retail and wholesale channels. All key markets delivered growth in the quarter, reflecting our ongoing brand strength and elevation. Europe retail comps increased 10% to last year with strong performance across stores and digital channels. Our Europe digital ecosystem increased double digits, driven by both our wholesale and owned digital businesses. Europe wholesale increased 18%, driven by higher-than-expected reorders and a planned shift in shipments into the first half of the fiscal year, as we previously discussed. The timing shift represented approximately 11 points of the wholesale increase in Q2, with the channel still reflecting healthy underlying growth.

Turning to Asia. Second quarter revenue and retail comps each grew 16%, with every key market contributing to growth. China once again led our performance, with sales increasing more than 30% to last year, driven by robust comps and new customer recruitment, enabling our continued outperformance versus peers in the market. Sales in Japan increased high single digits, driven by strong full-price selling and reduced discounting.

Building out our digital presence remains a significant long-term opportunity across Asia. We are encouraged by our early progress, including double-digit revenue growth this quarter. We drove meaningful acceleration on our Japan digital site, supported by the recent transition to our global e-commerce operating system. And in China, we continue to expand our presence on Douyin since launching our Women's Shop earlier in 2025, including our first Wimbledon live stream digital event this quarter.

Moving to the balance sheet. Our strong balance sheet and cash flow generation continue to be powerful enablers of our long-term strategy, supporting both our strategic growth investments and our commitment to shareholder returns. In the second quarter, we finalized the purchase of our Newbury Street store in Boston and also retired our $400 million in senior notes, which matured in September. In addition to our regular dividend, we have repurchased $313 million in shares this fiscal year-to-date, returning a combined total of approximately $420 million to shareholders. We ended the period with $1.6 billion in cash and short-term investments and $1.2 billion in total debt.

Net inventory moderated from Q1 levels as planned, increasing 12% to last year, roughly in line with revenue growth. Our inventories are well positioned to meet consumer demand in each of our regions for the holiday season. Looking ahead, our outlook remains based on our best assessment of the current operating environment, geopolitical backdrop and macroeconomic trends. This includes tariffs and other inflationary pressures, supply chain disruptions and foreign currency fluctuations, among other considerations.

For fiscal '26, we now expect constant currency revenues to increase in a range of approximately 5% to 7%, up from low to mid-single digits previously. This is slightly ahead of the 3-year guidance we provided in September for year 1 of our long-range plan. Foreign currency is now expected to benefit revenue growth by about 200 to 250 basis points this year. The increased outlook reflects our better-than-expected performance in the first 2 quarters of the year, as well as our continued brand momentum into fall holiday despite the challenging compares.

With our strong first half results, we now expect North America revenues to be up slightly for the full year versus our prior outlook of a low single-digit decline. We continue to expect Q4 to be the weakest quarter of the year for North America based on our caution around cost inflation related pressures on U.S. consumers, in addition to our planned strategic reductions in off-price wholesale. We expect Europe to grow at the high end of mid-single digits, unchanged from our previous guide, with the first half benefiting from planned wholesale timing shifts, followed by a sequential deceleration due to challenging second half compares. Despite the timing shifts, we still expect healthy underlying growth in Europe, in line with our long-term plan. And we now expect Asia to be up high single to low double digits for both the second half and the full year, up from high single digits previously.

Operating margin is now expected to expand approximately 60 to 80 basis points in constant currency, up from our prior guidance of 40 to 60 basis points, primarily driven by expense leverage. We now anticipate constant currency gross margin to expand about 10 to 30 basis points for the full year, with further growth in AUR, favorable cotton costs and geographic mix more than offsetting pressure from tariffs. Foreign currency is expected to benefit gross and operating margins by about 30 to 50 basis points in fiscal '26.

Following our strategic pull forward of receipts, we continue to expect tariff headwinds to ramp up in our fiscal Q3 and become more pronounced into Q4. As a result, we still expect a notable year-over-year gross margin decline in Q4 due to the combination of reciprocal tariffs, unusually strong prior year compares and previously discussed timing shifts, all negatively impacting our smallest revenue quarter of the year. We remain confident in our long-term gross margin outlook of 50 to 100 basis points of expansion over the 3 years of our Drive plan, with expansion expected in each year.

While we anticipate gross margin pressure over the next few quarters, Q4 of this fiscal year is still expected to be the most negatively impacted quarter, driven by the additional timing-related headwinds. As we move through next fiscal year, we expect to mitigate these pressures more meaningfully as we begin to lap the tariffs and our sourcing shifts and other mitigating actions take effect more broadly. For the third quarter, we expect constant currency revenues to increase approximately mid-single digits, reflecting a slightly improved outlook for the back half of the year versus our expectations in August and coming into the year. Foreign currency is expected to benefit revenues by approximately 150 to 200 basis points. We expect third quarter operating margin to expand approximately 60 to 80 basis points in constant currency. This is driven by 50 to 70 basis points of gross margin expansion, as well as slight operating expense leverage, more than offsetting tariffs and higher marketing investments to support our global holiday activations and Polo Women's fashion presentation in Paris. Foreign currency is expected to benefit gross and operating margins by about 10 and 20 basis points, respectively, in the third quarter. We expect our third quarter tax rate to be in the range of 21% to 23%, and a full year tax rate of approximately 19% to 21%.

In closing, we are proud of our team's strong execution and early progress on our Next Great Chapter: Drive plan across the world through the first half of this fiscal year. Even in an operating environment that remains dynamic, our agility, fortress balance sheet, culture of operating discipline and multiple engines of growth give us confidence in our ability to continue delivering sustainable long-term value. As we shape the future of inclusive luxury lifestyle, we remain focused on investing in the key strategic priorities that will enable us to connect with the consumers more broadly and deeply than ever before and to continue inspiring them to dream.

With that, let's open up the call for your questions.

[Operator Instructions] The first question comes from Matt Boss with JPMorgan.

Congrats on a great quarter. Patrice, so the company continues to outperform expectations despite the caution that you've been calling out. What does your updated outlook for this year assume for health of the consumer, particularly macro assumptions that you embedded for the back half? Have you seen any change in consumer behavior in any key markets today? And then just larger picture, Patrice, if we extend the lens. Could you walk through global brand awareness for Ralph Lauren relative to only 2% market share for the brand today? And just how that supports your revenue targets longer term?

Sure. Well, thank you for your question, Matt. So on the first part of your question, we continue to see strong broad-based momentum in our business, right? Our new Next Great Chapter: Drive strategy is working, and our brand is resonating with consumers around the world. To date, we have not seen any meaningful changes in consumer behavior across our key consumer segments or markets. Demand remains healthy, and our core consumer is resilient. Especially as we continue, as you know this, to shift our recruiting towards more full price, less price sensitive, higher basket size new customers.

Now from a macro perspective, as price increases take root across different sectors, we are watching closely to see how consumers will respond, and our teams are staying as agile as ever in this context. And listen, we continue to focus on our key strategic pillars and invest in spaces that we expect to successfully fuel our momentum and grow share for the long term.

So first, we've implemented a rolling thunder of brand building activations to drive brand desirability and retention and more consistent engagement with consumers. I'll come back to that when we talk to your awareness question. Whether that's through our impactful fashion shows -- we had 2 this last quarter -- our inspiring sport activations or our more innovative interactions like our AI-powered Ask Ralph styling assistant. This will remain a key area of investment as we look ahead.

Second, we've continued to drive a healthy balance of authentic core products that perform across macro cycles along with our high potential categories. Think women's apparel, outerwear and handbags. And both are performing well, as you heard us talk about earlier. And third, just a reminder that we still have a lot of distribution opportunities globally. Whether that's deepening our presence in the existing top 30 key cities in China or Western Europe, to what we've just started doing, which is opening new stores in the Bay Area, for example, as we build the San Francisco ecosystem or in the Pacific Northwest, here in the U.S.

So all in, our consumer continues to show up for our brand. And even as we navigate the macros, our business model is resilient with our multiple drivers of growth, and we will continue to stay on offense to deliver on our long-term Drive plan.

As far as global awareness is concerned, let's go around the world together, Matt. So obviously, our awareness is highest here in North America. Then Europe is very closely behind that across all the markets. But I think the opportunity still in markets like Germany, which historically have not been a focus area, as you know, for this company, but certainly, we are -- as the current leadership team are very focused on taking advantage of the Germany opportunity, and we're seeing strong continued momentum across that region.

And then in Asia, it's really a mixed picture. We've been in Japan for -- it will be 50 years next year. We have strong brand awareness there. We have opportunities for growth of the brand awareness in Korea. And probably, our greatest awareness opportunity remains in China, where I think based on our latest numbers, slightly more than half of the population is aware of the Ralph Lauren brand. So depending on the markets, awareness is or is not a key opportunity. Obviously, as we look to recruit new younger consumers, we know there's work to do on brand awareness and brand engagement.

And then it's really about making sure that we're telling stories that resonate with these different consumer groups. It's really about making sure that we have a product offering that takes advantage of our core icons and also leverages our high potential categories in a way that resonates with those consumer groups we want to go after. And it's making sure that we can offer a compelling shopping experience, whether that's online or in stores, in the key cities that matter for these consumer groups.

So certainly, you touched on it, we're very energized by the opportunity ahead of us when you look at market shares, right? Less than a 2% market share in a large and growing market total addressable market of around $400 billion. So building awareness is a vector of growth that will help us expand our market share. But obviously, conversion, basket size, all the different dimensions of revenue growth areas that our marketing teams are focused on.

The next question comes from Jay Sole with UBS.

Justin, the company has successfully driven 8 straight years of AUR growth. Patrice kind of touched on this a little bit, but how are you thinking about using pricing as a lever over the next few quarters before you start to lap tariffs? And how should we think about your ability to mitigate tariffs over time? And how much of your guidance of a second half deceleration is due to your general caution on a consumer slowdown versus true structural or timing shifts this year?

Thanks, Jay. Thanks for the question. Those are a few really important questions. So let me try to take them one by one and see if I can provide some helpful context here.

So first on pricing. So we have a proven multiyear elevation strategy that's driven those sustained AUR gains you referenced in more than 8 years and counting. Our AUR growth has been and continues to be driven by multiple levers, right, investing in our brand, attracting more full-price customers, elevating our product mix, favorable geo, channel mix and pulling back on discounts in addition to strategic pricing actions. And as we talked at our September Investor Day, these drivers are durable into the future.

And really importantly, we continue to see consumers recognize and respond to the value we're delivering. It's critical. Now for this fiscal year, we took normal course of business pricing actions for fall as we continue to elevate our brand around the world. And with the higher tariffs that were announced, we did layer in some additional modest adjustments, both for fall and for spring '26. And that's reflected in that high single-digit AUR growth guide we provided for the back half of the year.

Your second question on gross margins, we still expect Q4 to be the most impacted quarter this fiscal year, consistent with our planned cadence. And it's a combination of the reciprocal tariffs and the timing shifts we made to accelerate receipts earlier in the year, and this is all happening and Q4 is our smallest revenue quarter of the year. It's a transitional quarter, right, between fall holiday and spring.

So even with the year 1 tariff pressure, we're now expecting 10 to 30 bps of gross margin expansion this fiscal year, better than our initial outlook. And talking beyond this year, we still expect to mitigate the cost inflation. And you'll start to see our broader mitigating actions take shape, country of origin shifts and optimization, merchandising mix actions and potentially some further targeted pricing.

And then lastly, on the second half guide. So clearly, we made some strategic intentional choices to front-load our performance this fiscal year given the higher level of macro uncertainty as you move through the year and specifically in the back half. But that all said, we've been able to raise our outlooks for Q3 and Q4 modestly as we move through the first half of the year.

Now we do realize there are a number of moving parts here. But when you adjust for the timing shifts, when you adjust for the strong holiday compares, the general caution we've called out on the U.S. consumer, our underlying trajectory remains in line with our longer-term algo of that mid-single-digit growth.

So I said a lot, just to summarize. Targeted pricing, one of our many durable levers of AUR growth that we're applying to this fall and beyond with a focus on value. We continue to feel good about our ability to expand gross margin and mitigate tariffs both this fiscal year and beyond. And while there's a combination of structural and timing shifts impacting the second half of this fiscal year, our underlying growth continues to track to our long-range algo of mid-single digits as we shared at Investor Day.

The next question comes from Brooke Roach with Goldman Sachs.

Justin, Patrice, I was hoping you could dive a little bit deeper into the strategic actions that you're taking to engage the North America value-oriented consumer this holiday season. You continue to take a little bit of a conservative approach there, but it looks like you've been outperforming your expectations to date. Wondering what the plan is for this holiday and what you're looking to do if the consumer does look to get a little bit weaker?

Sure. And thanks for the question. So just taking a step back as we enter -- or enter this fall holiday season, we saw some pretty broad-based momentum behind our brand, across markets and channels, including in North America. And we've been -- past 8-plus years, we've been through a number of different iterations of a tough environment before, right, of cost inflation, price inflation, cotton freight, pressures on the consumer. And we've navigated that pretty successfully using that diversified toolkit of levers that we talked.

And the brand is positioned now better than it ever was before during any of those periods. So we know -- we have confidence that we can navigate through the macro pressures. We've got real pricing power, and we also have seen our value perception grow progressively along with AUR throughout the elevation journey.

So when we think about fall holiday, a couple of words come to mind. One is flexibility, right? We've got the flexibility in our price architecture to be able to -- in a very targeted, selective way, still talk and convert those more value-oriented customers subsegments that exist in channels like wholesale and the outlets when the macro pressures sort of tighten. And we can do that without walking back our broader brand guardrails.

The other word that I think about it is value. We're going to stay laser focused on making sure we're providing a compelling price value proposition to our customers. And as we kind of sharpen our marketing, as we sharpen our analytics, as we get to know the customer better and we get our segmentation more precise, we're only getting better at being able to understand that -- what's that sweet spot in terms of price value to appeal to the consumer.

And Brooke, I might add to Justin's perspective, 2 points, first on branding and the second on product offering. So our storytelling -- and you saw the range of activations this past quarter, which was very special. And obviously, it's given us momentum going into this holiday season. Our storytelling is really designed to appeal broadly, including to the more value-sensitive consumers. And what we have certainly found the past few quarters is the broad range of marketing activations from sports; to fashion presentations, to the serendipitous celebrity moments have talked to the different consumer segments that we appeal to. And then our teams here in North America are putting disproportionate emphasis now on better segmentation to make sure we're getting the right message to the right group at the right time. So I think we're gaining momentum there. There's more to come on this front. That's on the marketing branding side.

On the product side, what's very interesting is across consumer segments, the strategy of both driving our core icons and our 3 high potential categories is resonating. So we're seeing that play out at the upper end echelon from a revenue standpoint of our customer base. We're also seeing that play out within our more value-sensitive consumers, which obviously makes it a lot easier to execute and gives us confidence in our ability to win during this upcoming holiday season.

The next question comes from Michael Binetti with Evercore.

Congrats on a nice quarter. Yes. I want to ask just 2. So on the AUR, look at a few metrics here. The global AUR growth rate has been very, very close to the DTC same-store sales growth rate for a while. You're implying flattish units in the first half, something near that. You consistently tell us it's really attractive new customer growth, so customers are growing units are not. Is there an opportunity for the units to help you start to outpace the AUR growth as you look at the rest of the year?

And then Patrice, the Investor Day plan looks for EBIT margins, 15%, 15.5% range by fiscal '28. There's a scenario where you get to that range this year. I guess, it's a jump ball between Patrice and Justin. But in the first year of the plan, I know you clarified that 16% is in the cap. Maybe you can help us frame the long-term opportunity with a nod to the update for the second quarter upside here?

On margin, there's no jump ball. It's always Justin.

In case it was unclear. So on the AUR question, so we've been pretty -- to your point, consistently growing AUR, and you see the AUR gains with the comp gains, which really shows the quality of the revenue they are putting up and the share gains that we're getting behind them. To your point on units, we've been growing units along the course of this journey. I think earlier in the elevation journey when we had the step changes in elevation, they were slower. But now as we move through, where we've been seeing unit growth is those areas that we've really been targeting, right? So our full-price businesses, right? Our digital businesses, our markets like China, where we know we have outsized growth opportunities. On our accelerator categories like women's, like handbags, like outerwear. We've been seeing unit growth there.

I think when you think about the environment from a macro perspective that we're going to go -- that we expect to go into in this sort of second half and maybe carrying into the first half of next year and we talked this a little at Investor Day. We are going to lean more into AUR versus unit growth overall as we navigate those cost inflation pressures. That all said, to your point on opportunity, there was certainly a unit growth opportunity, specifically in those areas that we've been focused on, like those areas that are further along on the elevation journey. So you'll continue to see us opportunistically focus on and grow units there. And then as the other areas of our business progress on that elevation journey, you'll see the inflection point in those facets as well.

On the OI margin question in terms of opportunity, 16% plus, when you think about longer term, I mean, we -- and we've talked this before -- we're committed to balancing -- delivering on or often exceeding our near-term commitments with reinvesting back behind our brand in our business for that longer-term sustainable growth. So you see us do things like this year, this guide, we took up both the top and bottom line. We also took up our marketing expectation, right, as we continue to reinvest behind that sustainable long-term growth.

I think in terms of -- that philosophy is not going to change. You'll see us continue to follow that as we move forward. So as we have potential upside, you're going to see us balance the flow-through between operating margin expansion and between reinvestment back into the business with marketing probably being the 1A area. You're also seeing this year as we move through the year based upon our guide, and you kind of saw it start last year, you see us work this sort of SG&A leverage muscle, right? This cost optimization muscle. And that's going to be another lever we have at our disposal, both to mitigate and manage the macros. And as we know, gross profit does have some choppiness associated with it, but also to balance between flowing through near-term profitability gains with reinvestment back into our business.

The next question comes from Ike Boruchow with Wells Fargo.

I think this is for Justin. Wanted to kind of dig more into North America wholesale. You've been -- you've inflected the positive, I think, 3 quarters in a row now, but you kind of went low double digits this quarter, but there's an 11-point shift. And then, Justin, some of your comments on the fourth quarter kind of suggests you're going to pull back from some unproductive sales.

So kind of just peeling the onion back, just how should we think about the trajectory of North America wholesale? And then I assume that shift is hurting us in the third quarter, but would love some clarity there. So kind of just looking for the trend line and how you kind of plan that channel at this point?

Sure. So listen, when you think about the underlying quality growth that we're seeing in our wholesale business, I would say, North America and in EMEA, but let's focus on North America as well as the strategic ongoing elevation work in these channels, that is quite purposefully meant to balance momentum at times, notably in North America. I mean, we're very encouraged. Our brand momentum has been strong and we've been able to deliver more outsized performance than we were expecting. I think it's fair to say through the first half of this year.

And the great thing about this growth is that it's healthy, high-quality growth on an underlying basis, right? And it's reflective of the diversity of our growth driver. So it's working in retail, is carrying over and cutting through in wholesale. Women's is a great example. Women's is working really well, both from a door perspective and a comp perspective in North America wholesale, specifically at that top tier -- at the top-tier channel. So it's great to see the execution of the strategy, and it's great to see the healthy underlying growth.

To your point on sort of a normalized growth expectation as we think about first half versus second half and beyond, we've always talked about sort of a stable to up type of algo for that North America wholesale business. And that's really balancing between growing in areas like top-tier doors, growing in areas like digital, growing in areas like key cities with our wholesale partners. Balancing that out with continuing to call off-price, continuing to call the lower tier distribution.

So when we think about the second half specifically versus the first half, we've got some off-price reduction pressure that we know is coming that is planned for Q4. That's going to impact that business by 2, 3 points. We've also got -- we're caution embedded in our outlook around the U.S. consumer, right? Because we know as the pricing environment begins to take shape, those sort of strong reorder rates that we've been seeing in that business, there's some elasticity pressure that we're layering on top of that as we head into the second half.

And then we've got the third step, which is really continued brand elevation reinvestments, which is going to partly offset some of our gross bookings. So when you think about the shape of things, there will be some expected pressure in the second half, but I think we feel good about the core of that business. And if you strip out some of the one-offs, we feel good about that sort of stable to up normalized growth organic trajectory.

The next question comes from Dana Telsey with Telsey Group.

So nice to see the progress. As you think about your retail distribution, both full price and outlet, anything different you're seeing in outlet from full-price? And with the AUR increases, how is trajectory and outlets basically globally of higher-priced product there? And just lastly, anything on the supply chain to make note of as a benefit for margin going forward?

As far as the performance is concerned across all our DTC channels, I might even expand that to ralphlauren.com, if you don't mind. We're actually seeing really nice, consistent growth. Both our full-price stores, our outlet stores and actually disproportionate growth on digital, which we're very excited about.

And as I mentioned earlier to Brooke's question, what we're seeing is on marketing activations and our product offering is resonating pretty consistently across these 3 different channels. And as we get more precise on consumer understanding and consumer segmentation, we're able to better target through particularly our social media platforms to get the full potential performance across all 3.

But the short answer to your question is broadly consistent performance across the 3 areas. And of course, moving forward, our expectation is to continue to expand our full-price stores, right? You saw this quarter, we opened 38 around the world. That will continue. We do not expect to expand our outlet doors. If anything, what our teams are doing around the world now is combining outlet presence, so we might have a center where we have 3 different locations. We're building that into one. And then we expect to have some closures of outlets moving forward as we look to continue to elevate our presence. And of course, we're leaning in aggressively in ralphlauren.com and our digital operations because we're seeing very strong response there.

On the supply chain piece, Dana. So our global sourcing supply chain, well positioned, strong long-standing partnerships. It's really been, as you know, a key differentiator for us over the past 8-plus years, significantly diversified. So we have been taking advantage of that diversification in terms of being nimble and agile as we navigate the ongoing cost inflation landscape. And we do also maintain alternate sourcing capabilities for all of our key products in more than 1 country of origin, right? So we've been certainly leaning into that as well as working with our supply partners to drive efficiencies in our cost of goods and broader sort of end-to-end relationships.

That supply chain is also very innovative. They also continue to focus on developing and scaling new opportunities in each of our regions to mitigate what we know is a very dynamic global macroeconomic environment. So you'll see some of those mitigating actions start to ramp up as we move sort of through this year into early next year and into next year more fulsomely, and that is obviously a key lever in our mitigation toolkit when we think about cost inflation.

The next question comes from Laurent Vasilescu with BNP Paribas.

Patrice, I have to ask about China. I've seen China grew over 30% this quarter. I think that's in line with the prior quarter. Can you talk about what you're seeing there? Is there a rebound in the luxury space? Or is it idiosyncratic to Ralph? I would think that's the case, to some degree. And I think -- I know you don't guide explicitly for China, but I think you mentioned on a prior call that your expectations were for China to grow low double digits this year. How should we think about growth this year for China?

We always love to talk about China. So thank you for your question. So very pleased with the performance, again this quarter, up 30%. If you look at our run rates in China, we've been performing strongly for many years now. Why is that? While it's our strategy at play that the teams on the ground are doing a brilliant job executing, building the brand in a way that resonates with the Chinese consumer, leveraging our core items and also leading into our high-potential categories, particularly our women's apparel and handbag businesses, disproportionately performing in China. And then expanding our footprint in a very selective way across the 6 key cities, building these unique ecosystem.

So the performance you saw this quarter is really the result of these actions over many years. While we are, like you, reading the headlines on the economic environment in China, I think, to use your terminology, a lot of our performance is driven by idiosyncratic elements from the Ralph Lauren mix. Now keep in mind, Laurent, market is significant, right? And we still have relatively small share. So there's a lot of business to be had even if the overall category, we're not growing.

As we did guide, I think, low double digits for China, even longer term, right? So not just for this year, but over the 3-year period of our Next Great Chapter: Drive. We don't typically do that for individual markets, but we thought it was helpful for all of you just to get a sense of how we think about that market in particular. We stand by that. Listen, we gave that guidance 6 weeks ago, so it's unlikely that changed in the span of 6 weeks, but we feel very good about the balance of growth drivers and the diversity of growth drivers across that market, healthy comp growth quarter-on-quarter with new store expansion in a very selective, disciplined way, really leaning into digital and digital -- significant growth potential, including with -- and we touched on this in prior calls -- social commerce, which is really gaining momentum in China in particular.

So we talked about our activations on Douyin. We have a women's total activation that's performing very well, actually ahead of our expectations. We'll be expanding that across our portfolio. So the combination of new consumer recruiting, which drive a strong comp growth, select store expansion and acceleration of our digital platform and footprint along with clienteling, this is probably one of the markets where we have the best understanding of the customer and the best connected understanding of the customer across the ecosystem gives us confidence that we can continue to build strong, steady performance in China. We're in China for the next few decades, right? So we're also being very disciplined in terms of how we grow quarter-on-quarter to make sure it's done in a quality way, a sustainable way. And we're encouraged by the momentum we've got.

All right. Well, Laurent, you had the last question. So thank you, everyone, for joining us today. We look forward to reconnecting in February. We will have just -- we'll be in the middle of the Cortina Olympic Games, where we sponsor the U.S. team. And we'll be looking forward to sharing our third quarter fiscal '26 results. And until then, take care, and have a great day.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.

Welcome to Ralph Lauren's Investor Day 2025. I'm Corinna Van der Ghinst, Head of Investor Relations here at Ralph Lauren. We're so excited to have all of you here today, both in the room here in New York City as well as on the live stream. Before we get started today, we're going to share some disclosures with you all. While you are diligently studying these disclosures, I'll share the program with you.

We've got a great lineup of leaders speaking to you today. We're going to have a lunch break where I encourage you all to check out the insanely gorgeous product displays that our team has put up for you guys, enjoy some Ralph's Coffee in the hallway. And during those breaks, feel free to roam around and meet your colleagues as well. And so like I said, we have a great lineup for today. I would like to ask you to go ahead and silence your devices before we get started. And thank you all for joining us. Let's have a great day. Thanks.

[Presentation]

That's the incredible power of Ralph Lauren. Good morning to all of you here and on the webcast, and thank you for joining us. So 8 years ago, we began a journey of transformation. Ralph and I believe that this brand had a future worthy of its legacy. We made clear choices. We focused. We put the consumer at the center. We brought together the right team, many of which are in this room, and we delivered.

We were motivated to do this because we knew one thing with absolute certainty. This company is unlike any other in the world. Think about it. Ralph Lauren has a distinct brand position that's clear, consistent, relevant and emotionally resonant. A legacy of leadership in fashion, in culture, in innovation, and a proven ability to execute with discipline, precision and creativity. That's a formula for creating value, and it's how we'll unlock our next chapter of growth, brand, leadership, execution.

So let's start with our brand, who we are, why we exist, what we have uniquely and consistently stood for, for 58 years. Ralph has never been about close, although you are surrounded by close, Ralph has never been about close. He's inspired by possibility, by optimism, by a vision for a better life and by helping others see themselves in that vision and step fully into it. It's right there in our purpose, to inspire the dream of a better life through authenticity and timeless style.

This isn't about selling clothes. It's about offering possibility. That is the foundation of our brand. Timeless, elevated, inclusive. Indeed, Ralph Lauren stands for a different kind of luxury, one that is grounded in meaning, not materialism. We call it inclusive luxury. It's not about status, but self-expression. It's not about exclusivity, but individuality. And it's not about wealth, but aspiration and personal style. It's luxury that welcomes you in and stays with you throughout your life, whether you are a kid getting your first Polo Bear sweater for back-to-school at our store in Tysons Corner, decorating your Mayfair Townhouse. I know many of you have a Mayfair townhouse in this room, with our home collection at New Bond Street in London or wearing a Polo dress. As you say, yes, to a lifetime together.

We're there for all of life's moments, delivering consistency and quality with warmth, joy and optimism. And Ralph Lauren is the only inclusive luxury lifestyle brand with the DNA, scale and emotional resonance to inspire millions around the world. That distinct position is what has fueled our leadership over decades. As always, Ralph says it best. The excitement of being in this business is not following. It's about leading. And we have led again and again.

Over 40 years ago, Ralph was the first clothing designer to launch an all-encompassing home collection. In the '80s, we redefined retail when we opened our Madison Avenue flagship, recently renovated. You're all welcome to join us after this there. In the '90s, we first stepped into hospitality with our RL Restaurant in Chicago. And today, we have restaurants and coffee shops that have become iconic destinations. You should see the lines of our coffee shops, and I know many of you have actually complained to me about how long they are. So apologies for that. That's not going away.

And 25 years ago, we trailblazed e-commerce with polo.com, the first online lifestyle platform of its kind. Recognize these 2 young men. Bill Gates and someone you're going to see in just a few minutes. Time and time again, we have led. And you're going to hear about some of our more recent innovations today. What's more, we drive leadership across markets. We cut through from New York to Dallas, Paris to Milan, Shanghai to Tokyo. Across cultures, I see the love for our brand wherever I travel from Madrid to Miami. Across generations, and I'm going to pause on this point for a minute because this is a real differentiator as you look at the industry that we participate in.

What other brand serves every stage, every milestone, every moment of life, from babies to Gen Z through to the silver generation. After nearly 60 years in business, we see generations of family living in Ralph Lauren. Parents who grew up wearing us, I don't know, maybe some of you are doing this are now dressing their children. And maybe -- and I doubt any of you are doing this yet, but they're grandchildren in Ralph Lauren.

We often hear stories from our customers that start with our iconic Polo shirt, a way for a child to choose their favorite color and early act of self-expression. And over time, our pieces weave into the fabric of life's memories. First day of school photos, family holiday cards and eventually, may be wearing that same color of Polo shirt, likely a few sizes larger on the golf course after retirement. This is the enduring power of Ralph Lauren, timeless style that transcends generations.

We also drive leadership across channels, consistently innovating everywhere consumers are, digital, social, wholesale and our own stores. Across product, where we have one of the most powerful portfolio of core products in our industry. Across lifestyle, and I'll pause here for a moment. As I just mentioned, we were one of the very first to enter categories like home and hospitality in our industry. If you want to sit down, John, there's a seat for you. It's going to be a long day, so I don't want you to stay standing up all day. And while these categories are today a small portion of our total business, they are important channels for our brand, giving people a tangible way to step into Ralph's world. We don't just talk lifestyle. We deliver it at scale with integrity and unmistakably Ralph Lauren.

Leadership is not just in our DNA, and it's not just in our history. It is actually in our DNA. Pioneering, innovative and original. And if you think about it, there aren't too many originals in the world. There aren't too many brands who can say they are the only one who can do what they do. And it reminds me of this famous quote about the Grateful Dead. Are You're all familiar with the Grateful Dead. The older part of the group is saying yes. If not, please come and see Bob Ranftl, our Chief Operating Officer, at the end of the session, he'll give you some insights on the Grateful Dead.

And the quote is, why be the best when you can be the only? Why be the best when you can be the only. We embody that spirit at Ralph Lauren. So yes, Ralph Lauren is an only, so much so that you probably know exactly what it means when someone says something is very Ralph Lauren. It conveys an instantly recognizable lifestyle vision. It's not about a single product. It's about a world Ralph Lauren has created. So we've recognized our legacy of leadership, and we've reflected on the enduring strength of our brand.

But you'll recall that there's a third component in the value formula I outlined earlier. Execution, because even with a powerful brand and a history of leadership, none of it matters if we don't consistently execute with excellence. And at Ralph Lauren, when we commit, we deliver. Now that doesn't happen by chance. It happens because of the 23,000 employees around the world who are dedicated to executing Ralph's vision every single day. And I'd like to take this opportunity to actually give them a big round of applause for everything that they've done that's enabled us to be here today.

You're going to see several of us on stage today, but we represent our global team and their pride in and love for our brand. And since 2018, this team has driven towards strong, sustainable growth and value creation. We did not waver even in the face of headwinds and challenges, whether it was the pandemic, freight disruption, inflation or tariffs. Promises made, promises kept. Since our last Investor Day, we delivered on both our strategic and financial commitments.

We grew our top line high single digits annually. We expanded margin by over 300 basis points, and we delivered mid-teens EPS growth annually. We generated over $2 billion in free cash flow, over 100% return on invested capital, over 100% on total shareholder returns. And we gave back around $2 billion through share buybacks and dividends while continuing to strengthen our balance sheet.

I'm going to let you digest these numbers because they are the foundation for the rest of the day. But what we've accomplished so far is really just the beginning. If there is one word we want you to take away from today, it is this, opportunity, opportunity, opportunity. We have accelerated our momentum over the past 3 years, and we have laid the groundwork for growth well into the future. We are about lasting value. And we are now more elevated, more consistent with multiple drivers of growth. That's an exciting position to be in.

So let's dimensionalize the opportunity. The total addressable market we play in across premium and luxury is more than $400 billion and growing. We are a $7 billion company today and growing. And if you did the math correctly, less than a 2% market share, okay? That represents an incredible opportunity for this company, not just for the next 3 years, but for actually decades to come. So the past 3 years have been our proof of concept.

And we are now in a position of real brand strength. And you'll hear a lot about this later today, but just some top lines. The consumer around the world is telling us that today, we are the most trusted fashion brand in the world. We are the most considered fashion brand across demographics. We have the most loyal customers in the industry. And on top of that, our value perception has continued to strengthen.

With this strong foundation, we're going to continue to drive leadership in everything we do. This is our next great chapter, drive. The word drive matters here. It means pushing forward, not cruising, navigating, not meandering, staying in control of where we're headed even as the terrain shifts. That is how we will lead and that is how we will deliver our next phase of growth. At first glance, our next chapter drive strategy will look familiar. It should because our current strategy is working.

Our 3 diversified strategic growth drivers remain consistent. I think you know them well by now. One, elevate and energize our lifestyle brand; two, drive the core and expand for more; and three, win in key cities with our consumer ecosystem. So what's new? Well, you've heard us talk about our brand. Now you'll hear how we're carrying our brand desirability into the future with sharper insights to recruit new customers and deepen relationships with our existing customers.

You've also heard about driving the core and expanding for more from a product standpoint. Now we're accelerating even further into the opportunity with women's, serving her across our lifestyle portfolio. And you've heard about our top 30 cities. And now you'll hear about how we're expanding our ecosystems and laying the groundwork for the next 20 cities with digital becoming an even more powerful surround sound in the future. All of this is powered by our 5 key enablers. They allow us to be agile, resilient, on offense.

First, it all starts with our people. Our engagement surveys show that our employees are proud to work here. Our scores will exceed industry benchmarks. Our scores will exceed industry benchmarks. Culture drives performance. And we will continue to inspire and engage and empower our teams. Second, our key enablers also include our industry-leading operations, like our diversified sourcing strategy and the strong sourcing partnerships that have been established over the past few years. These afford us incredible agility, speed and risk mitigation.

Third, we've invested in advanced tech and analytics, including AI. We understand the consumer better than ever. And we're applying superior tech and AI to enhance creativity, engage our consumers and drive productivity across our operations. Fourth, to drive our success over the next 60 years, and while today is about the next 3 years, our lens is much longer than that. We have to future-proof our business. This requires supporting the resilience of our partners, our communities and the resources that enable our purpose and our growth. We do this through our citizenship and sustainability strategy. And I am pleased to share that we're ahead of schedule on our key commitments in this space.

And fifth, and I know you all care deeply about this one, not that you didn't care about the other 4, but you care deeply about this one, our strong, powerful balance sheet, flexibility, resilience. These enablers are all real competitive advantages in our industry. And they turn our ambitions into superior performance. So let me share how all this translates to our financial algorithm for the next 3 years, in case you're interested. Mid-single-digit top line growth, continued operating margin expansion, all while increasing our investments behind our brand and strategic initiatives and remaining committed to strong shareholder returns. You're going to hear a lot more from Justin later on about this.

So let's come back full circle to where everything started, Ralph's story. Optimism, a vision for a better life. Dreaming, we believed in Ralph's dream when we started this transformation 8 years ago. Ralph and I knew that our best days were still ahead of us, and we're proving it. In fact, after our fashion show last week, Ralph and I talked about how his vision is coming to life around the world more powerfully than ever, leveraging the distinctiveness of our brand, leaning into our legacy of leadership and executing with excellence at every turn to create value.

We are on an open road with so many opportunities ahead. Brand, leadership, execution, value, keep all this in mind when you listen to all the presentations throughout the day. So we have a rich day plan for you, full of the details of our strategy and our building blocks. You're going to hear from some familiar faces, and you also get a chance to meet some of our newer members on our team. We actually also have a lot of our team members here in the audience today, including some of the designers who design the amazing products that you've seen throughout the room and downstairs. Maybe you can grab them over lunch for style advice.

Later, we're going to address the key questions that I know are on your mind. How will we sustain brand momentum over many years to come? How will we ensure our products, our timeless products fit today's and tomorrow's consumer preferences? How will we grow geographically from Chengdu to Munich to Los Angeles, where the games are happening in a few years and beyond. And underpinning all this, how are we harnessing tech to support, how we work and how we engage with consumers. Thank you for being here and spending the day with us. I look forward to seeing you later for our Q&A session.

And now let me turn the stage over to someone who literally has this brand in his DNA, who believes in our company's potential as much as I do, Mr. David Lauren.

Thank you. Thank you, Patrice. Thank you for your leadership and for your partnership. Thank you for helping us to unlock our potential and really to envision a better future. So thank you very much.

I'm David Lauren, and I'm very proud to be here today to talk about the power of the Ralph Lauren brand. My father started this company nearly 60 years ago in a tiny apartment in the Bronx, where my mother and my grandmother sold the labels into the backs of every tie that he designed. And on the back of each label was the word Polo. And even though my father had never been to a polo match before, he picked the name because it conjured up an image of elegance and aspiration, on and off the field. Quite simply, it conjured up dream of a better life.

Now from those ties, my father was able to grow an entire world, menswear, womenswear, children's, home, hospitality and so much more. And behind every product were stories. And these stories became the backbone of our marketing and our advertising that you know today. And many would say that the images and the ads we've created have become as iconic as our products themselves. My father has always said that he's more than a designer, that he writes to his clothes about the dream of a better life and a way of living. And that's what's inspired people to be part of his world.

Now this past year, I had the privilege of joining my father as he was honored with the Presidential Medal of Freedom. It's the highest honor that could be given to a civilian. And he's the first and the only designer to ever be given this honor. And he was given it for his business leadership, his trailblazing entrepreneurship, for his philanthropic efforts and for literally helping to define American style and culture.

And while this moment was incredibly emotional for me, and you can imagine that. Perhaps it really hit me when I had the opportunity to travel all around the world. We traveled from India and China across Asia, Europe and America. It's been incredibly busy, busy, busy year. But I think it hit me as I met people and they told me stories about how our products have become a part of their lives and how they literally wanted to live inside the Ralph Lauren ads that they had seen. They want to be a part of our culture.

And perhaps that's because we take them from the skylines of Manhattan to the Great Plains of the West, from the fashion-forward streets of Milan to the iconic fields of the Hamptons, from the untained beaches of Montauk to the racetracks of London, from the boardroom, to the classroom, to the intimacy of your home. And it's always been about community, people wanting to be inside of Ralph's world, be together. And Ralph has always made it inviting. As Patrice talks about, it's about inclusive luxury.

And people dress up to be a part of this world. They dress up to go to our stores on a Saturday afternoon because our stores are not stores. They're homes where people gather to be a part of a culture. They come to our elegant restaurants, maybe they'll see Oprah or see some cool influencers. And they wait in line for our coffee, like you might see outside here or up on 72nd Street, where it's not unusual to see a line of people waiting for coffee. And maybe it's because they've seen people like Selena Gomez, who's the most followed woman on Instagram, wearing Ralph Lauren or they've seen us dressing the stars at the Met Gala. Maybe they've seen Beyonce or Billie Eilish or perhaps Mark Lee, one of the great K-pop stars, wearing Ralph Lauren on stage.

And of course, we've addressed some of the most iconic stars in amazing roles from Michael B. Jordan to Anne Hathaway. Now I want to stop and just tell you about one example of where we've really brought people into a world that no one else can do, something that Ralph -- only Ralph can do, and Patrice talks about that a lot. And I've grown up in the Hamptons. My father has always loved the Hamptons. It's been a part of a theme that he's returned to quite often. But in this instance, we created something even more spectacular. We created something that really felt like Ralph's Hamptons.

And what Ralph Lauren did is he created an amazing fashion show. You probably heard about this. Men's, women's and children across many of our brands. And then we created a world around it. We enveloped our customers in this, horses running in the fields. Karen, you remember this. Beautiful cars, vintage classic cars, we even built a Polo Bar and surrounded people with hospitality. And that was just so you can take care of the people who were there that day.

And it was an incredible experience that felt like you had stepped into the world of Ralph Lauren. No one can question what this dream is about. But then while this was incredibly viral, we built an ad campaign around it, which we've brought to the entire world. And I want you to just take a second and see if you can feel enveloped in it.

[Presentation]

It's about love, it was about family, it was about aspiration, it's about warmth, and once we knew that, that had really connected and the campaign had taken off and the event in the Hamptons had taken off and really connected with people, we started to organize events around the Hamptons all around the world from Germany to Dubai to Shanghai, where we did our first ever Ralph Lauren fashion show.

And we brought the show over there, including a live fashion show, including a Polo Bar experience, and they loved it. There were cheers in the audience and people felt like they were connecting with our brand. It was resonating all the way in Beijing with 30 million people watching Ralph Lauren live. It's an incredible experience. Now you can get a sense that just this campaign alone garnered over 20 billion earned media impressions. It was a staggering reach for a single campaign, and we're very proud of what we've accomplished.

Now it's one thing to outfit a fashion show, but perhaps an even more exciting fashion show is the Olympics. In front of 1 billion people, we dressed Team USA as they walked in front of the entire world, representing the best of America. We outfit Wimbledon on and off the field. We just celebrated 20 years of a partnership with the U.S. Open. And of course, our partnership all the way on the other side of the planet with the Australian Open. And the Ryder Cup, which takes place next week, we dressed Team USA in front of the entire world.

Lando Norris represents our fragrance, one of the great racing car drivers that's happening today, and I hope you'll catch him on television because he keeps winning. And so does Ralph Lauren. My father grew up in the Bronx, and his dream was always to play for the Yankees, and he literally had the opportunity to throw out the first pitch. And from the time he walked from the pitch bound to the dug out, our capsule collection with the Yankees had sold out. And from the major leagues, Aaron Judge, one of the greatest players in history is the face of Ralph Lauren fragrances.

And from the major leagues to the digital leagues, this is G2 where we outfit some of the greatest gamers online. We created an entire world of Ralph Lauren on Roblox to talk to another generation. And while digital world is important, integrating it with our retail experience is important. My father has always created an experience, an experience inside of our stores. And so to see our store windows become holographic interactive bears for holiday was incredible.

In many stores all around the world, you could walk up to the windows and wave, dance and the bear will wave way back to you and dance with you. It was a fun experience, but it created something that was very viral and very fresh. And of course, it's cool to do digital things, but the windows are only so big. So why not blow up your fashion show to a football field and a half tall and create a drone show that would walk along the bund in Shanghai. And as I ran after these characters, there were crowds taking pictures. And again, another 20-something million people just taking pictures and posting across social media.

It was an unbelievable and original experience for Ralph Lauren, showing how a classic brand can be thoroughly modern. And of course, you can see that our reach has been absolutely essential across all these programs in a single year. Now all of this is possible because of our values. Now behind every product with Ralph Lauren is meaning and values, and that is the new luxury. It's not just about price point. It's about what these products mean to people, how they resonate in a very personal way.

And with Pink Pony, we're very proud to connect with our consumers as we promised and now committed and successfully opened 5 cancer centers across the United States and research centers across Europe and now working very closely with our team in Asia. This has been incredibly successful, and we're so proud of our partnership and what we've done to fight cancer.

Now we've expanded our portrayal of the American dream with our partnerships with Morehouse and Spelman, and we're constantly trying to learn about new stories and new ways to tell the story of what America and different cultures are about. This is Naiomi glasses of Navajo descent. And she's come into our offices to help train and educate some of our designers about her culture. We've always loved what her culture is about, and we've always paid image, but now we've taken it to a new level of authenticity and credibility, and we're very proud of this relationship, and many others as part of our artists and residents.

Now this is all just the beginning. In the next 6 months alone, we've just shown our fashion show, and we're about to create an entire book, about 60 years of Ralph Lauren collection. And that book will be sold all around the world as the fashion show is then emulated and brought to our stores this coming spring. We just launched this past weekend, a new fragrance with Usher, the great superstar, and the fragrance is just out of the box literally. My son has it and he's smelly a little bit because he's only 9.

And we've just launched something called Ask Ralph, which is a partnership with Microsoft to celebrate 25 years of our digital innovation and leadership, and we're very proud of this. This is literally a style guide. It's Ralph Lauren in your pocket. You wake up in the morning, you want to feel confident about how you're getting dressed, how to put together a look of clothes, Ask Ralph. He will tell you what you need, when you need it, and of course, you can shop from it. It's us leading in the world of artificial intelligence and leading in the digital space again. And we continue to do that, and there's a lot more coming behind this.

And of course, we're going back to the Olympics and what promises to be the biggest Winter Olympics of all time in Cortina and in Milan this year in January. So what can I say? I can say a lot.

I've worked in this company for 25 years. In many ways, I've grown up in this company, literally playing under the desks of our designers as a little boy. And this company has never been stronger and more relevant than it is today. As I've said, Ralph Lauren is more than a designer. He writes to his clothes about the dream of a better life and a way of living. And it seems like today, everybody wants to dress like Ralph Lauren.

So I thank you very much. And now I'm going to turn this over to Iris, who's my partner in crime, talk about how some of these marketing initiatives are connecting with people all around the world. So thank you very much.

David, thank you. Do you realize that we've been working together for 16 years, the time flew by because of the dream. You and Ralph always ask us to dream with you, and we do, but we don't only dream, we deliver. Hello. Lovely to see you all again. Since we last met, our team throughout the world have propelled the brand to new heights from Paris to Milan, L.A. to Miami, Tokyo, Shanghai, Seu, all the way to Sydney. I have never witnessed so much excitement and momentum behind the brand. And this momentum is scalable. I know you're going to ask me that question, and I'll repeat again. This momentum is scalable.

So what's behind it? First, it's our art, our iconic brand that sends a test of time. Two, it is the deep trust we have built with our customers. And three, it is our scientific approach. That combination is unique, especially in a disrupted world where luxury has been redefined and AI has shifted customer expectations and behaviors. The lines between inspiration and commerce have blurred.

People want to entertain and shop at the same time. They want to watch a movie, buy the heroes look and have a conversation about style, quality and price all at once. And whether they are in a store on social media or talking to ChatGPT at midnight, they wanted to feel effortless. But they also want to shop a brand they trust, a brand that is authentic, that's genuine. And this is where we lead.

We have the most loyal customer in the industry because we have earned it over 60 years, thanks to our timeless consistency and because we know how to build deep, long-lasting relationship with our customers. We are built for this moment. And today, I'd like to explain to you how we are positioned to lead not just right now, but in the world that is coming next.

Over the last 3 years, we have delivered concrete results. Brand desirability. We have the highest and the fastest brand consideration in luxury and premium fashion. Put simply, more customers want to buy us than ever before and more than any other brand. Isn't that remarkable? Let me say it again. We have the best brand consideration in fashion. Second, quality customer growth. In only 3 years, we have added more than 16 million new customers to our DTC business, but it's not about volume, right? Customer value is up, and we have a record-breaking NPS. Customers are more satisfied, they shop more with us and they stay for longer. And that builds lifetime value, and I'll come back to that a few times.

And let me be clear, this success didn't happen overnight. This result were built progressively season after season, quarter after quarter, year after year with discipline and consistency. And this is why they are so solid. I'm extremely proud of our team. They are performance driven. I know they are watching. So congratulations to everyone.

Let me now go a level deeper into that notion of art, trust and science. First, the art. At the core of our success is our unique brand positioning, inclusive luxury. We have one of the largest penetration in the industry, yet 79% of customers see us as a luxury brand. This combination is absolutely unique. Very few brands can have both scale and luxury at the same time, but we do. In parallel, we have elevated our AUR and kept one of the highest value perception in the industry. Again, this is inclusive luxury and this inclusive luxury builds trust.

So now let's talk about trust. When we recruit a customer, it is for life. We serve customers for every stage of their life, but they don't only shop with us. They live the Ralph Lauren lifestyle for themselves, their friends, their family, their homes and their kids will do the same and their grandkids will do the same from one generation to the next. We take lifetime value literally. While the industry tracks loyalty over 2 or 3 years, we measure it in decades. We have the most loyal customer in the industry and listen to this, almost 50% of our customers have been with us for more than 10 years and almost 25% for over 20 years. This is loyalty. This is trust, and this trust translates into demand.

We have the highest demand ever across all commerce platforms. But what's most exciting is that we have high traction in new digital spaces, Gemini, DeepSeek, YouTube, Kakao, Line, Douyin, Red, you name them, wherever customers are migrating, we are cutting through. And this is all possible, thanks to our science. We started our AI journey nearly a decade ago, and we are now embracing agentic AI. We're using AI to improve customer experience, lifetime value and our team's productivity.

And we are ahead of the AI game because we have, one, agile tech that evolves fast as we do, sizable rich data that understand our customers deeply, talented data scientists that blends AI with style and working hand-in-hand with our creative teams. And finally, sophisticated AI models that have been running on our brand DNA for more than 7 years. They don't behave like robots, but like real stylists. We've also been using AI to refine our investment framework. So our in-house predictive models identify top value creation drivers for every marketing dollar we spend. We can then test and learn and pivot in real time with great confidence.

Our investment strategy is a subtle orchestration between brand impact, customer growth impact and profit impact. And the impact is real. We have increased our market ROI over the last 3 years. And this is why we will be increasing our marketing investments, but we will be doing that with great diligence, pacing ourselves.

As Ralph says, we don't want to be too hot. We don't want to be too cold. We need to protect the brand authenticity, the brand integrity. Branding is a very long-term game. The other bold move that we've made is in our organization. We have shifted from a centralized models and invested in talent where the expertise lies. So we have 4 hubs. It all starts in New York with Ralph and the creative leaders setting the vision. In Shanghai, we have our social commerce team. No surprise there. China is the most advanced digital commerce market. In Paris and Milan, we have our luxury hubs. And finally in L.A., we are embedded into entertainment close to studios and talents.

So we have our unique inclusive luxury positioning and a timeless iconic brand, the art. The highest lifetime value, the trust and an organization deeply rooted in AI, the science. We have great fundamentals. So let's now drive into the opportunities ahead and the strategies. We are the leader in menswear, no doubt. And actually, over the last 3 years, we have widened the gap with the competition, and we would continue to do so. I'm looking at our menswear designer. Congratulations. You did it.

Thus, our biggest acceleration is coming from womenswear, Karen, here we go, from the next generation and from high net worth consumers and the potential is still immense. Our womenswear desirability is the strongest ever look. When Taylor Swift decides to get engaged in the Polo dress, that says it all. And the next generation, they absolutely love our authentic brand, and they're not shy about it at all on social media. We are their favorite brand.

High net worth consumers as the luxury market evolves, they are deepening their engagement with us because they value our consistency, our integrity and the quality of our products and the results speak for themselves. But above all, today, our biggest opportunity is our lifetime value. This is the beauty of our lifestyle business. Over 1/4 of our customers cross-shop brands and categories. But thanks to our data and analytics and our art of styling, we know we can deepen that penetration much further. So we have clear acquisition and retention opportunities.

Now let's spend the last 5 minutes talking about the strategy to grab these opportunities. So the market has evolved. The frontiers between inspiration and commerce are blurring. People want entertainment, convenient shopping and service, all at once. And our response is very clear, entertaining and exciting at scale. This is marketing fulfillment, reimagine underpinned by 5 strategy. It all starts with culture. David talked about it. We don't infiltrate culture. We shape it. Fashion, sports, art, music, lifestyle, our brand is the leading with power and authenticity.

Let's take the example of sports. In a world shaped by AI, people create real human emotions and moments, and sports delivers exactly that. It's live, it unscripted. It unites people around values and dreams just like we do. And our investment in sports drives high reach and conversion. Over the last 20 years, we have built the largest sports portfolio in the luxury industry. We are the most established luxury brand in sports. That's power.

Let's now talk about my second strategy, top cities. This is where we invest the most. Why? Because they have huge lifestyle authority and a high concentration of affluent shoppers. We understand each city's digest and pulse, thanks to our connected teams on the ground. Let's take an example, random, Paris. We invest in BOLD media on [indiscernible], retail theater in Saint-Germain-des-Prés, Glamorous events in -- during Paris Fashion Week, and that creates cultural impact. When we go in a city, we go deep, we go wide, we go with intention and precision, and that's cultural impact that fuels social conversation, which leads me to my third strategy.

In the last 3 years, we have transformed social media. And the results speak for themselves. We do it with a data-driven approach and a platform native approach. But what really drives our success is the unique power of our cinematic brand and all our cultural dimensions. They perfectly fit the algorithm. Our movie that campaigns cut through the algorithm on your feed. And whether you follow sports, fashion, art, music, we will appear on your feed on a regular basis authentically, organically. This is cultural impact.

But people don't just watch our content. They engage with it, they share it and they even become creators. This is the power of the Ralph Lauren community, a community of passionate fans who spread the word on our behalf. The result, huge organic, authentic reach and clear leadership in social commerce. On Douyin, viewers of our Shanghai show were not just watching the fashion show. They were shopping in real time with style advice at their fingertips. This is proper, entertaining and styling at scale, and Shin will elaborate on that later on.

We piloted this in China, and we are now scaling it across major Western platforms, which brings me to my fourth strategy, styling at scale. Personalization is table stakes. We have elevated personalization to something much more meaningful, the art of styling. Our recent example is Ask Ralph that David mentioned. This is proper styling at scale, marrying our art of styling with our agentic AI capabilities.

And by styling customers, we increase basket size and we build these lifelong relationships with our customers back to their lifetime value. The core and final pillar is that we are always on. Our rolling tender of marketing activities moves at the pace of culture and anticipates consumer needs all year long, translating into commercial impact. This is the intensity of our brand. 10 days ago, we were at the U.S. Open. On Wednesday, we hosted our fashion show. On Saturday, we had an event with Usher downtown. We are also at Goodwood near London.

Today, we are launching our new fall campaign, I am with you, that's the highlight. And then in 2 weeks, we will be at the Ryder Cup. This is cultural impact. This is brand momentum that translates into lifetime value and fuel sustainable growth.

So to close, Ralph Lauren is uniquely positioned to continue winning. We deliver what very few can, that seamless blend of art, trust and science. We don't just market, we entertain. We don't just dress customers, we style them. But above all, we've earned something very rare, deep trust and brand love that create loyalty for life. This is just the beginning.

And now I'd like to invite to the stage, Halide Alagoz, my great partner and friend, who is the Chief Product Officer and our teams together work very closely to fuel that brand momentum and lifetime value. Halide.

Thank you. Thank you, Iris. Your passion and expertise always inspire me, and I'm so proud how our teams work together to deliver a consistent powerful message for our consumers. So thank you for your partnership.

So if the storytelling is what inspires, product is how you become a part of the dream. And I feel very fortunate to be here speaking to you today about product because since 1967, that's how Ralph has invited consumers all around the world to join his vision. And it's that vision that continues to guide everything we do, a vision rooted in quality, timelessness, authenticity.

And while we never waiver from that foundation, it's our job to put that vision into context. That means knowing and understanding your customers. As Ralph said, who they are, where they shop and how they live. So when it comes to product, we start with vision, our timeless vision, our anchor of consistency and authenticity. We then marry this vision with insights. We have more precise data and insights than ever before. Today, we know not only how to meet our customers' functional needs and experiences, but also about their emotional aspirations.

As Patrice said in the beginning, we have one of the most powerful portfolio of core products in the industry. They are the foundation of any wardrobe and they are the foundation of the signature Ralph Lauren style. This is such a differentiator for our brand. And then ultimately, we bring those products to life in uniquely Ralph Lauren ways, clear, consistent, compelling across marketing, product and channels. This connected execution is so powerful. Like Patrice said earlier, I bet you know what I mean when I say something is very rough. And we work together in every turn to deliver that.

This simple, proven framework and approach works across our business. It's embedded into how we frame and deliver our product strategy, whether it's one of our well-established businesses like men's or our high potential growth areas like women or in a specific category like handbags. And as you know, we have a unique balance of foundational strength and market leadership in core and high potential growth areas where we are already seeing traction. Together, our high potential categories, women's, outerwear and handbags, delivered a combined sales of 40% increase over the last 3 years.

Outerwear continues to be a very important category, a high potential growth opportunity for our company because it's a very important element of our customers' wardrobes, and it enhances our lifestyle proposition. And our women's business continues to be our largest growth opportunity over the next 3 years and beyond. Today, I will walk you through how we apply our approach into these areas. But first, let's look at core.

Since our last Investor Day, our revenue in our core products increased by 33%. Our gross margins follow suit, up by 390 bps through better connecting our supply and demand, so we have the right product at the right time, at the right place. And we have delivered 30% AUR growth, improving quality and value for our customers. We have offered core in higher price points within a category. For example, in our sweater category, our cable knit sweaters in cotton, wool and cashmere helps us build a price architecture. And through our core, we also trade customers up and across to higher AUR categories like outerwear as the customers pick their outerwear to pair with their gorgeous sweaters.

Our core products is at the heart of our success, and they will continue to be a part of our biggest growth opportunity ahead. Take Polo Men's, where we are well positioned in the market, and we still have significant growth opportunities as an example. We offer timeless products that transcends seasons and defines the essence of the Ralph Lauren Lifestyle, blazers, Polos, chinos, Oxfords, the Polo coat and more. These are the products customers know and trust, and they are willing to invest in them.

Our core is a reliable foundation that delivers consistent performance and profitability. They represent 70% of our business, which means 70% of our business demonstrates remarkable resilience across business cycles and maintaining full price sell-throughs. And while our core is iconic, it is not static. We innovate with fabrication, quality and design elements while preserving the authentic heritage of our icons.

We inspire consumers to wear these classics in new ways relevant for different occasions in their lives. They are worn together in iconically rough ways. The look is never an Oxford shirt alone. It's that Oxford shirt worn beautifully with a beautiful Tweed Blazer or with a very soft cashmere sweater with a beautiful chino pant under a beautiful functional windbreaker for an ultimate, comfortable and sophisticated style.

You see many examples of those amazing core and how we style them with other amazing products to give you the Ralph look. And our unique point of view in styling supports not only our core, but it also trades our consumers up and across our portfolio. So our approach is effective in core, and it applies equally well to one of our greatest opportunities, women's. And for women's, let me start with where we are with the business. In fiscal '25, our women's business reached $2 billion, accretive to our brand and AURs. And women continues to represent one of our most significant long-term opportunities for growth.

We are one of the few women apparel brands that hit the $2 billion mark, and yet we are only 1% of the global premium market, a market that's highly fragmented. And no surprise, I know the woman in the room will agree with me, women are the powerhouse consumers of our brand. They are frequent shoppers. They are deeply engaged and they are less price sensitive. And this creates enormous opportunities across our portfolio. We expect our high potential categories, including women, to grow at an accelerated rate over the next 3 years and beyond, outpacing our total company growth.

So let's see how we apply our approach to women's. As we touched earlier, our comprehensive consumer segmentation analysis has provided us deeper insights into our target consumers. This rich global data has given us clear direction and confidence in understanding how to engage and inspire her. And based on these insights, we have then strategically aligned our brand portfolio to target each of these target consumers or as we call them the muses.

So let's take each of our brands in return. Starting with Women's Polo. This is our biggest and fastest-growing women's business and continues to be our largest opportunity of growth in the company. Polo is the reference point for joyful, warm, defined American lifestyle for women around the world. You see in these images how she elevates classic items with a unique twist in styling or prep colors. She's not interested in following trends. She leans into style and confidently expressing who she is. So Polo Women's says, you compare this native blazer with a wrap trousers and it works.

Moving into our next fastest-growing brand, Ralph Lauren Collection. Collection is the destination for this elegant, sophisticated woman who strives for excellence in all aspects of her life. We are so excited to see the high levels of business growth in collection, and we expect to deliver strong double-digit growth this year in collection business. How are we doing it? We're doing it by leaning into iconic core styles to build a foundation of everyday sophistication and then we complement it with special occasion dressing. The collection woman gravitates towards elevated fabrics, unique product details and high levels of artisanal crafts.

Coming into Lauren. Lauren is the destination for trusted classic feminine lifestyle for this modern woman, dressing her for every occasion. Over the past 8 years, we have continued to elevate the Lauren brand from an opening price point position to a premium brand destination with a very strong value proposition. We have been expanding our reach, and we will continue to expand our reach through new points of elevated distribution.

The Lauren woman is also a very high-value customer for us because she not only shops for herself, but she also shops for her significant better, for her kids and for her home. And finally, you might be familiar with our cult favorite RRL brand. The RRL is there for this confident woman with an individual sense of style with the opportunity to add pieces that she loves to her collection. The RRL really resonates with this customer who really values personal style, elevated quality and authenticity as she collects and curates her wardrobe with unique pieces.

Each of these women are proud to wear Ralph Lauren in her own way, and we are so proud to be a part of their life. Our approach works in our large foundational categories in women where we continue to find new ways to delight her. And it's also the means by which we are taking share in a very important acceleration category for women's, handbags, where we have great traction, and we're just getting started. Handbags is a powerful acceleration category.

Since last Investor Day, we have delivered more than 40% growth in the category across our brands, yet handbags still represent a small single percentage of our total company business and less than 1% of that global highly fragmented market. Within Polo specifically, the fastest growth is in this $500 to $1,500 segment, a sweet spot where high quality meets accessibility. And it's delivering compelling value with significant white space for profitable growth.

This category is not only a growth driver, but also a powerful entry point for our customer -- next-generation customers. So it supports both of our new customer recruitment, but also brand awareness. You've seen many of our beautiful handbags also in the product pads. Please go and have a look. It's soon holiday gifting season. So you want to spoil yourself or buy gifts for your significant others.

So now I talked about core and highlighted women's and handbags. And beyond apparel and accessories, we need to talk about one more group. And that is our complementary lifestyle categories. They enhance our portfolio and cement our position as one of the only true lifestyle brands in the world from home to sleepwear to fragrance and gifting. When you enter our world, it's not just about what you wear, it's about how you live. One great example, which many of you got to experience here this morning is Ralph's Coffee. And as a Turkish person, I can confirm our coffee is really good.

So with locations all around the world, our coffee provides a fun, inclusive and joyful way to step into the brand, and it's one of our most Instagram experiences worldwide. These categories create opportunities for our consumers to discover and engage with our brand, which drives relevance and excitement.

Okay. Before I wrap up, I want to take a minute to touch a point that I know is top of mind for many of you, and it happens to be something I'm very passionate and proud about. And that is how we bring all these products to life through our supply chain. We have built a powerful supply chain over the last 10 years. We don't let global disruptions get in the way of our ability to meet our consumer demand. From pandemic challenges to trade uncertainties, we were agile and resilient. In fact, not only once, did you hear us highlight supply chain as an excuse on an earnings call.

Our model aims on creating a responsible supply chain that creates optionality and agility so that we can adapt quickly to changing conditions. Coming into this year of extreme disruptions, no country comprises more than 20% of our production. That creates structural stability. We have multi-country sourcing for all of our core products. This creates optionality.

We reduced our SKU count by 20%. That creates productivity. And while we were doing that, we increased our ability to chase by 40%. This enables responsiveness. We also continue to bring our supply chain future forward by integrating digital, AI and machine learning in everything we do from product design and development to supply-demand balancing. We have built in flexibility to deliver consistently without compromising on quality, sustainability or cost, and we will continue to future-proof our supply chain.

I want to leave you with this. Our product strategy is a uniquely powerful blend, anchored in the enduring strength of our core while accelerating growth through our high potential categories that have already proven their ability to scale. This combination of a steady foundation and a dynamic growth engine sets us apart. And it's further enriched by our lifestyle portfolio, which keeps us in the center of how people live, dress and express themselves. Together, this creates a strategy that's both resilient and expansive, rooted in what only we can do while boldly seizing opportunities ahead. And with a supply chain that's designed to deliver everywhere, every time, we intend to keep delighting our consumers and unlocking growth. Thank you.

Thank you, Halide, and thank you all for joining us. We're going to stop for a quick lunch break. Again, I encourage you to check out our gorgeous product displays. You can also test drive Ask Ralph, which you've just heard about this morning. We will reconvene here for the webcast live at 12:20 p.m. See you guys.

[Break]

Hello. Good afternoon, everyone, and welcome back from lunch. Do we have everyone back? Well, I hope you have a nice little break because this afternoon is going to be exciting, just like the morning session.

So it's great to be here with you. My name is Shin. I'm really excited to tell you and talk to you about the great progress that we have made in Asia Pacific over the last 3 years and discuss the future opportunity in APAC. But before we do that, let me just on the behalf of the regions, share with you our global key ecosystem approach, the third pillar of NGC Drive. You heard from these speakers this morning -- my colleagues this morning that we put consumer in the center of everything we do. And of course, with the channel approach, we do the same.

This comes back to our inclusive luxury positioning, ensuring that we show up in a consistent, elevated way for all our customers wherever they are across geography, price points and channels. And since we last spoke, we have done a lot of work to sharpen the role of each of our channels. So let's first start with digital. This is the window to our brand. And Naveen will speak more about it later of how we made it a surround sound for the brand.

Next, social commerce. Anyone shopped on social commerce recently? I did. This is becoming increasingly important, particularly in China, where millions of women are shopping every day, every minute across platforms like Douyin, WeChat.

Full-price stores. This is where our customers will experience the world of Ralph Lauren with an elevated assortment, hospitality offers and selling services, and we will continue to expand here. And finally, wholesale and outlets. We have done a lot of work here over the last 3 years. They remain important channels for access and new customer recruitment, and we will continue to elevate here. From a market perspective, we will focus our investment in our top cities with high fashion influence, high-value customers and of course, new store opportunities.

We will continue to build into our top 30 cities in black while investing in our next 20 cities in blue. You will hear more from my colleagues from Ashley, from Mercedes about how this all shows up in EMEA and also North America. But first, I want to give you a glimpse of how we bring this to life in APAC.

So let's start with some context. APAC is 60% of the world's population. It's crowded there. We have 40 countries and 3,000 different dialects and languages, 3,000, I speak 3.5. Over the last 3 years, our teams have really succeeded in connecting the consumer to our brand, and the results are super clear. APAC has grown 17% CAGR over this period, 17%, and this is exceeding plan. And in fiscal '25, we reached $1.7 billion annual sales or 25% of our total company's revenue.

We've been busy, and thank you, Karen and team. We opened 275 new stores. And now we have the largest fleet of DTC, directly operated stores globally. And these stores are highly elevated, differentiated, showcasing our broad luxury portfolio of brands, and we are commanding the highest AUR globally, and this is still growing at double digit. And what's more, we're winning across generations from Gen Z to Silver Spenders. So what's next? I think I'm going to get the same question as Iris. Are we going to keep up with the momentum? And the answer is yes. Why are we so confident? What gives me such confidence, is actually the proven playbook we have in China.

And this playbook can be scaled across the other markets. So let's start here with China. It is a standout success over the last 3 years. Our revenue nearly doubled, and China's penetration to the total company grew from 5% to 8%. And during this period, we have expanded our operating margin by 15 points while continuing to invest in building the brand, driving brand awareness and investing in innovation that's going to support our future growth. We opened 100 new stores here. And these are not just smaller dual gender stores. These are also complemented with emblematic stores in key locations and top malls.

Today, we have more than 250 stores across Greater China. And we still maintain the #1 AUR globally and of course, growing double digit year-on-year. And if we look at digital, where we focus from the beginning, we are very proud to say that we are the #1 luxury brand across Tmall, JD.com and more recently, Douyin.

We've reached this impressive results by focusing on the following 3 key areas. And that is amplify the brand locally, drive across the full funnel and tailor our offering to consumers. So let me share with you a few examples of how this looks like. We know what Ralph Lauren stands for. David spoke so much about it. It talks about aspiration, authenticity, timelessness. And I think most relevant today is optimism. We know that these values are universal. And so when we premiere our very Ralph documentary in China, it was the largest ever campaign in the market.

We went big, really big because we knew that what Ralph sense for would really resonate, especially if we deliver it in a powerful localized way. We had a full takeover of Shanghai, a stunning beautiful drone show across the beautiful bun. And of course, we telegraphed the live stream across multiple digital channels, reaching and touching the hearts of 22 million Chinese consumers. This is a great example of how we have successfully leveraged global content and campaigns to go big at the top of the funnel to grow our awareness and in this case, by 4 points.

So the full funnel execution was key here as it will be in my next example, which David spoke about, our first-ever Resee Fashion Show in Shanghai. In one night, we brought Ralph's Hampton show not only to the privileged 200-odd guests in the room, but to 37 million live stream viewers across China. And what's more, it wasn't just a Resee Show in Shanghai, we added a See Now, Buy Now show. We had live shopping backstage where the runway models and a professional host was presenting looks for consumers to shop online immediately. This drives additional 4 million viewers.

And we took this brand event as a content hub. We leverage it as a content hub, producing content for different channels. And as a result, we drove our digital sales by 80% during the month of the show. The full funnel approach and model reaps high return both in brand and commercial results. And it is something that we can do and will do and replicate it across the other markets.

Lastly, let me talk to you about how we are engaging in our key target consumer, namely women. Halide spoke about it this morning. So in China, we are traditionally known as a men's brand. But from the time we reenter, we have strategically positioned and focused on winning with women. So we have intentionally created dual gender format stores, prioritized locations in the malls where there are high-value women consumer, and we offer a balanced men's and women's assortment.

Today, China has the most balanced gender sales mix globally. Chinese women like me, are highly engaged on their social platform on Red Note, on Douyin. And so we launched lots of efforts, campaigns to reach them there to help us grow our brand awareness, our desirability and, of course, strengthening the women's consideration. And over the last 3 years, we grew a CAGR of 40%.

So I think you've seen that we have a clear formula of success in China. And we expect China to continue to grow and to deliver high growth in the next 3 years. But what's more exciting is that these key learnings can be scaled across APAC, where there remains significant opportunity. So let's talk about it.

Let's start first with digital acceleration. I'm really excited about this. Building on our digital success today, we aspire to drive half of Mainland China's digital acceleration through social commerce. So we need to talk about Douyin when we talk about social commerce. So Douyin, commonly known as TikTok outside of China, is already the second largest e-commerce player after Tmall.

Our Douyin store was opened in April this year. And since the last few months, we've been tracking really, really positive results. Most of the consumer -- majority of the consumers are new to the brand. And when compared to industry benchmark, our store deliver higher average order value and stronger customer engagement through time spent and click-through rate. But what really stands out is our approach on Douyin. While others are focused on pricing and promotion, we are focused on bringing our brand storytelling to life and using this channel as a source of style inspiration for Chinese consumer.

The social commerce opportunity is beyond China. In fact, we know it. It's global, and we will start to replicate the success of China around the world.

Next, clienteling. Our ability to do effective clienteling is going to be our turbocharger in this drive strategy. Our DTC fleet in APAC allows us to own the customer relationship and to unlock the first-party data that allows us to be more precise with customer acquisition. So 3 years ago, China spearheaded the company's first e-clienteeling app embedded in the WeChat ecosystem. So this application or platform allows our store associates to connect with the customer one-on-one, every day, 24/7, if they want.

So this, of course, drives higher and deeper connection with the brand. And of course, the result is higher lifetime value. The capability that we have built has already contributed to 1/4 of the growth in China. So over the course of the next few years, we will invest in technology and data infrastructure to unlock the growing database with predictive AI technology to drive clienteling at scale across APAC.

Now let's talk a little bit about geography. First, by starting with Japan, our biggest market in APAC. In this market, we expect to continue to drive solid growth over the next 3 years. In fact, next year, we celebrate 50 years anniversary in Japan, 50 year,s, that's impressive. Given our history, we have a really high brand equity and also strong luxury perception in this market with a really loyal and sophisticated consumer base. But yet, we have lots of opportunity to elevate Polo and to make it the style reference brand in Japan and to the rest of APAC.

We also look to meaningfully scale digital. Here, our digital penetration is only single digit. Imagine the opportunity. Next, moving on to Korea. This is an iconic cultural fashion capital of the world. In the last 10 years, we have seen the rise of K-pop culture across the globe. And did you know that there are 250 million K-pop fans around the world, 250, I'm one of them.

So we have a solid business here for 40 years, and we will continue to grow over the next 3 years. We will continue to optimize our K cultural partnership and leverage the K talent globally where it's relevant. As you've seen on this video, we have recently shot the Polo Women's global campaign featuring Winter from AESPA Group. She was at the show last week. And this is the first time we shot a global campaign in Asia. And similar to Japan, we have aggressive digital growth plans. In fact, in the coming year, we will launch the RL app, the first app to be launched outside of North America in Korea.

This will allow our consumers to be able to access our brand and product much more quickly and much more personalized. So today, one last point in Korea is that our business in Korea is dominated by Polo in department stores with smaller footprint. So we have a lot of opportunity to grow and freestanding stores and luxury through new distribution expansion.

So as we look across APAC, despite having the largest distribution of DTC stores globally, we still have a lot of meaningful white space opportunity to continue to expand our city -- our network across the cities. This holds true for the top 8 city ecosystem in black and as well as our next top city in blue. And as we focus on our top city clusters -- this is very key because it enables us to focus and to consolidate our resources so that we can dial up marketing activations and to ensure our brand shows up in the most elevated possible way here.

Over the next 3 years, we target to open 150 new stores, 150. And this reflects a balance of targeted new openings with improving productivity in existing top location through square footage expansion and operation discipline. So as we scale and elevate, I am confident that APAC will continue to lead the enterprise at an anticipated high single-digit CAGR and while continuing to expand our operating margins over the 3-year horizon.

Our 3 drivers of growth will be China, digital acceleration and continued AUR expansion as we continue to elevate the brand. From a market perspective, our top 3 largest markets are well positioned to lead APAC's growth with China expected to continue growing at a low double-digit rate and further solid growth in our mature markets like Japan and Korea.

So in conclusion, we are well positioned to maintain our momentum and continuing to drive sustainable profitable growth in the region. Our teams are highly engaged and our playbooks are proven. So I'd like to end off with a quote from Ralph, Love what you do, be passionate, work hard, work together and aspire to the best. This is the Ralph Lauren way, and this is also the secret sauce of our success in APAC. Thank you.[Foreign Language]

So I would like to hand over now to Ashley, who is a dear friend and also a very keen competitor. And -- but I do admire him because after more than 30 years with Ralph Lauren, his love and his passion for the brand is so undeniably contagious. Welcome, Ashley.

Thank you very much. Thank you, Shin. That was spectacular. What you've been able to achieve actually swimming against the tide is fantastic. Of course, it does add a little bit of spice into our competition of who's going to have the best month and quarter. Time will tell. So I hope you're ready to hear of our journey in Europe and what we call emerging markets.

And that is primarily a story of elevation about creating balance in key city ecosystems to engage with the consumer at every touch point and by embracing the fact that they have a choice and knowing who they are, where they are and where they shop and by ensuring every time they engage with us, they get a uniquely Ralph Lauren experience.

Before I go into too much detail, I just want to give you an overview of our region. $2.2 billion last fiscal year, over 130 countries, 100 currencies, 60 languages, so we are complex. We are diversified, and we've benefited from that diversity as we grew and try to navigate these geopolitical and macroeconomic, macro environments that have been pretty heavy in our region. We deliver our global brand strategies in a localized way, and that's been a key part of our success and enabled us and contributed to us having the highest operating margin globally.

And I'm delighted to say that despite that volatility, we have been able to deliver ahead of expectation across both the top and the bottom line by achieving a revenue CAGR of 10%, whilst expanding our operating income by close to 500 basis points. We've enhanced our brand position through many initiatives, but including pricing power and a reduction in discounts, and that's enabled us to grow our AUR by over 30%, and that is 8 consecutive years of AUR growth.

So how are we able to do that? Well, simply put, by building these key city ecosystems and putting the consumer right in the middle, by investing across the portfolio, by accelerating our marketing spend across key cities and key countries and knowing that when we impact the Paris and Milan, fashion icon cities, we are making global statements, not just local ones. And by being bold in growing digital across our own websites and through wholesale partners and ensuring every channel consistently represents who we are, whether that's across stores, across digital or across wholesale.

And we've done that through new openings, through renovations and when required, through closures. Let's take a closer look at how we've been able to embed ourselves in these key European cities. Paris, the fashion capital of the world. And through strong marketing and store statements, we've been able to grow our visibility and our credibility. I love this image. Here we are planting our women's flag, bang, right in the middle of this strategic city. And London, a model ecosystem actually with 12 of our own stores and internationally recognized department stores and where we have the highest VIC penetration in our region. And we've built a scalable clienteling model that we're going to roll out.

And if you were in London for Wimbledon, you would have seen a fantastic example of how we activate a city. And in Dubai, the shopping and tourist center for the region where we focused our attention, delivering differentiated experiences in this highly competitive luxury landscape. We opened a Ralph Lauren Pop-up Beach Club. We entertained on a super yacht, and we took over a luxury villa and recreated the Hamptons. And this is what we mean when we say that Ralph Lauren is a storyteller and a dream maker.

A large part of our success is a very healthy balance we have across our channels, which is about 50% DTC and 50% elevated margin-accretive wholesale, because we know the consumer is channel agnostic, and we own that fact. So we ensure that our stores, our website and wholesale complement each other and speak with the same tone. And that's allowed us to deliver consistent revenue and profit growth across all channels.

I'd like to talk about digital for a moment, and we've spoken about that quite a bit today. It's a really powerful pillar of our story. But it's not just about revenue growth. It's about customer acquisition, particularly NextGen. And we've done that using 2 vehicles really, our own website, and we're now in over 70 countries, and that's delivered accelerated growth and through strong partnerships with our key pure players and brick-and-click retailers, and leveraged their extensive database and expanded our reach whilst growing our market share.

And just like Shin, we've been busy opening stores. We were underpenetrated and knew we had to build that direct route to the consumer. So since the last Investor Day, we have opened over 60 stores, including a magnificent men's and women's flagship on Via della Spiga in Milan and across the street, a stand-alone children's store -- our largest children's store in the world actually. In London, on a prominent Sloane Square in Chelsea. In fact, that store has been so successful, we're going to expand it next year.

And making new investments in cities where we didn't even have a store, Amsterdam, Barcelona, Bordeaux, Prague, Istanbul, further elevating those city ecosystems. And just as a side note, Istanbul has a population twice that of New York, of London and Paris. And we've only just started that journey, opening our first store there last December. And that store like Sloane Square has been so successful. We'll be expanding that next year.

But it's not just about opening new stores. It's about continuous improvement, working harder with what you've got. And so we've been able to drive greater productivity through our existing brick-and-mortar fleet, through initiatives, a number of them actually, space optimization by replacing cash registers with mobile points of sale. And that very simple act across the entire fleet.

It's like opening new stores in terms of retail space gained by engaging with our retail team, our ambassadors, our frontline workers, our largest population and ensuring they have the right tools to deliver a one-of-a-kind service and leaning into our assortments towards core and high potential categories, particularly womenswear. And the roll-up of that is more efficient use of space and better engagement.

Outlets, we have to talk about outlets because they are a really big part of our inclusive luxury positioning. I'm really proud of the role that they play. They're often the first place we engage with the consumer and sometimes the only place. So it's imperative we deliver an elevated service in that Ralph Lauren world. So we started a complete renovation of the fleet, and that's enabled us to drive quality comp growth and narrow our pricing gap to our full-price stores. And it's also allowed us to reduce our third-party liquidation to a single-digit percent of sales through better inventory management and better leverage of that elevated fleet.

And wholesale, I said earlier that it was 50% of our business, and it's been pivotal on our journey from an exposure and a profit perspective. We have exited literally hundreds of doors, and that's enabled us to elevate and build a healthier platform for growth. And that reduction in distribution has enabled a higher quality of sales while showing spectacular growth. And we've built stronger partnerships with those that shared our aspirations and became mutually more productive.

I'd like to bring these ecosystems to life by using 2 fantastic, but very different examples of how we've been able to transform the consumers' perception of our brand, Germany and Italy. Let me start with Germany, our highest growth market, the biggest economy in Europe and the biggest population. And we only have 4 full-price stores and a wholesale presence that really didn't represent us appropriately. So we went to work.

In Munich, we expanded across all channels and introduced our first Ralph's Coffee in the European department store. We refurbished our flagship, and we added a second store in that city very recently. And in Berlin, we now have a store on the CODA, the Berlin Madison Avenue and another store in a mall. And we have a very elevated wholesale presence. And from Dusseldorf to Hamburg, we further elevated our wholesale presentation through immersive takeovers. And Germany has also played a pivotal role in our digital growth. And so we've worked very closely with the digital natives, deepened our luxury credentials and expanded our reach across Europe.

Italy, completely different, where we've reenergized and reshaped our brand. In fiscal '18, frankly, we had too many outlet stores and only 1 full-price store, that was in Rome, wasn't even in Milan. And in this high equity market, we weren't representing Ralph properly. We were underwhelming the consumer, and that was reflected in our results. And with Italy not having a sizable department store group, it was even more critical we opened stores. So we embarked on an opening program, and we've now added 15 full-price stores. I mentioned the 2 in Milan earlier, but also we opened in key resorts like Forte dei Marmi, Lake Como and Capri.

And we notably increased our marketing investments across the country through activations. And now Italy has the highest brand consideration in all of Europe in our last fiscal year. So that's been our story for the last 3 years. I'm really proud of what we've been able to achieve. We've set the stage and laid the foundations for what is ahead, and we have data to support significant opportunities and white space to harvest.

So for the next 3 years, we'll build on this with even more purpose and focus, lean into where we've been the most effective, and we're going to continue to run the play through a number of initiatives, outpace investments in marketing, scaling to more top cities, increase market share in digital and expand our productivity initiatives, accelerate our store opening program.

Let me talk in a little bit more detail about some of those initiatives, starting with marketing. David and I spoke about the power of cinematic storytelling. At Wimbledon, we inspire across generations, and we will have the same impact in the upcoming Winter Olympics in Milan, Cortina as we did in last summer's Olympics in Paris. We're going to be expanding the scale of our activations from our top 5 cities to new cities like Madrid, Frankfurt, Hamburg and Mumbai.

Digital will remain a powerhouse and will lead our growth over the next 3 years. We already have the highest digital penetration globally, but we still see so much opportunity. We're going to continue scaling our online flagships and reach new consumers. And with digital wholesale, we'll continue leveraging our high-reach accounts and our high equity accounts.

And with the stores, we'll broaden our reach from our top 8 cities to our top 15 cities, including in statement cities like Vienna and Zurich and reaching further into Germany, but also in more mature cities like London, where between now and Christmas, we will open 2 more stores and further expanding in Paris. So we'll accelerate our full price openings to 75 stores over the next 3 years, increasing our desirability and reach.

So where is that going to take us? Well, by fiscal '28, we're going to build on this strong growth, and we're projecting a mid-single-digit revenue CAGR whilst expanding our operating income. And as a result, since the start of our next great chapter journey in fiscal '18, we would have opened 200 full-price stores, elevated our outlet fleet, reshaped wholesale, acquired millions of new DTC consumers, increased our revenue by almost $1 billion whilst increasing our operating income.

So as I come into land, let me just headline this. This has been and will be and will always be a story of elevation. And as we look forward, we won't be short of choices or options, and we're really optimistic about building on what we've built and prioritizing where we will have the highest impact. So thank you for listening.

And now it's my pleasure to introduce to you today our newest leader, Mercedes, who's joined at just the right time to lead North America into its new future. Thank you.

Thank you so much, Ashley. The way that our teams in EMEA have delivered Ralph's vision is truly inspiring. So good afternoon. It's a pleasure to be here today for my first Ralph Lauren Investor Day. So I just celebrated my 6-month anniversary with the company, so I'm a little younger than my colleagues up here on the stage, but what an unforgettable and exhilarating 6 months this has been.

It's taken me across the country to visit our stores, meet our wholesale partners, see our teams and visit our incredible distribution center in action. I also went to China and to Europe, where Shin and Ashley kindly welcomed me to see the way that Ralph Lauren shows up in such an authentic way. Every place I have been, what has stood out for me is that we have the most passionate, exceptional teams who are obsessed with our customer.

So across my career in luxury hospitality and retail, I have seen firsthand the difference it makes when you create welcoming environments, when you elevate service and when you deliver undeniable value to the customer. It is what keeps people coming back throughout their lifetime like Iris spoke about earlier. And who does that better than Ralph Lauren. In fact, I believe we have the opportunity to connect and scale this even further in North America. And it is a main reason I joined Ralph Lauren is because I believe the company's best days are ahead of it.

Many of you have been on this journey with us as we successfully undertook one of the most challenging and ambitious resets in our company's history. One could argue without clear precedent in the industry. So over this most recent leg of the journey, I'm proud to say we have pivoted the region to a healthier foundation for long-term sustainable growth. So today, I will walk you through how we are creating the best consumer-centric curated experience for our North America consumers, not one size fits all, the significant opportunities for growth that still lie ahead and of course, the key building blocks that we will deliver on.

So let me start with some context on where we are today. North America remains our largest region in the company with $3 billion in revenue. Throughout our elevation journey, we have delivered on our highest brand awareness, value perception and now luxury perception globally. We are starting to deliver healthier, sustainable long-term growth because of fundamental repositioning work that the team has been underway with since 2018.

So some highlights. Let's take a minute to digest this slide. There's a lot of numbers. So we have transformed our online business from a discount site into a true digital flagship and one of the best expressions of our brand, driven by full price sales growth. We have rationalized our wholesale and outlet presence, focusing on Tier 1 doors and reducing our reliance on off-price sales.

And we have expanded and continue to accelerate our full-price store portfolio, which is now our fastest-growing channel in our ecosystem. So all of this has resulted in increased brand desirability with our consumers. Our AURs have more than doubled over this period even as we continue to grow our value perception. And I can't help but mention that this has all stabilized North America in revenues and operating margin amid all this repositioning, the pandemic inflation and the list goes on.

So the business is in a much healthier place today. So how have we started to think about driving solid consistent growth? Well, first, in digital, we brought in new leadership, who you'll hear from shortly, bringing focused approach to our strategies in product, marketing and communications and also the site experience. Demand is there, and we have not yet fully grown into our potential, especially as we further connect our digital experience with our in-store experience.

Second, our full-price stores. We started this elevation journey in FY '18 with 40 stores. We spent the last 3 years developing and testing a highly disciplined model for new store growth that is driving a more profitable key city ecosystem. We're focusing on productivity across the board of space, of product, and of our people. So we've added about a dozen new stores with a focus on very disciplined economics, opening stores in the right centers, the right adjacencies and with the right financials. We've also renovated several of our key flagships here in New York, also in Chicago, and we have invested in small locations around the country for increased productivity in certain areas. Now I'm sure you've heard, we purchased two flagship locations this year, Prince Street in SoHo, not far from here, and Newbury Street in Boston. We will remain highly selective and look at opportunities in our most important top cities going forward.

So next, our outlet environments. These are working really well for us. The channel has an important role to play in how we reach consumers in North America. You may not know, but our average household income in this channel is over USD 100,000, and the outlet is their local channel. So we've invested in the client experience in our more elevated environments. Woodbury Common, not too far from here is a great example. I was recently there to check in on back-to-school activity, and it was so incredible to see the warmth of how the customers and our teams are working together, the demand for coffee, the engagement around our create your own offering and the customers' traffic spanned generations and demographics.

As we have elevated the experience here, we have brought the consumer along with us, expanding the consumer base and our audience. We are also initiating a segmentation focus in the outlets, tiering based on local dynamics and local demographics. So we have more local doors and some that are more driven by international tourism. We've responded with agility to drive value, service, and targeted merchandising. And as I mentioned, in some of the more elevated locations, you will see things like coffee. All of this has resulted in driving positive comp growth in 7 of the last 8 consecutive quarters and AUR growth of 20% since 2022, with still more opportunities ahead.

Now within wholesale, we have focused on a more disciplined inventory management to align sell-in to sell-out. We invested in our top doors and elevated our assortments. We grew our AUR and reduced promotions. Promotions are down 50% versus pre-pandemic, and our AUR is up 30%. We increased penetration in luxury department stores with increased brand strength in those doors and more performance. We are continuing to reduce our off-price unit volume, which is down over 75% since FY '18 and down 45% since FY '22.

Now all of this has resulted in us further elevating our presence in this channel, improving quality of sale and building proof points for share gains across all of our families of business. So now that we have started to drive solid consistent growth, how will we build on it? It's not lost on me that a person named Mercedes is driving the North America region into the future, something I never used to like as a child, but now it's a great name for this time.

We will build on our foundation in North America by first, putting even greater focus on the consumer; second, evolving the role of digital; and the third, building into the white space ecosystem expansion opportunities. So let me dive in. You've heard today from many of my colleagues that we now know our consumer better than ever. We will leverage regionalized insights to deliver more precise and informed engagement and communication and precise product selections to our consumers. We can now tailor communication not just for the North America consumer, but to specific consumer cohorts.

And in digital, you'll hear shortly from Naveen how we've been pivoting the role of digital and the need for a 360-degree brand presentation across your shopping journey. We've optimized the balance between brand building and performance driving investments. We've harmonized our product assortment and inventory, shifting from wide and shallow to focused and deep, resulting in bigger average baskets. And in the experience, we have created elevated friction-free journeys, enabling product discovery and brand engagement.

This is on top of the work that the team has already done to increase marketing effectiveness, quality of sale and the site speed and performance. This has resulted in sequentially improving comp sales growth over the past year, and these actions have put in motion even more opportunity ahead.

So moving to the wider ecosystem. Our full-price stores serve as an extremely important touch point for consumers. They discover our brand, their service, they get immersed in our world and the styling that is so unique to Ralph Lauren. As you've heard from my colleagues, it's not just about a Polo shirt or a sweater, but it's the mix that reflects your personal style. From the start of our key city journey, we disproportionately focused our investments on the top store -- our investments in marketing and store expansion on our top 14 cities in North America that you see here on the map.

Over the next 3 years, we'll expand our focus to include an additional 6 cities where we will start to plant the seeds for longer-term growth. We plan to add approximately 15 more full-price stores in the region over the next 3 years. And we see further comp opportunity in our existing stores base as we use our current momentum to fuel further changes to increase that productivity, leverage data and AI to understand the consumer better and lean further into the market-specific learnings that we're gaining. We also cannot leave out that very important one-to-one client relationship building that comes from the very special Ralph Lauren engagement I mentioned earlier. Our teams are amazing at making you feel a part of Ralph's world, and that is the true definition of inclusive luxury.

So in our outlets, our outlets remain important for new customer acquisition. It's a local store for many and an entry point into the brand for others. We've been increasing store productivity, leveraging the data analytics here to drive the segmentation and price architecture across North America ecosystem. We've leaned into clienteling capabilities to cater to this channel's high-value clients who shop with us very frequently and build on that lifetime value.

We're still in the early innings of this, but empowered by all this data, we are leaning on future productivity gains in this channel as well. And finally, let's talk wholesale. It remains a strategic channel for brand discovery and new customer acquisition in North America. Of course, we are mindful of the broader secular challenges, but we'll continue to manage with discipline and exit a modest number of lower-tier doors season by season.

We plan to drive sustainable growth in wholesale through a combination of share gains and comp growth in our go-forward premium doors and expand into newer top-tier luxury accounts, where we're targeting a double-digit increase in luxury department store doors over a small base in the next 3 years. And then finally, let's dial into a specific white space opportunity for ecosystem acceleration, which is the Los Angeles area.

Needless to say, L.A. is a center for global entertainment and rich with opportunities to tell the stories that reach well beyond L.A. Today, we have built incredible presentations in iconic shopping locations like our Rodeo Drive flagship and RRL on Melrose as well as outlets throughout this region. But with over 10 million people in L.A. County alone, we've really only just begun. Our ambitions for L.A. are bold and long-term, and what better place to tell the story of Ralph's world and feel that you're in the movie set that he is creating.

We are investing in deep local insights to understand the market's unique cultural dynamics, shopping behaviors and preferences, and they will guide our execution. We actually have 5 new stores in the pipeline for California already. And very excitingly, as mentioned earlier on, we are building a drumbeat of engagements as we head towards the LA 28 Olympic Games, where Ralph Lauren will once again proudly outfit Team USA and serve as an official sponsor. This historic moment represents not only a significant commercial opportunity, but also a powerful platform to reinforce our legacy at the intersection of sport, style, and culture.

Beyond L.A., we believe we have white space across the Southeast, the Midwest, the Pacific Northwest, and also Canada. So how does this all roll up? As we drive this plan into the next 3 years, we will go after more full price opportunities with a targeted market-specific approach from L.A. to Chicago to Miami. We are targeting a low single-digit revenue CAGR led by D2C, including digital. And this outlook incorporates our caution embedded in the current FY '26 guidance for the second half of the year with broader industry-related tariff pressure expected into the first half of FY '27.

So to be back where I started, it's a great time to be at Ralph Lauren and a great time to be a leader in North America. We have spent almost 60 years building an incredible emotional connection with customers in North America. We have now positioned our business to better capture that market opportunity, and we are going after it. This is a game of execution. And of course, we know the devil is in the details. The experience of every customer and every channel matters. The team and I are already hard at work about bringing that vision of Ralph and that feeling of warmth, service and value to every customer coming through our doors or touching us on our digital touch points.

As we've mentioned, digital does play a key role in our success. So to tell you more about that, I'm pleased to introduce you to another new member of the Ralph Lauren team, Naveen Seshadri.

All right. Thank you, Mercedes. Good afternoon. It's so good to be here with all of you today to talk about our digital strategy. I joined the Ralph Lauren team a little over a year ago, having worked for some strong consumer and retail brands like Disney and Foot Locker. Even before I joined the company, I admired the innovative ways in which Ralph Lauren was engaging consumers in Ralph's cinematic vision. It was clear to me that when Ralph and our leadership team talked about being in the dreams business, they understood that digital was a very core part of this.

Digital is so much more than a sales channel. It is one of the most powerful ways that you can immerse and inspire people to step into their dreams. But before I share how we will extend that Ralph Lauren vision even further through digital, I'd like to showcase the incredible momentum our global digital team has built over the last 3 years.

[Presentation]

A big round of thanks to our digital and technology teams all around the world for driving and enabling this business. And as you can see, we've been rather busy. And we have built an incredibly strong digital foundation. The question now is, how are we building on the top of this foundation? So let me start with how we think about digital. As I said a moment ago, we think of digital as so much more than just a commercial channel. Digital is an always-on, always connected crosscurrent that permeates across every aspect of what you heard from my colleagues earlier today.

It connects every thread of our business, and it powers a journey that puts the consumer at the center of everything that we do. That perfect loop, that perfect infinite loop of commerce and engagement, regardless of how they engage with us or transact with us across every touch point and in every single market. Every interaction is an opportunity to connect, to engage, to elevate, and to convert, not just once, but over an entire lifetime. Our mission is to integrate and accelerate agile digital thinking into every aspect of how we work and do so in ways that are sustainable well into the future. So let's get into that a little bit.

I'm first going to focus on our digital business. Digital commerce is now 26% of the company's overall revenue, up from the low teens when we started this next great chapter journey. And it's now outpacing brick-and-mortar growth. And our digital revenue mix is diversified across all channels. We're elevating the brand, not through promotions and discounting, but through design, through storytelling, and through premium positioning. That discipline is paying off. We hold leadership positions in all 3 channels, and we continue to grow.

Within our owned DTC channels, which now comprises over 40% of our digital business, we've meaningfully repositioned and elevated the role of our digital flagships, resulting in more than 25% AUR growth. We have also driven a significant reduction in promo days since our last Investor Day. 20% of our online sales in North America now come from our RL mobile app, which we also launched in 2022. This is home to where our most loyal, highest-value customers shop. Wholesale digital and pure plays also remain extremely important in our ecosystem. They enable us to recruit new customers, particularly younger next-gen customers, and scale into new markets with speed and precision while presenting our brand in an elevated and consistent fashion.

To maintain our leadership and continue to drive growth, our focus is clear. We will stay at the forefront of consumer expectations and deliver a seamless elevated shopping experience agnostic of the channel. How we do that comes back to the same inherent point, which is to think about digital well beyond commerce alone. As you've heard throughout the day today, our consumer is always at the center of everything that we do. Our strategy is built to deliver a frictionless, personalized, connected, and consistent Ralph Lauren experience wherever, whenever, and however the consumer chooses to engage.

And again, doing it in a way that is fit for today, but proofed for tomorrow. So let's talk about what that looks like. There are 5 key areas where we're focused on evolving. I'm going to walk you through each one of them. First, on content and design, as you've heard throughout the day, Ralph Lauren is not just about clothes. Rather, it's about inspiring people to dream. The way that we are seamlessly integrating immersive content right into the consumers' purchase flow empowers just that.

Take our shirt shop, for example. We embed content in situ to drive enhanced product discovery and inspire our consumers, guiding them down this seamless path to purchase. Our ability to adapt and improve is enabled by the investments we're making in our platform and technology through a composable architecture. So let's talk about composable commerce. Composable commerce is how we're shifting from a one-size-fits-all e-commerce platform to a modular way of building technology.

Think of it as building with LEGO blocks instead of buying a prebuilt toy. This gives us the flexibility to pick the best-in-class tools with things like search, content, checkout, and anywhere across the consumer funnel. And then we assemble them in a way that fits our brand and consumer experience perfectly. This also enables increased scalability, faster speed to market and improved innovation. But what does that actually mean in practice? So in the past, it would take months to integrate a preferred payment system into our digital flagships.

And now when we see a new platform like a Klarna take root, for example, we integrate that in weeks, not months. In other words, you don't have to throw an old toy away. You can just reconfigure the LEGO blocks or replace a couple of bricks and create something brand new. Third, putting the customer at the center of everything that we do means that we truly have to understand them and their preferences. And now we can do that with much greater precision than ever before. With a more holistic and focused view of the consumer, we can reach the right person with the right message at the right time consistently and at scale across platforms and across media.

Fourth, let's move to digital in our stores. You've heard a little bit today from my colleagues about how we're deepening the connection with the consumer through clienteling. Digital helps power this at scale. We're investing in a modern intuitive clienteling platform that enables personalized high-touch service, not just in stores, but across channels and across touch points. What was once a highly manual process is now being transformed into a digital turnkey experience. This empowers our teams to do what they do best, which is to build long-lasting relationships with our customers, offering thoughtful styling advice while delivering the aspirational service that only Ralph Lauren can provide.

Finally, let's pivot to a topic that I'm sure is on everyone's minds, AI. A lot of what I walked you through leverages the power of AI already. It is the cross current or the surround sound as we say, in so much of what you've heard from us today. I want to highlight a few examples. From a forecasting and analytics perspective, we're enabling AI and machine learning to connect product attributes directly to search algorithms, improving product discovery and showcasing the right content at the right time to the customer. We're also enabling predictive buying and forecasting, which is helping us to buy smarter, align inventory with supply and demand trends, reduce markdowns and discounting with the ultimate aim of improving profitability and customer satisfaction.

Second, from an employee-facing perspective, AI is transforming how we work across teams and functions, enabling us to move faster, make better informed decisions and spend more time on strategic and creative work. One example is how our design teams, led by John Wrazej, are leveraging AI for mood boarding and concept creation, supporting the design process while staying true to the Ralph Lauren ethos, tone, and voice, human-led AI-augmented design.

And then, of course, we are unlocking the power of AI for our customer. David mentioned upfront the new AI-driven styling experience, and hopefully, you had a chance to try it out during lunch, ask Ralph that we launched in the U.S. app last week. We see opportunities ahead for it to support clienteling, support in-store training, and a plethora of other use cases. And eventually, we'll bring it to U.S. -- to consumers well beyond the U.S. shores and across platforms.

In parallel, we're also applying AI in our contact centers, transforming customer service by reducing wait times, resolving issues much faster, and delivering a model of care that feels more personal and more seamless to our customer. Together, these innovations allow us to meet the customers where they are with interactions that are more intuitive and always centered on them, the customer.

Now as you can see, we're applying digital across everything that we do. And what makes our approach really unique is that we use it to bring Ralph's powerful way of cinematic world building and storytelling to life. We're applying it in ways that are relevant, consistent, and connected, not just for today but well into the future.

Now it is my pleasure to seed the stage to someone who you all might know very well. I've learned a lot from him during my time here at Ralph Lauren, and I admire his 20 years of experience with the company. I'm grateful for his partnership, grateful for his support, but most importantly, I'm grateful for him unlocking funds for our digital strategy. Thank you, and please welcome our Chief Financial Officer, Justin Picicci to the stage.

Amazing. Thank you, Naveen. Good afternoon. Great to be here with you all. Over the past year as CFO, I've had the privilege of meeting with many of you. And we've really had some thoughtful conversations about our business, our strategy, and our future. But my connection to Ralph Lauren began long before I assumed this role. Growing up as a kid in Queens, New York, I was captivated by Ralph's vision by the idea that clothing could be more than just what you wear. It could be a gateway to the life you dream about. I still remember pulling on my first Polo shirt as a teenager in our Woodbury Common outlet, purposefully about two sizes too big. Remember, Queens, '90s, don't judge. Now that first Polo was big, but that moment, it made me feel like I was part of something bigger, something aspirational at the same time, really personal.

My own journey reflects what Patrice spoke about earlier, how Ralph Lauren resonates across generations from those very first Polo shirts to the Bear sweaters I began collecting in the '90s, some of you out there know about that, to the Purple Label suit that I'm wearing today. This brand isn't just about clothing. It's about a way of life. Now I address my 5-year-old son in Ralph Lauren and seeing him in the same Polo pony that I once worn. It reminds me just how timeless this brand truly is. I've also grown up professionally within the company, spending nearly 20 years in various leadership positions.

One of my most pivotal experiences was helping to launch our elevation strategy in China. Now that work shaped not only how we protect and grow the brand in one of our most important markets, but also how we approach brand elevation globally with both the courage to evolve and the care to preserve what makes us so special. Those early connections with the brand as both a customer and a leader continue to shape the way I think about our company and the opportunities that lie ahead of us. And our teams are powered by people who share that same passion and purpose to come together every day to bring Ralph's vision to life.

As we think about what's next, it's this collective dedication and resolve that gives me deep confidence in our path forward. We've strengthened our foundation, and we're leading with conviction. We're reinforcing our brand desirability all around the world. We're leaning into our core strengths while also investing in our high-potential categories. We're cultivating new growth markets and channels, and we're driving agility across our operations, our supply chain, and our expense structure. This is what gives me confidence, not just in our ability to deliver the plan for this year, but in our ability to deliver sustainable, high-quality growth and value creation in the years ahead.

And we'll get to the financial outlook shortly. But first, let's take a step back to recap what you've heard from our speakers today and highlight the progress we've made since our last Investor Day in 2022. Over the past 3 years, we continue to strengthen our brand desirability and attract high-value consumers globally. Our investment in marketing has driven a step change in our top line growth and full price sales as we scale in a highly elevated way. We also further elevated our brand positioning with AUR up strongly since our last Investor Day and more than doubling since 2018, driven by our proven strategy to elevate our customer engagement, our product, our ecosystems, and our price value proposition.

We transformed our business model to be more consumer-centric and DTC-led, while at the same time, reshaping our wholesale business towards healthier, more strategically aligned growth. We became a more internationally diversified company with Europe and Asia outpacing total company growth and now comprising well over half our revenue. And we sharpened our focus on our top 30 key cities. As you heard from our team today, Ralph Lauren is a stronger, more international, more DTC-oriented, more full price and importantly, more profitable company than we were in 2022. We delivered on all of the key commitments of our 3-year plan from top to bottom, all while staying true to Ralph's vision and what our brand stands for.

At the same time, our teams have done an outstanding job embracing a diversified set of growth drivers and a mindset of agility, productivity and resilience, allowing us not just to navigate volatility in the global operating environment, but to turn disruption into opportunity. As you heard from Holiday, we've built a more responsive and agile supply chain. We've adopted a disciplined demand-driven inventory model, enabling us to mitigate risk, but also importantly, to chase into opportunities. And we have a proven track record of realizing and leveraging cost efficiencies to reinvest back into our business. We generated around $400 million in gross savings over the past 3 years with more opportunity looking ahead. These savings have helped fund our key strategic priorities from marketing and ecosystem expansion to enhancing our talent and digital capabilities.

In short, we're creating our own fuel to power growth. Our plan is delivering, and our growth engines are durable and built for the long term. The past 3 years have given us powerful proof points that validate our strategy for the next chapter. And these proof points give us confidence in our ability to continue to deliver consistent, sustainable, healthy growth. So as we look ahead to the next 3 years, today, we'll walk through the building blocks of our growth and profitability, the key enablers that will support this growth while also helping us future-proof our business as consumer behaviors evolve, technologies accelerate, and our operating model continues to scale.

And finally, our financial outlook and capital allocation principles. Let's begin with our top line building blocks. We remain focused on what we can control, creating demand for our brand and our products and how we show up for consumers as we execute with agility in a dynamic operating environment. We're introducing a 3-year guide of mid-single-digit revenue growth in constant currency. We're also reiterating our fiscal '26 guidance, as shared last month on our Q1 call, with this year's outlook of low to mid-single-digit constant currency growth roughly aligned to that longer-term trajectory. Importantly, this is a balanced and diversified plan backed by multiple engines of growth.

Starting with our top line. Our future revenue growth is grounded in a balanced mix of 3 key drivers. First, high-value new consumer recruitment and retention. Second, AUR growth with a continued focus on delivering a compelling value proposition to our customers. And third, targeted unit expansion, notably in our DTC and international businesses and accelerator categories, consistent with the last 3 years. Together, these drivers reinforce our focus on growing consumer lifetime value in a way that only Ralph Lauren can.

Now in the near term, we expect our top line growth to remain a bit more AUR-led, especially as we navigate newer cost inflation pressures. But over the longer term, we're focused on scaling all 3 revenue levers, activating each in a high-quality brand-accretive way to drive durable, profitable growth. As you've heard today from my colleagues, our growth is diversified across multiple dimensions from geographies to consumer segments. And we're pursuing opportunities across each of these areas with discipline, intentionality, and confidence in our ability to execute.

Let's now walk through how these drivers shape our outlook by region. We expect each of our three geographies to contribute to our 3-year growth. Asia is expected to remain our fastest-growing region with a high single-digit CAGR. Our outlook reflects growth across all key markets, led by continued expansion in our top cities across China, Japan, and Korea. This is followed by EMEA, up mid-single digits with healthy balanced growth across our elevated DTC and wholesale businesses. North America continues to reflect a more cautious outlook, especially in the current fiscal year. While our brand and recent trends remain strong, we continue to assume a more challenged consumer backdrop, notably in the second half of the fiscal year.

Moving to margin. We've significantly increased our gross margin since the start of our elevation journey, and we expect further expansion ahead, supported by drivers broadly consistent with the past 3 years. Pricing and promotion remain the most meaningful contributors with pricing actions to mitigate cost inflation and increased promotional effectiveness driven by stronger targeting and personalization. We continue to benefit from the ongoing elevation of our product assortment as well as from favorable channel and geographic mix. And productivity remains a key enabler of margin expansion with increased efficiencies across our supply chain and inventory management operations.

Our guidance also reflects continued investments in product quality and sustainability, alongside expected headwinds in tariffs, incremental labor and overhead inflation. Taken together, we expect these proven drivers to deliver modest gross margin expansion annually over the next 3 years. And this is on top of the nearly 800 basis points of expansion we delivered since the start of our Next Great Chapter plan.

Moving to our enablers for the future. Our superior operations are a foundational part of our culture and a key competitive advantage. Over the past 8 years, we've been intentional about institutionalizing this mindset, embedding productivity and discipline into how we operate each and every day. And this focus on productivity isn't just about cost savings. It's what enables us to fuel our future growth. Now we delivered on our commitment of $400 million in gross savings across our cost of goods sold and operating expenses over the last 3 years. And looking ahead, we're targeting an additional $400 million plus in gross savings through fiscal '28. We have a broad range of productivity initiatives underway.

Let's talk through a few of the more notable work streams. First, our next-generation transformation or NGT project, where we are reimagining our end-to-end operating model, which I'll come to shortly. Second, vendor cost optimization, leveraging our dedicated cross-functional team focused on reducing cost and driving discipline across geographies and categories. And third, as you heard from Naveen, we're continuing to scale the use of AI and advanced analytics across both the front and the back ends of our business. The savings from these initiatives and more will fund our strategic investments to continue to elevate our brand, to expand our digital commerce and store footprint, and to build and strengthen our operational capabilities and talent. This is all part of our ongoing commitment not only to be more efficient as an organization, but to better serve our customers through richer experiences, more exceptional product and deeper engagement.

Double-clicking on the NGT project. This is a critical initiative designed to modernize our core operations and future-proof how we run our business, enabling greater agility, better decision-making and more seamless consumer experiences. The project is made up of three key components. First, implementing a globally unified ERP system; second, transforming our logistics operations; and third, integrating and automating our buying and planning processes. Together, these three transformative initiatives will position us to operate faster, smarter, more effectively, creating the infrastructure to support our DTC-led AI-enabled future.

So taken collectively, our operational enablers set us up well for meaningful consistent profitability gains over the next 3 years. We're guiding further operating margin expansion of 100 to 150 basis points in constant currency by fiscal '28, driven by a combination of gross margin improvement and disciplined operating expense leverage. This implies operating profit growth at an average annual rate that is outpacing our top line growth. Over the longer term, while we're not putting a ceiling on profitability, we remain committed to balancing operating margin expansion with the ongoing investments required to support our strategic priorities and deliver sustainable, profitable growth for our stakeholders.

Moving to our capital allocation plans. A key enabler of our business and one of our most enduring strengths and important differentiators is our robust balance sheet. We entered this fiscal year with $2.1 billion in cash and short-term investments with low financial leverage and with inventories well-positioned to meet consumer demand in each of our regions. Our capital allocation priorities have remained largely consistent over time, reflecting that same discipline and long-term mindset as our balance sheet philosophy.

First, invest in our business. We're targeting capital expenditures of 4% to 5% of sales, mainly to support new store openings, renovations, and upgrades to our digital infrastructure. We're also pursuing selective real estate opportunities that strengthen our brand presence in key global cities. I think Mercedes talked to a couple of those in North America. Second, return excess free cash flow to shareholders through our dividend, which we typically increase with durable net income growth and with the remainder allocated to share repurchases, an important component of our balanced capital return strategy. We're targeting at least $2 billion of total returns to shareholders over the next 3 years.

Third priority, maintain responsible debt leverage. And finally, the strength of our balance sheet gives us the ability to be selective with our strategic investments, including any potential capability-focused M&A. That said, our top priority remains investing in our brand to continue growing organically across our full lifestyle portfolio. And with the strength of our balance sheet, we're well-positioned to deliver sustainable value creation.

Now let's summarize what this all means from a financial perspective. Our Next Great Chapter Drive Plan is designed to deliver solid growth on both the top and the bottom line. Our healthy durable revenue growth reflects our best assessment of the current operating environment, balancing macro considerations with the strength of our brand and the diverse growth opportunities we've created across regions, channels, and categories. We expect to drive further operating margin expansion through a balance of gross margin improvement and operating expense leverage, as we discussed.

Now we are already leveraging in year 1 as we begin to scale multiple years of investments in our talent, in our key city ecosystems, and in our digital infrastructure. And this leverage is expected to more than offset planned increases in marketing, which, as you heard from Iris, is expected to ramp up from an average of 7% of sales over the past 3 years to 7.5% to 8.5% over the next 3. And as I mentioned earlier, these investments will continue to be funded through productivity initiatives. And importantly, we've built in the optionality to adjust our expense base as needed depending on how the external landscape evolves. So bring it all together before we go into the Q&A.

In a global operating environment that will continue to evolve rapidly, our priorities are clear: Stay agile, execute with discipline, and invest behind the multiple engines of long-term growth that set us apart. Our confidence to deliver rests on three things: First, our iconic brand, timeless, resonating across generations and elevated into a rarefied space we created, not followed. Second, our growth drivers, proven now scaling across categories, channels, geographies. And third, our operating discipline and fortress balance sheet, which gives us the flexibility to invest for the future while navigating near-term volatility. And underpinning this all is our team's proven ability to execute with agility.

We've had an amazing few years, but we believe there's still much more road ahead for Ralph Lauren. We've built the foundation, earned our leadership position and have the talent, tools, and capabilities to continue to drive high-quality growth and value creation. We're not just managing through uncertainty. We're shaping the future of inclusive luxury lifestyle, connecting deeply with consumers and inspiring them to dream just like I did when I put on that very first Polo so many years ago.

With that, let's take a quick pause to reset the stage, and then we'll invite the team back and we'll start the Q&A. Thank you.

[Break]

[Operator Instructions] Why don't we start right in the middle here with Matt.

Matt Boss, JPMorgan. So thanks and really appreciate the great day. So Patrice, a clear theme today was elevation. So with more companies starting to imitate your elevation playbook, what are you doing to differentiate yourself going forward? And as you execute the next great chapter strategy, where are you putting the most organizational focus and investment relative to the last plan? And then last for Justin, could you just help bridge modest annual gross margin in the plan versus the 400 basis points of expansion that you saw over the last three years?

Thanks for your question, Matt. It's always good to inspire the industry. It goes back to our legacy of leadership. Our core strategies are evergreen. I suspect when we get back again in a few years, we'll still be talking about the elevation, driving the core and expanding for more and winning in key cities. And then we're evolving how we execute it. So the elevation never stops. One of your colleagues from the media actually asked me this after a fashion show a year -- I think a couple of years ago.

When does the elevation stop? The elevation never stops. There's always an opportunity to do better to provide the customer with even more elevated storytelling, even more elevated product, even more elevating shopping experience, whether that's in-store or online. Obviously, the key thing we need to do as we do that is keep an eye on the value equation and make sure that the consumer who is smart continues to say, this is worth it. But if you go back to the history of this company, Ralph launched this company with a tie 67 years ago with a luxury positioning, right?

The tie was 2.5x the price of a Christian Dior tie. So there's still a lot of room to kind of get back to the essence of that brand positioning. So elevation will continue to be at the very heart of this company, again, with a focus on making sure that the consumer sees the value and feels like this is a worthwhile investment to make, not just a worthwhile purchase, but a worthwhile investment. In terms of key priorities for investments going forward, one is we're going to continue to build our brand and invest in our brand.

And one of the things I'm most excited about is the fact that this company, eight years ago, spent around 3.5% of revenue on marketing. Now we're at 7%, 7.5%. You heard us talk about going from 7.5% to 8.5%. So Iris, that's a lot of quality money to spend to build the brand. Counting on you and David to make sure we're putting it to good use as you have been so far. So brand, continue to build on the core, right? This company has an incredible rock with its core, 70% of the business, we expect to continue to build that. And so we're going to continue to invest there.

Third, and you and I talked this a little bit during the lunch break, women's. Right? In the women's opportunity. Now what's exciting about the women's opportunity, and you heard Halide kind of frame it is -- we're a pretty sizable business in women's today, $2 billion. There are not many companies in our price tiers that have a $2 billion women's apparel business. There are a lot of accessory companies that have that kind of size, but not many apparel companies. So we have scale, we have so much upside because we're less than 1% market share. Third area is expanding our footprint from a key city standpoint. So store openings.

We have some really exciting ones coming up that we will progressively reveal as we get closer, but a lot of exciting things coming up from a store opening standpoint. And then finally, tech, right? You heard Justin talk about our cross-stitch projects, so ERP, automation, what we're doing on IBP. That's obviously a very meaningful investment. As I was just chatting with one of you, if you think about this company for the years to come, that's going to be incredible infrastructure, for this company to continue to create value well beyond the next three years.

So there's a lot of fundamental investment here that isn't just designed to pay off next year or the year after that. It's to set this company up for success for the next 10 to 15 years.

On the gross margin expansion, so we've guided for the three years, to your point, modest expansion because you think of the cadence of that and it's really going to be most pressured in year 1 and due to the cost inflation pressures. And as we go into years 2 and 3, we expect that to pick up. When you think about drivers on the plus side, our durable gross margin drivers remain. So whether that's product mix elevation, geo and channel mix, whether that's promo pullback and discounting reduction or whether that's like-for-like price, those drivers remain.

I think from a headwind perspective, the notable headwind that gets added to the mix alongside, I would say, continued reinvestment back in our product and alongside labor overhead is tariffs and cost inflation, right? So that's really, I would say -- and that's also an uncertainty, right? That continues to evolve. So when I look at sort of the risk profile going forward, it's both a risk and an opportunity as we look ahead. So watching that closely as we move into fall.

Why don't we head over here to Jay, please?

Jay Sole, UBS. And let me add my thanks also for a great day and a great presentation. Justin, my question is for you. It's -- how are you thinking about the cadence of your 3-year algorithm on top line and margins? And what could cause you to become more positive on growth looking ahead?

And conversely, what do you see as the biggest risk to your forecast? And I would also add one extra on to that is you mentioned marketing as per the sales is 7.5% to 8.5%. How do you think about the difference between what would drive that 7.5% number versus what it would take to get to that 8.5% number?

Perfect. And maybe we can have Iris handle that last one. But I think when it comes to the cadence of our growth algo, I would say that the -- in both revenue and from our gross margin perspective, in the first half of our 3-year plan, we expect to be slightly below that overall algo. And that's really due to the pressure we're calling for in the second half of this year, primarily in North America due to the cautious macro environment and the pricing environment that the customer is entering into.

As you go through the 3-year plan, I think we expect growth to normalize as you get to years 2 and years 3, and that's true for both top line and for gross margin. I think when it comes to risks and ops or what can be better, what can be worse. On the positive side, I think -- listen, I think the macros cut both ways, right? Our brand has momentum. It's strong. And we know that we're going into a pricing environment where we're going to see what's going to happen with the consumer, right?

So the rubber hasn't really fully met the road just yet. So that could be a plus. It could also be a bit worse than we expected if we have a prolonged economic downturn. I think on the other side of -- on the plus side of the ledger, I think about the work that Iris talked about around segmentation, personalization, clienteling, still early innings, and we could potentially take a bigger share of closet and higher retention coming out of that.

And then our international businesses, I see as a potential upside. We've been outperforming. We're entering into new key cities and expanding and deepening our ecosystem. I think that's something that we're watching as a potential upside. And then on the downside, aside from the economic environment, I mean, geopolitics are still very much a real thing, and we've seen disruption not just the business, but the supply chain. So that's something we're also watching and monitoring very closely. And then your question on marketing, maybe Iris?

Yes. So listen, I'm very confident about increasing marketing investment while continue to improve ROI. We've developed great capabilities in order to do so. We have now in-house predictive models that help us to really optimize each marketing dollar we spend, test and learn, and it's always a subtle orchestration between brand impact, customer growth impact and profit impact, always balancing the short, medium and long-term -- and we have huge opportunities for additional, I would say, investment.

And I see three areas where we can invest further with great impact. One, it's behind the great customer opportunities that we have. So womenswear, the new generation and high net worth individuals. Two, it's geographically. So it's behind our top cities. Today, we're very well funded in our top 10 cities. I think we have another 20 cities where we could invest further for further cultural impact and commercial impact.

And then finally, it's all of these sports sponsorship and cultural platforms. I mean we've had massive impact with the Olympics last year with all of our tennis properties with golf, and we can deepen our investment to have even more global reach. That's democratic reach, and that's huge impact in terms of brand desirability and business impact immediately.

Thank you, Iris. Let's come over here to Laurent.

Laurent Vasilescu from BNP Paribas. I just wanted to ask about North America, Mercedes. With your retail experience in luxury, I'd love to hear what you have to see ultimately for this channel in terms of store exposure, elevation strategy. How do we think about the mix between wholesale and DTC?

And then Justin, I have to ask a financial question. The $400 million of gross savings, you achieved that three years ago. You've talked about that. For this incremental $400 million, how do we think about those gross savings across COGS and SG&A? And should we think about it as a linear format?

Thank you, Laurent. So first of all, I think our full-price businesses are where we see the opportunity right now in North America. We're already recruiting a less price-sensitive customer. So we expect that to continue. That's one of the reasons we're so excited about building out the store footprint.

We know that there's white space opportunity to add more stores and to really reach our consumer where they are. So we're looking for those organically, Yes, we can do that. By channel, I think retail and DTC in general, so retail plus digital are where the opportunities are. But there's still opportunity in wholesale to gain share in healthy wholesale and share gains in the great wholesale channels that we're in.

And then I would say on the $400 million plus that we're expecting, I would say, between COGS and SG&A, about evenly split. We think about the drivers, and I would say a little bit front weighted in terms of the three years. So year 1, probably a little bit more than years 2 and year 3 in terms of total.

When you think about the drivers, it's really -- the three big ones would be the NGT project benefits. It would be our advanced analytics and AI application, and it would be the vendor cost optimization, both, I would say, indirect and direct costs. So those are the three big buckets, about an even split between COGS and SG&A and a little bit front weighted on the three year.

Okay. Let's go to the back of the room with Dana.

Dana Telsey with Telsey. Thank you for the terrific day today. As you think about the last Investor Day you had and you go forward to this one with the 3-year plus, you talked about new customer acquisition, AUR growth that's still to come. For each of the different regions, how is the next three years in the different buckets going to differ from the past three years?

Should we start with maybe Shin and Ashley will come back to North America.

Yes, I can take that first? Right. We're really excited about the momentum that we're seeing in Asia. And I think you've seen from the earlier presentation that we are also very excited about the proven playbooks.

So as Patrice mentioned, the strategy isn't going to change that much. We are not going to fix what's not broken. So we'll continue our play, and we have identified also significant opportunities to continue to pursue. So they are namely China continues to be a growth engine. We have solid growth coming from Japan and Korea. We will double down on digital.

And of course, we have a really disciplined approach in terms of store opening across the board, balancing both new store opening with protecting brand equity. So I think the momentum is really encouraging, and we'll continue to take that forward. Ashley?

Yes. As I said in my presentation, we've had a very productive three years. So we don't see any reason to change that path. We're going to continue to run the play with more focus and we lean into where we've been the most successful. But we're going to -- I think we've got opportunities by channel because they've all delivered growth. By geography, every geography we split our region up by sectors have shown tremendous growth. Germany is leading that, but we see lots of strong growth in Italy and France and Spain, et cetera.

And then by brand, and we see lots of opportunity, not just by brand, but womenswear is definitely leading the charge. But children's wear, we've elevated our children's and repositioned that. So we'll see considerable AUR growth in children's wear, but also in new categories. We're looking to lean into outerwear. And I think there's a huge opportunity for us as a brand in that category.

Thank you, Ashley. And then for North America, I think the last three years have really been about resetting the foundation for a very sustainable business in North America. So now we can pull on all the proof points that my colleagues have been already executing in the other two regions. So it's DTC, first, building out the ecosystem, the women's business, the ultra-high net worth. So lots of opportunities still in North America.

And Dana, if you kind of look at the three building blocks of revenue growth, right, by region, you can expect those to stay relevant across all three regions. New consumer recruiting, AUR expansion, and select unit growth.

You've all been very kind recently. You haven't asked us about our ability to continue to grow AUR. So thank you for that. It's taking us whatever, 40 quarters to get to that. But obviously, we expect to continue to expand AUR, right, to Matt's earlier question on elevation. We're going to do that as a result of the elevation work that we do, so that the consumer still sees the value.

But a number of you had question marks a few years back on our ability to continue to expand AUR in Asia, right, where AUR is the highest. And if you look back at what Shin and her team have achieved over the past three years, we've seen very healthy AUR expansion in APAC. So we expect to continue to drive growth across the three regions across these three vectors.

Thank you. Why don't we see over here, [ Chris ], and go with Michael Binetti.

Michael Binetti with Evercore. Thanks for a great day, guys. So Justin, surprised I got a couple for you. You gave us maybe a hint on this earlier, but you have a history of guiding us pretty conservatively, back half looks like you've taken some conservatism in North America. To the extent that we do see an upside scenario and margins outperformed this year, can you -- do you continue to expand margins 33 to 50 basis points after this? Or is there a natural limit at 16% where you start to say over the 3-year period, if we do outperform early, we start to manage more for sales? Help us think about that a little bit.

And then just -- at the last Analyst Day, I think you gave us $2 billion in shareholder returns as well. You're a much bigger company today, gave us, I guess, $2 billion with a plus sign at the end of it. How do you think about philosophically, what do you think you should grow that at as this business becomes a larger business?

Sure. Thanks for the questions, Michael. So on the first, we're -- and you saw this in the past three years, we're going to continue to balance delivering on, or in the case of the last three years, exceeding our profitability commitments with reinvesting for longer-term sustainable growth, right? You saw us do that. That playbook is not going to change.

So I think as we think about the second half, it's going to be a balance, right? It will be a balance of honoring our current year commitments and also putting it back behind our business and brand in places like marketing, in places like our key city echos, in places like talent so that we can build out that longer-term sustainable growth algorithm. That, I think you could certainly count on.

On your question on the $2 billion plus, which, to your point, yes, we are taking it up a notch from the last three years. One thing that we recognize and it's a high-class problem. We have a lot of strong opportunities to invest in our business in front of us. You see us -- whether it's the NGT project, whether it's all of our new stores, whether it's the stores that we're purchasing, which are strong ROIs not just from a longer-term perspective, but from a short term, rent first depreciation perspective. So we've got a lot of opportunities that are in front of us that we want to be able to act on.

So part of the balance between returning cash to shareholders via the dividend or via share repurchases and reinvesting back for that sustainable top line, that's a dance, that we're going to continue to navigate as we move forward. We feel that the opportunities we have, first and foremost, with capital to invest in our business are very compelling, and that's our top priority.

And Michael, we will not cap our profitability at 16%. But exactly to Justin's point, we're here for the next decades. We want to invest to make sure we're delivering growth, and we don't just have a wonderful 3-year period and then start to struggle, and you've seen that a lot in this space, right? And so we're very conscious of the fact that we have to invest for the long term, but we're not going to cap our profitability at 16%.

John Kernan, over here.

John Kernan, TD Cowen. And yes, great presentation. Congrats on all the success. Justin, Europe and APAC saw a lot of margin expansion in the last three years. Is there any region you see more opportunity in as we get over the next three years?

Yes. I mean I think in general, the algo assumes continued margin expansion across the board. Now I think North America is a bit more pressured, right, due to the -- just the second half of fiscal '26 environment that's -- we're expecting to carry over into the first half of '27.

So I think that international is positioned to lead our growth over the 3-year period. But I think if you take a step back and you think about what's driving our operating margin expansion, it applies to all three of our regions, right, scaling our fixed investments, right, driving quality of sales and AUR. That's going to result in expansion across all the regions.

Excellent. And a quick follow-up for David. Your father is a global icon. How do you make sure his legacy endures in future years in Next Great Chapter plans?

How do we make sure...

How do you make sure his legacy endures into the future? At Ralph Lauren?

Well, I think we are practicing that right now, obviously. I think the goal at Ralph Lauren is to build on stories that he tells. There's a philosophy in our design that there's always a story behind the creation of a product. And that is a unique part of what our company is about.

It's not just about a shirt or a tie, but it's about the dream of a better life. And as long as we're clear on our mission and our purpose and our philosophy, our job is to animate that, amplify that and make sure that the stories are compelling.

Often, people compare Ralph Lauren to Walt Disney because it is about really making movies. We're writing through our clothes. And I think that philosophy is enough to unify this team, and you can see it at our retail stores. You can see it in the marketing, you can see it in the technology. You can see it across every single person on this stage and 25,000 employees around the world. So I think we're doing well, and I think we just got to keep building on that better and better.

Just to build on that, John, Ralph's philosophy, our brand position, what we stand for, I think, is very well defined. And our lead designers who work with Ralph day in and day out, John, Karen bring that to life. In many companies, you see designers kind of bring in their own perspective and a different point of view. And sometimes that works, and sometimes, it doesn't. The benefit we have is I think the clarity of what we stand for, to David, what you just mentioned.

And our responsibility is just to keep bringing it to life in a way that's interesting, that's fresh, but consistent. Because if you look back at the history of this company, it's had a pretty consistent performance throughout the past 58 years. You can attribute that to just the clarity of what we stand for, the loyalty to the core values and the broader understanding of what we need to bring to life across the teams.

Thanks. We'll move over to Chris.

Chris Nardone, Bank of America. So can you just remind us how you're approaching price increases globally in this current plan? And then just on the promotional cadence, here in the U.S., if we do see a little bit of pressure in the lower kind of income consumer, the value consumer, how are you balancing kind of maintaining the current promotional rates that you guys are running the business today, while also at the same time, lifting that premiumization and increasing AURs over the long term?

Sure. I'll tackle the first two. Maybe Mercedes, if you want to just input on the second. So we don't look, Chris, at price in a vacuum, right? And if you think about our AUR, you heard is up more than double since 2018 and there's a lot of things going into that. But what's up alongside that, is value perception, luxury perception, right? We keep a keen eye on our consumer and how they're feeling about what they're getting, that price value proposition, right?

So pricing is honestly really just -- it's another output of the elevation strategy as we elevate marketing as we elevate product, as we elevate experiences and environments. So we're running our elevation strategy, and price is a part of that. It's one part of that, right? So I think if you think about fall, we had proactive pricing plan for fall just from a normal market-based pricing approach before the newer cost inflation pressures.

Now we've refined that a little bit, but that's just the elevation strategy at work. For spring, we've got some time, and we're assessing, and it's one of our many levers we have to offset cost inflation pressure that we're assessing. And we'll update you more as we get closer to that decision date.

On the promo cadence, I'll just start by just saying we have no plans to walk back our brand elevation journey and the progress we've made on promotions. I don't know how many years it's been, but it's been many that consistently season over season, where either we're pulling back on promotions either meaningfully or to some extent. Right?

That's not going to change. Again, that's another product of our elevation strategy. And even when the environment around us, it's pretty aggressively promotional, I'm thinking about Europe in the outlets in North America, we remain true, and we're seeing our consumer, which is a bit of a more elevated consumer in those channels come along with us on that elevation journey as we elevate up. I don't know, Mercedes, do you want to add anything on that...

I think you said it very well, Justin. I think that consumer is coming along with us in North America, and we are watching it carefully. We are using our price elasticity models to make sure that we're pricing things appropriately, but they're seeing the value in what we're delivering. And I fully concur we're not going to walk back our strategy. So we will remain true to it and go where the consumer is.

The one thing I'll just add is we do have our price architecture after many years of elevation does afford us the ability to be able to be flexible when needed to maybe cater in key selling moments to some of those more value-oriented consumers, right, in channels like outlet. So you will see us flex that to retain knowing that the macros are not going to be here forever, right? But that's a flexibility that we're very particular and selective about.

Let's go over here to Brooke.

Brooke Roach from Goldman Sachs. Thanks for taking the question and for hosting the event today. I'm curious, Patrice, what your view is of what's different about your plan to win with women in this chapter versus the Accelerate plan? And how do you drive new customer acquisitions specifically with women? And then for Justin, you mentioned that AUR is going to drive a little bit more of the growth of your three levers in the first half of the plan versus the back half. Can you elaborate on that?

So Halide and I are going to tag team on your -- on the women's question. I think, Brooke, one of the key differences moving forward is much more precise segmentation and brand positioning within our portfolio. There's been a lot of work done over the past 18 months on understanding the women's consumer around the world, segmenting her around the world, understanding where we want to play and how we leverage collection, Polo Women's, and Lauren along with that.

And there's some work that's just been finalized that we actually rolled out across the entire organization. That now puts us in a wonderful position, I think, to further take advantage of this opportunity around the world. So that's a big structural change. There are other things, that Halide will shed some light on...

What you said, Patrice, we have data on what our existing consumers are doing. We also have data on the consumers we don't have are doing. So I think the power of that precision of data shows us all the white spaces in different price points, in different sensibilities, in different categories and product styling.

And it really opened a really good book for growth when it comes to women. And the dedication or the direction of each brand targeting a specific sensibility and the target consumer will help us both build loyalty with the women we have today and go deeper in her wardrobe and continue to recruit the new ones through our acceleration category, specifically outerwear, handbags, we're seeing. This is where many of our new consumers are entering the brand.

And then on top of that, there's a footprint evolution. We were chatting that a little bit over lunch, right? We're now being clear on which brand appeals to which consumer group, then we know where we want to be from a store opening standpoint, from a department store presence standpoint, from a digital standpoint. And so you will see us continue to expand the women's business geographic footprint, which will be a further accelerator to the performance we have so far.

And from an AUR perspective, to your question on AUR, I would just say that we expect healthy AUR growth over the course of the plan. I think what's a little bit different about year 1, first, we delivered mid-teens AUR growth in Q1, and we've guided for high single in Q2.

So really strong start to the year. And we also have cost inflation that we know those pressures are on the come for the second half. I think as we move through the plan, while we don't expect AUR growth to go away, we expect it to abate a little bit, be a bit more balanced along with new customer recruitment, retention and our targeted unit growth as we get into year 2 and year 3.

Thank you. We'll head over here to Paul Lejuez.

Paul Lejuez, Citigroup. Start, Justin, I love the Queens shout-out.

Queens. Queens in the house.

You very clearly laid out the 3-year algo. Everybody always assumes there's some conservatism built in to any algo that you put out there. I'm curious if there are any numbers that you think are going to be pretty tough to hit as you look at the numbers up there, as you've thought about it, which do you think you're going to have to work hardest to hit?

And then I want to flip that for Patrice. Patrice, when you think about all these numbers, when you look back at that algo three years from now, which are you going to be pretty disappointed if you don't exceed?

So I would say that -- and I alluded to this, I think, in Jay's question. I think I would start with the fact that there's a lot that's outside of our control. So we built this agility muscle. We feel good about it. We have diversity of our growth drivers, which we feel really good about and helps us navigate.

But the environment is choppy, right? So I would say what's going to happen to the consumer in the second half of this year for holiday in the U.S. is a question mark, right? That's a question mark. What's going to happen where we land ultimately with the cost inflation pressures, that's a question mark. It's still not resolved as we sit here today.

So I think those are the areas that we've really built the plan. And we've built the plan -- as you would imagine, we built it with a broad range of scenarios. So we've had some upside scenarios where the macros are a bit better, some downside scenarios where the macros are a bit tougher. That's sort of how we shape the plan. I think that's really the big, in my mind, the big, I would say, risk to the downside is the macros are a bit worse than we're calling.

Paul, on your question, first of all, you heard me say this morning, we believe very much in promises made, promises kept. Right? So that's a guiding principle for us. So the commitments we're putting out there today are commitments that we're very determined to hit.

In terms of what would be disappointing if we didn't exceed, one of the things I really like about our performance now and over the past few years is how diversified it is. It's not dependent on one region. It's not like it's all China. It's not dependent on one category. It's not like it's all women's. It's not dependent on just one consumer group or it's all Gen Z, right? It's actually quite diversified.

And across all these vectors, whether that's consumer group, geography, channel, you're seeing growth. So this plan is not dependent on can we hit women's out of the park or not, right? This plan is not dependent on can we accelerate growth from a DTC standpoint in the U.S. Those are important building blocks, but we have a series of building blocks. And I think that's what's helped us navigate what's been up to now a pretty volatile environment and will likely continue to be pretty volatile are these multiple diversified drivers of growth.

Now if we sat here three years from now and our brand perception had gone down, I'd be very disappointed by that, right? And Iris and David know that. But we've got amazing momentum. We're spending in the right way, and we're going to continue to expand new consumer recruiting. But I think the key thing you need to take away from our game plan is this notion of diversification.

And the fact that we've got growth drivers that are strong, that are proven and that are very different so that if one of it hits a snag, we're okay. And listen, you've seen us deliver, even though not everything is necessarily delivered every quarter the way we expected it to. But we've got this portfolio of activations that enable us to deliver consistently across all of these.

Let's go over to Paul.

Paul Kearney, Barclays. I'm just curious on the investments that you made into the operations of the business, the ERP system, the increasing the agility, diversifying the sourcing. Are there any specific metrics you can kind of point to, whether it's like inventory allocation or speed to market and how this is driving returns for the business over the long term?

Sure. Yes. I mean I think it's really -- our returns are pretty broad-based. I'll give you an example. So inventory is a great example.

So when you think about the way we've been able to navigate the choppiness in the macros, think about things like the Red Sea disruption, even coming out of the pandemic holiday and our supply chain team, the investments we've made to digitize the supply chain, right, to enable us to flexibly receive inventory, get inventory right time, right place, allocate it out, have inventory when others did not have inventory, right, get inventory into the channel on a more real-time basis, leveraging our core, which is 70% plus of our assortment, right?

Those investments you see pay off in our inventory availability, and that transits obviously into sales and market share gains when others are not able to leverage that muscle.

I think when you think about some of the top line growth that we've been seeing for the past few years, a lot of that is the investments that we've been making in the key city ecosystems and in our marketing right, that some of those returns don't necessarily come in the short term, right? They take sometimes 12 months plus to come to fruition.

I mean, whether it's a beautiful new store or it's one of our global brand amplifications that often have both short and longer tail implications from an ROI perspective, we've seen that rolling thunder of always on marketing build up, and now it's incrementally returning upon itself.

So that we're seeing both the longer-term tail and the shorter-term pop. So I think that if you think about where we're focusing our investments, right, so digital, marketing, our key city ecos, these are the areas that are driving our sustainable top line growth.

Justin, can I build on that?

Please.

The digitization investments are great in both in areas of implementation. But what we're doing very differently is connected digitization and end-to-end digitization on the operation. So it's not about making supply chain faster, but our read and react faster, so we can respond to the market needs. So the ultimate KPIs are always top line and bottom line besides the secondary KPIs that follow. But I think what makes our operations unique is they are connected.

Up front here with Marni.

Marni from The Retail Tracker. And David, by the way I think it's time somebody gets Anna Wintour on the phone. The Met Gala, the Met Institute should obviously be honoring Ralph Lauren at this point. I don't know what they're waiting for.

You should put in a good word.

So I have a couple of very quick questions. First query, this won't surprise you, but can we just talk a little bit about the handbag business where you think it can actually be over time, the two separate brands? And I'm very curious to see what the response is in Asia to the handbags and in Europe, I'm curious what that looks like?

And then just on the marketing side, getting Gen Z in. I know Patrice said growth across the board. But Gen Z, I live with them. I know them, they're discovering your brand, thrifting. I love the vintage tab. I looked at it. I checked it out. But I'm curious how you are getting them into the brand, where their entry point is, and then how you kind of I guess, move them further and further into the brand, if that makes sense?

Should I start then Hwee Shin, you built. On the handbag business, the acceleration started where we decided to make it an impactful category for our business, and handbag then shifted from being an accessory to apparel to a business of its own. And the precision of the insights that we have talked about earlier, now we know what target consumers need, what type of handbags at what price points and where are they shopping those handbags.

So in each of our brands, we have identified those spaces. And if you follow the foundational playbook that I was going through, the second piece is make sure every brand for those target consumers really build a strong foundational core.

We have -- we are now at that stage in our Polo business, in our Collection business, in our Lauren business, we have very strong core handbags to continue to build on now. And with a very impactful and connected marketing strategy, we were able to grab her attention and really tell inspirational stories, inspiring stories and have to make use of our handbags.

So all in all, connected. Now we see a great traction in every part of the world, but we really heavily lean into APAC, which Shin's data coming first and we've seen a great traction, created a lot of learnings, test and learns there as we really expand it to the other regions. So maybe Shin, you can now build on the APAC part of it?

Yes. I think we're very excited about handbag growth in APAC predominantly led by Polo, very exciting, as you saw from the video earlier with the winter campaign, it was featuring our new Polo Play, and it was a resounding success. We wish we could have more. And I think the momentum and traction in handbag really gives us really strong confidence that we are building women's consideration and growing that, right?

Because for women to consider to carry a handbag on her arm, she desires this brand. And so we've seen it also across generation from my daughter, which is 16 years old, to myself, much older. This desirability is across generations. So it's very encouraging, and we will continue to build on this and to become a true pillar of our business.

Ashley, you want to add perspective on Europe?

Yes, we've had great success across all of our channels, wholesale and retail. And it's no surprise that when you put great product, which we now have into our stores with dedicated space and windows, consumer response. So we've driven great sales for our own stores, but also wholesale. Those accounts, they don't have to buy our product. They only buy it because it's productive. And so that's really a good bellwether for us. When they come in -- and they're seeing other brands, they say, "wow, this is really significant improvement."

So as we've just finished selling our spring '26 numbers, one of our highest growth categories was our women's handbag business. So that's really gives us confidence for what we're doing.

I will take on Gen Z. So listen, first of all, we are a multi-generation business. And what we have seen is our growth recently has been really driven by all consumer groups, all generations. But yes, our customers are getting younger each quarter. And the population we've the most -- the highest growth are the Gen Z.

So we're extremely excited about that because it's the basis of our sustainable growth. As we know that we have the capacity to keep them for life, and it's back to that notion of lifetime value. And we've developed a lot of data and analytics and art of styling to really try to keep them in the brand and encourage them to cross-shop brands and categories.

In terms of what other strategies to get the Gen Z, I think one, all of the partnerships and our cultural platforms are redesigned to be multi-generations. And all of our sports platform are actually very young, whether you have tennis or gaming. These and Olympics, these really attract the new generation, and we do it in a way that they reconnect emotionally with us.

Second, we are really leading in through social media with across all platforms, whether the Western platforms, so the Meta of this world, the YouTube, but also, as you saw, Douyin, WeChat, Red, Kakao, LINE. So throughout the world, we have a tailored approach by platform which is data-driven, embellished by storytelling, and we're cutting through culturally. And so many Gen Z actually post on our behalf, right? We don't even have to pay them or do any part of it, they do it. So that's the second.

And third, I think we have a very attractive brand portfolio and they really connect with our iconic products. So yes, they do connect with our fashion lines, but they really in love with our iconic products, whether it's the cap, whether it's a -- the cable knit sweater, the Bear sweater, so the Oxford shirt and more and more of the womenswear handbags and key products. So we are confident that these iconic products are permanent and will continue to attract them.

And actually, if you look at the -- to bring it home from a digital perspective, if you look at the handbag category and Gen Z customers, that's been a runaway success on e-commerce and digital channels by a long shot. I mean, we're talking double-digit women's growth, then multi -- like higher double-digit sort of handbag growth.

So I think that model that Iris was talking about, where you attract the customer, but then you scaffold them and bring them into the digital ecosystem. There's no disconnection in that process. The top of the funnel and the bottom of the funnel are highly super imposed right now, and we've sort of got that connective tissue where we can bring them in, sell them and add, bring them in and completely sort of light up the experience for the best way possible. And it's showing in our numbers right now with those categories.

Let's go over to Tom.

Tom Nikic with Needham & Company. Congrats on all the success. And thanks very much for a great day. So I want to ask about the digital business. It's been said that digital is a tough channel to sort of replicate the luxury experience. So can you talk about the way that you're working to elevate e-commerce as a channel while you elevate the brand?

And then also a follow-up for Mercedes. I believe you're the newest addition to the team, at least among the people up on stage. What have been the biggest surprises that you've seen since joining six months ago?

I think it's a great question. From the way we look at -- we look at digital very differently from how other brands would typically look at digital, right? If you look at something as simple as our pages where we list products, you saw from the shirt shop, I mean, the way we're trying to embed content and experience within the actual selling journey is the most important thing.

And the idea is to inspire you every step of the way, whether that is through Iris' top of the funnel, social media model, whether we bring you into the site, the idea here is to give you a full fledged experience of what you were experiencing in the store.

And that was the exact inspiration behind why we even started Ask Ralph, right? The idea has existed for 25 years. David knows this because we've tried to do that over and over for 25 years, but now with the embedding of AI into the journey makes it so much more easy to just light up that experience in the right way and inspire you every step of way.

So the idea at the end of the day is to convert, but how do we bring you along that journey in a very, very seamless fashion is exactly what we're doing. And we're taking that -- mixing it with the store client having journey, it's seamless, the customer can shop online, offline today, and it's only going to get better. So it's not like we're resting on our laurels in any way.

I'd just like to add on, on digital commerce. We have a lot of pressure in China to promote to do pricing. We have big campaigns like [ 11.11 ], 618. But we choose to protect integrity of the brand. And this is again year after year and year after year. And now without having to promote and price differently, we are #1 on Tmall, JD and Douyin as the #1 luxury brand.

And I think it's the choice that we make to stay true to the brand, to express the brand storytelling through digital, which is the window of the brand. And I often say to the team that digital is where millions of consumers are engaging with the brand. And this is where we need to show up the purest and the most right.

Thank you for your question. In terms of surprises, I think I get asked this a lot. And really, the great news is there weren't any surprises because the storytelling that the team does very well here is the same story that was offered to me as a reason to join. But also, let's think about it. We've all grown up with Ralph Lauren. And I think the best surprise is that there's still so much potential and also that there's so much passion and loyalty from both our customers and our teams.

Thank you. We have time for one more question. We'll go to Rick in the back.

Rick Patel from Raymond James. Appreciate all the insights today. I had a couple of follow-up questions on the $400 million of savings. So first, how do we think about where those savings are coming from as we think about U.S. versus international versus corporate? And second, it implies a pretty big margin tailwind as we think about the next three years, you framed the investments around marketing, but can you help us understand the other expense buckets that you see as being partial offsets?

Of course. Thanks for the question, Rick. So three -- I would say, three main buckets for the $400 million plus NGT project buckets. So that's all three pillars, right? That's the ERP integrated business planning and then also our logistics transformation. Then we also have our vendor cost optimization, which again is, I would say, indirect cost optimization, so challenging SG&A across categories, geographies. And again, global, much like the NGT project is. And also direct cost, right? So the input costs, right, challenging that as well, which is obviously taken on a greater significance with some of the pressures we have on cost inflation in the last six months.

And then as you heard Naveen and Iris talking about AI and analytics and scaling that out broadly across our organization to drive cost efficiencies in connection with enabling us to do things and enhancing how we operate as a company in both front end and back end. So those are three categories, they are all global categories.

So I wouldn't say one, I would look at our overall expense mix, and I probably apply that same pro rata in terms of what gets what benefit. But it's not like these are North America focused or corporate focused. They're broad-based expense savings initiatives that are going to cut across over our 3-year plan.

In terms of some of the other investments that we're making to offset some of that, well, one, you have the cost inflation pressure. So some of this, especially the direct is tabbed up against that cost inflation pressure as well as our continued investment in our products. So one thing -- it's one of the reasons why our gross margins, whenever we get the question AURs up double digits, why isn't your gross margin up more. Our answer usually is because we're investing in our product, right? We're investing in our product. We're going to continue to run that play.

You'll also see us of the marketing investment. That's a part of it, so investing behind marketing, and you're going to see us up our investments, I think, about our Europe new stores, which are accelerating year-over-year. So as we think about the key city ecos and going from 30 to expanding to the next 20, that's also going to get some of that incremental investment.

I appreciate that several of you are asking about that cost-saving bucket because we're really focused on, of course, quality top line growth that's sustainable over time and productivity. And we've talked in prior forums that this industry isn't necessarily known for its focus on productivity as much as FMCG might be, for example.

But we are driving a culture in this company of every dollar matters. And everybody -- every dollar is going to get challenged to make sure that we're getting a return on it. And so that helps fuel the $400 million we just delivered and the $400 million plus we expect to deliver moving forward.

Thank you, everyone, for your questions. This concludes our question-and-answer session. And with that, I will turn it over to Patrice.

Do I need a clicker? No, I don't need a clicker. I just need an update here. All right. Thank you, Corey. Hard to believe that day is almost over, at least with us. Listen, as I close and at the risk of overstretching the drive analogy, we're driving. We're not cruising. Okay? The tank is full with a strong brand. The road map is drawn with a clear strategy to lead. And the crew, our team here and on the webcast is the best in the business, ready to execute with excellence.

And finally, as I mentioned earlier, with all the opportunities, and we talked to a number of them during this Q&A session, the road ahead is wide open for us. So across our 60-year history, we have proven our ability and our agility and our experience to handle whatever lies ahead. And certainly, the past three years have been quite eventful with many unexpected things, and we expect the next three years will probably serve us the same thing, okay? We recognize the world around has a lot of volatility.

But there's one thing that Ralph Lauren has always stood for: Optimism. And we are optimistic about our future, about the power of style and authenticity, about the human connection at the heart of our brand. And ultimately, it really is what uniquely positions us to create value. Value creation that is strong, value creation that is consistent and value creation that is sustainable.

So we talked a lot about the next three years, but this for us isn't just about the next three years. It's really about the next 30 and beyond. That's the legacy we want to leave as a leadership team. So if you reflect on today, hopefully, what you take away is, this is only the beginning for our brand. And I want to thank all our teams here and around the world and just say, buckle up. Here we go. Thank you for being here today. Thank you. Have a wonderful day. Take care.