Ralph Lauren’s Q4 Earnings: Can Full-Price Luxury Survive the Storm?

As Ralph Lauren prepares to report fiscal fourth-quarter results on May 22, investors are watching closely to see if the iconic luxury brand can sustain its premium pricing strategy amid macroeconomic headwinds and shifting consumer preferences. With analysts forecasting earnings of $2.40 per share on $1.65 billion in revenue, the question isn’t just whether Ralph Lauren hits these numbers—but whether its full-price selling model, which has driven margin expansion and brand desirability, remains viable in an uncertain economic climate.

The Full-Price Gamble: Why It Matters

Ralph Lauren’s recent success hinges on its ability to sell at full price, avoiding the discounts that can erode brand equity. In fiscal 2024, its global comparable store sales rose 6%, fueled by a 13% jump in Average Unit Retail (AUR) and strong demand in Asia. This strategy has paid off: gross margins expanded by 190 basis points to 66.8%, with Q4 margins soaring 480 basis points to 66.6% as cotton costs fell and inventory discipline improved.

But the test comes now. Can Ralph Lauren replicate this in Q4 2025, when macroeconomic risks—slowing consumer spending, elevated inflation, and supply chain disruptions—are intensifying? The answer lies in three critical metrics: comparable sales, gross margins, and inventory turnover.

1. Comparable Sales: The Pulse of Demand

Analysts are eyeing whether Ralph Lauren’s Q4 comparable sales growth holds steady. In fiscal 2024, Asia’s sales surged 25% in China alone, while Europe’s Q4 comparable sales jumped 12%. North America, however, lagged with 3% growth as the company scaled back wholesale channels.

The challenge in Q4 2025 is balancing geographic momentum with U.S. retail softness. If Asia’s growth slows or North America’s drag deepens, it could pressure margins. Yet Ralph Lauren’s experiential retail push—flagship stores in Amsterdam, Singapore, and Dubai—could offset this by boosting full-price sales in high-margin markets.

2. Gross Margins: The Premium Pricing Play

Ralph Lauren has guided for gross margins to expand 50–100 basis points in fiscal 2025, driven by higher AUR and a shift toward direct-to-consumer sales. But risks lurk: rising freight costs (due to Red Sea shipping bottlenecks) and labor expenses could eat into gains.

Investors must assess whether the company’s “brand elevation” strategy—think collaborations with artists and premium product launches—can sustain pricing power. If margins miss estimates due to cost pressures, it could trigger a selloff.

3. Inventory Turnover: The Silent Risk

While Ralph Lauren cut inventory by 16% to $902 million in fiscal 2024, the Q4 report will reveal whether this discipline persists. Overstocking could force discounts, while understocking might risk lost sales.

The sweet spot is a turnover ratio above 2.0, signaling efficient stock management. If the ratio slips, it could signal misalignment between supply and demand—a red flag for margins.

The Risks: Discounting, Dollars, and Supply Chains

Even if Ralph Lauren hits its numbers, three threats loom:
1. Currency Headwinds: A strong U.S. dollar could shave 1–1.5% off revenue growth, squeezing margins.
2. Discounting Pressure: If holiday sales slow, the temptation to markdown inventory rises—a death knell for brand equity.
3. Supply Chain Volatility: Freight costs and shipping delays (e.g., Red Sea congestion) could eat into profitability.

Bottom Line: A Buy Ahead of Earnings?

Ralph Lauren’s stock has historically surged post-earnings, rising 63% of the time with a median 4.4% pop. With its brand strength, geographic diversification, and margin expansion targets, the stock could be a winner—if it delivers.

Buy the Dip if…
- Q4 comparable sales beat 6% growth, especially in North America.
- Gross margins exceed 67%, with AUR growth >10%.
- Inventory turnover stays above 2.0, signaling no overstocking.

Avoid if…
- Margins shrink due to cost pressures.
- Comparable sales miss due to discounting or inventory missteps.

At $280, Ralph Lauren trades at 12x forward earnings—a reasonable premium for a luxury brand with pricing power. Investors willing to bet on Ralph Lauren’s resilience in a tough market should watch this earnings report closely. The next 48 hours could redefine its trajectory for years to come.