The debate earlier in 2025 was over who would pay for tariffs. Would foreign countries and suppliers foot the bill? Or businesses? Or mom and pop consumers?
So far, it looks to be a blend. Suppliers are making some concessions, businesses are absorbing some of the hit (albeit that’s leading to other bigger problems, including layoffs), and Joe and Jane Mainstreet are picking up the rest.
Ralph Lauren at a glance:
- Founded:1967
- Annual revenue in fiscal 2025: $7.1 billion.
- Number of employees: 23,400
Prices on hundreds of thousands of items sold by major retailers are tracking 6.14% above the trend expected before tariffs, according to Harvard Pricing Lab data. Meanwhile, CPI inflation was 3% in September, up from a low of 2.3% in April, before most tariffs were enacted.
The trend toward higher prices has been widespread, particularly among apparel companies, many of which have passed on these higher costs to consumers because they rely heavily on imports from Asia, including China and Vietnam.
In September, apparel prices industry-wide rose 0.7% from August, the biggest month-over-month increase since before tariffs were enacted this spring.
Price increases may not be over yet, either, given comments from retail industry leaders, including David Simon, CEO of mall operator Simon Property Group.
Many companies have yet to fully pass along tariffs in prices or have taken a measured approach to increasing prices, avoiding customer frustration by implementing gradual price increases and reducing or eliminating sales promotions.
As a result, prices are likely to continue to shift higher, something popular apparel maker Ralph Lauren acknowledged in its latest earnings call.
Ralph Lauren increases prices as profits climb
Ralph Lauren (RL) reported its latest quarterly results on Nov. 6. There was plenty of good news for shareholders. and bad news for consumers.
Ralph Lauren is pivoting toward a full-price model as tariffs impact prices.
Image source: Ralph Lauren
The fashion apparel maker’s revenue increased 16.2% from the same period last year to $2 billion, surpassing Wall Street’s expectations by $120 million. Meanwhile, earnings per share clocked in at a healthy $3.79, 34 cents higher than analysts predicted, and nearly 50% higher than last year.
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Its adjusted operating margin rose 2.1% to 13.5% last quarter.
“Our iconic brand and timeless products continue to resonate with consumers around the world, across generations and cultures,” said CEO Patrice Louvet about the results.
The company’s strong quarter was supported by demand from higher-income consumers who have more discretionary income. However, higher prices, including fewer sales, contributed to Ralph Lauren’s margin and profit upside, particularly at its company-owned stores.
“AUR [Average Unit Retail] increased 12% in the second quarter, supported by strong full-price selling trends, reduced discounting, modest targeted pricing growth and favorable product mix,” said Chief Financial Officer Justin Picicci.
Ralph Lauren suggests higher prices are coming
The trend toward more full-priced apparel and fewer promotions and discounts is expected to continue through the important holiday season.
“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,” said Picicci. “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.”
Ralph Lauren’s decision to step away from discounting to build market share, focusing instead on full-priced sales to higher-income consumers, echoes a similar move by Nike and Levi’s, which have also stepped back from promotional pricing to keep customers shopping and protect their profit margins.
Ralph Lauren revenue by fiscal year:
- 2026: $7.8 billion (est.)
- 2025: $7.1 billion
- 2024: $6.6 billion
- 2023: $6.4 billion
- 2022: $6.2 billion
- 2021: $4.4 billion Source: Ralph Lauren SEC filings; FY26 estimate: Yahoo!Finance.
Concentrating on higher-income earners, who are less exposed to mounting layoffs and inflationary pressures, may insulate the business. Still, much will depend on whether economic uncertainty spreads further up the income ladder.
“We continue to expect tariff headwinds to ramp up in our fiscal Q3 and become more pronounced into Q4,” said Picicci.
“As price increases take root across different sectors, we are watching closely to see how consumers will respond,” said CEO Louvet.
The move toward full-price complements strategic price increases on products where Ralph Lauren feels it has pricing power.
“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,” Picicci.
Ralph Lauren’s tilt toward higher prices is set to continue, according to Picicci, who said, “With the higher tariffs that were announced, we did layer in some additional modest adjustments, both for fall and for spring ’26,” and that “potentially some further targeted pricing” could be coming.