Ralph Lauren Corporation (NYSE:RL), a global leader in the
design, marketing, and distribution of premium lifestyle products,
today reported earnings per diluted share of ($2.48) on a reported
basis and $0.89 on an adjusted basis, excluding restructuring and
other charges that were primarily related to activities associated
with the Company’s Way Forward plan, for the fourth quarter of
Fiscal 2017. This compared to earnings per diluted share of $0.49
on a reported basis and $0.88 on an adjusted basis, excluding
restructuring and other charges, for the fourth quarter of Fiscal
2016.
For Fiscal 2017, earnings per diluted share was ($1.20) on a
reported basis and $5.71 on an adjusted basis, excluding
restructuring and other charges. This compared to earnings per
diluted share of $4.62 on a reported basis and $6.36 on an adjusted
basis, excluding restructuring and other charges, for the full year
of Fiscal 2016.
The Company announced yesterday that Patrice Louvet has been
named President and Chief Executive Officer.
“The retail landscape today is more dynamic than ever, but
within this environment, our brand continues to be one of the most
recognized and beloved all over the world. Our performance for the
year reflects our work to strengthen our brand and I am confident
that the actions we are taking, combined with our strong heritage,
position us well to succeed. I am very excited to partner with
Patrice Louvet, who will join as our CEO in July, as we continue
our evolution,” said Ralph Lauren, Executive Chairman and Chief
Creative Officer.
“Fiscal 2017 was an important year as we strengthened the
foundation of the Company. We created operational efficiencies,
increased the productivity of our assortment and improved quality
of our sales,” said Jane Nielsen, Chief Financial Officer. “In the
fourth quarter, we:
- continued to drive quality of sales up
by moderating discount levels;
- lowered our inventory levels by 30% to
improve inventory turns;
- reduced the number of SKUs by 20% for
both Spring and Fall 2017, increasing SKU productivity and
producing a more focused, higher margin assortment;
- shortened our lead times and achieved
our goal of having 50% of our business on a 9-month lead time, and
remain on track to get to 90% by the end of Fiscal 2018;
- optimized our store fleet by closing
another 20 underperforming stores, reaching our goal for the
year;
- initiated the move to a more
cost-effective, flexible e-commerce platform;
- strengthened the global organization,
adding a Chief Marketing Officer and Men’s Brand President, and
created a single International organization under a seasoned leader
to drive a more efficient organization.”
Nielsen continued: “This work will continue into Fiscal 2018 as
we drive toward strengthening the brand, improving return on
investment and creating value for shareholders. The team and I are
looking forward to welcoming Patrice as we continue this important
work and bring demand back to the business.”
Fourth Quarter and Full Year Fiscal 2017 Income Statement
Review
Net Revenues – Fourth Quarter Fiscal 2017. In the fourth
quarter, reported revenue decreased 16% to $1.6 billion; excluding
the impact of foreign currency and on a 13-week to 13-week basis,
revenue was down 12% to last year. As a reminder, the Company’s
fourth quarter last year included an extra week which contributed
approximately $72 million of revenue. Foreign currency pressured
the fourth quarter revenue growth by approximately 100 basis
points.
The fourth quarter revenue decline was in line with the guidance
of a mid-teens decline. The decline was driven by our initiatives
to improve quality of sales and reduce excess inventory, as well as
challenging traffic trends.
International revenue in the fourth quarter (consistent with the
change in our reportable segments), declined 9% while North America
revenue was down 21% to last year. Excluding the impact of foreign
currency and on a 13-week to 13-week basis, international revenue
was down 2% to last year, with negative currency impact of 300
basis points of the difference.
- Wholesale Revenue. Wholesale revenue in
the fourth quarter decreased 17% to $777 million; on a 13-week to
13-week basis in constant currency, wholesale revenue was down 15%
to last year. The decline was primarily driven by North America as
shipments were strategically reduced to increase quality of sales,
better align with demand and reduce excess inventory.
- Retail Revenue. Retail revenue in the
fourth quarter decreased 16% to $745 million; on a 13-week to
13-week basis in constant currency, retail revenue was down 9% to
last year. Lower retail sales were driven by a decline in
comparable store sales that was negatively impacted by challenging
traffic and average transaction size trends, partially driven by
our initiatives to improve quality of sales.On a 13-week to 13-week
constant currency basis, comparable store sales decreased 11%
during the fourth quarter. Comps were negatively impacted by
calendar shifts related to both Christmas and Easter holidays by
about three percentage points; excluding this impact, comparable
store sales would have decreased 8%.
- Licensing Revenue. Licensing revenue in
the fourth quarter increased 7% on a reported basis to $43
million.
Net Revenues – Full Year Fiscal 2017. For Fiscal 2017,
revenue decreased 10% to $6.7 billion. This was consistent with the
guidance provided last June of a low double-digit decline, in line
with the Way Forward plan.
- Wholesale Revenue. For Fiscal 2017,
wholesale revenue decreased 15% to $2.8 billion compared to the
prior year period, primarily due to a decline in sales in North
America.
- Retail Revenue: For Fiscal 2017, retail
revenue for the year decreased 6% on a reported basis to $3.7
billion compared to the prior year period. On a 52-week to 52-week
constant currency basis, consolidated comparable store sales
decreased 7%.
- Licensing Revenue. Licensing revenue of
$173 million in Fiscal 2017 was 1% below Fiscal 2016 on a reported
basis.
Gross Profit. Gross profit for the fourth quarter of
Fiscal 2017 was $819 million on a reported basis, including $48
million in non-cash inventory-related charges. On an adjusted
basis, gross profit was $868 million and gross margin was 55.4%, 90
basis points above last year, excluding non-cash inventory related
charges from both periods.
This increase was primarily driven by improved quality of sales,
reduced promotional activity, lower product costs, and favorable
geographic and channel mix shifts. Gross margin improvement was
partially offset by unfavorable foreign currency effects of 90
basis points in the fourth quarter.
For Fiscal 2017, gross profit was $3.7 billion on a reported
basis, including $198 million in non-cash inventory-related
charges. On an adjusted basis, gross profit was $3.8 billion and
gross margin was 57.9%, 110 basis points higher than the prior
year, excluding non-cash inventory related charges from both
periods, and was partially offset by 80 basis points unfavorable
foreign currency effects.
Operating Expenses. Operating expenses in the fourth
quarter of Fiscal 2017 were $1.1 billion on a reported basis,
including $322 million in restructuring and other charges. On an
adjusted basis, operating expenses were $766 million, down 15%
compared to the prior year, primarily as a result of lower
headcount, store closures and other expense savings initiatives
under the Way Forward plan. Excluding the impact of the 53rd week,
adjusted operating expenses were down 12% to the prior year.
Adjusted operating expense rate was 48.9%, 70 basis points above
the prior year period, excluding restructuring and other charges
from both periods. This increase was due to fixed expense
deleverage and incremental investments in infrastructure and new
stores.
For Fiscal 2017, operating expenses were $3.7 billion on a
reported basis, including $572 million in restructuring and other
charges. On an adjusted basis, operating expenses were $3.2
billion, down 7% from the prior year. Adjusted operating expense
rate was 47.7%, 160 basis points above Fiscal 2016, excluding
restructuring and other charges from both periods.
Operating Income (Loss). Operating loss in the fourth
quarter of Fiscal 2017 was $268 million, including restructuring
and other charges of $370 million. On an adjusted basis, operating
income was $102 million and operating margin was 6.5%, 10 basis
points above the prior year period, excluding restructuring and
other charges from both periods, and in line with our expectations.
Excluding the impact from the 53rd week, adjusted operating margin
expanded 60 basis points compared to last year.
The higher operating margin year-over-year was attributable to
gross margin expansion partially offset by approximately 100 basis
points of unfavorable foreign currency impact and fixed expense
deleverage.
For Fiscal 2017, operating loss was $95 million, including
restructuring and other charges of $770 million. On an adjusted
basis, operating income was $675 million and operating margin was
10.2%, 50 basis points below the prior year period, excluding
restructuring and other charges from both periods. This was
consistent with the guidance provided last June, in line with the
Way Forward plan. Excluding currency impacts, adjusted operating
margin expanded 100 basis points in Fiscal 2017 compared to last
year.
- Wholesale Operating Income. Wholesale
operating income in the fourth quarter was $201 million and
wholesale operating margin was 25.8% on a reported basis, including
$10 million in restructuring and other charges. On an adjusted
basis, wholesale operating income in the fourth quarter was $211
million and wholesale operating margin was 27.2%, flat to last
year.Wholesale operating income in Fiscal 2017 was $659 million and
wholesale operating margin was 23.6% on a reported basis, including
$40 million in restructuring and other charges. On an adjusted
basis, wholesale operating income in Fiscal 2017 was $699 million
and wholesale operating margin was 25.0%, 10 basis points below
last year.
- Retail Operating Income. Retail
operating loss in the fourth quarter was $103 million and retail
operating margin was (13.8%) on a reported basis, including $119
million in restructuring and other charges. On an adjusted basis,
retail operating income was $17 million and retail operating margin
was 2.2%, 20 basis points lower than last year. Excluding the
impact of restructuring charges and the 53rd week, adjusted
operating margin expanded 240 basis points compared to last
year.Retail operating income in Fiscal 2017 was $145 million and
retail operating margin was 3.9% on a reported basis, including
$290 million in restructuring and other charges. On an adjusted
basis, retail operating income was $435 million and retail
operating margin was 11.8%, 110 basis points above last year.
Excluding the impact of restructuring charges and the 53rd week,
adjusted operating margin expanded 150 basis points compared to
last year.
- Licensing Operating Income. Licensing
operating income of $41 million in the fourth quarter of Fiscal
2017 increased 16% compared with the prior year period. Licensing
operating income of $156 million in Fiscal 2017 was in line with
the prior year period.
Net Income (Loss) and EPS. On a reported basis, net loss
in the fourth quarter of Fiscal 2017 was $204 million or $2.48 per
share. On an adjusted basis, net income was $74 million, or $0.89
per diluted share, excluding restructuring and other charges. This
compared to net income of $41 million, or $0.49 per diluted share
on a reported basis, and $74 million, or $0.88 per diluted share on
an adjusted basis, for the fourth quarter of Fiscal 2016.
In Fiscal 2017, on a reported basis, net loss was $99 million or
$1.20 per share. On an adjusted basis, net income was $477 million,
or $5.71 per diluted share, excluding restructuring and other
charges. This compared to net income of $396 million, or $4.62 per
diluted share on a reported basis, and $546 million, or $6.36 per
diluted share, for Fiscal 2016.
The Company had an effective tax rate of approximately 24% in
the fourth quarter of Fiscal 2017 on a reported basis. On an
adjusted basis, the effective tax rate was approximately 27%,
excluding restructuring and other charges, lower than our guidance
of 30% due to a geographic shift in expense mix driven by changes
in our e-commerce platform development. This compared to an
adjusted effective tax rate of 34% in the prior year period.
For Fiscal 2017, the Company had an effective tax rate of
approximately 28% on an adjusted basis, excluding restructuring and
other charges. This compared to an adjusted effective tax rate of
28% for Fiscal 2016.
Balance Sheet and Cash Flow Review
The Company ended Fiscal 2017 with $1.4 billion in cash and
short-term investments and $588 million in total debt, compared to
$1.1 billion and $713 million, respectively, at the end of Fiscal
2016.
Inventory at the end of Fiscal 2017 was $792 million, down 30%
to the prior year, driven by both restructuring actions and
improvement in operating processes, including a proactive pullback
in receipts and moving towards a demand driven supply chain.
The Company had $284 million in capital expenditures in Fiscal
2017, compared to $418 million in the prior year period, primarily
driven by lower IT and infrastructure investments as well as an
increased focus on return on investment.
During the fourth quarter, the Company repurchased $100 million
of its common stock, bringing year-to-date purchases to $200
million, in line with the guidance provided at the Investor Day in
June.
Full Year Fiscal 2018 and First Quarter Outlook
The full year Fiscal 2018 and first quarter guidance excludes
foreign currency impacts, restructuring and other related charges
expected to be recorded in connection with the Company’s Way
Forward plan, and severance-related payments associated with the
CEO departure.
For Fiscal 2018, net revenue is expected to decrease 8-9%,
excluding the impact of foreign currency. Based on current exchange
rates, foreign currency is expected to have approximately 150 basis
points of negative impact on revenue growth in Fiscal 2018.
The Company expects operating margin for Fiscal 2018 to be
9.0-10.5%, excluding the impact of foreign currency. Based on
current exchange rates, foreign currency is expected to pressure
operating margin for Fiscal 2018 by 50-75 basis points.
In the first quarter of Fiscal 2018, the Company expects net
revenue to be down low double-digits, excluding the impact of
foreign currency. Based on current exchange rates, foreign currency
is expected to have approximately 225 basis points of negative
impact on revenue growth in the first quarter of Fiscal 2018.
Operating margin for the first quarter of Fiscal 2018 is
expected to be about 9.5-10.0%, excluding foreign currency impacts.
Foreign currency is estimated to pressure operating margin by
approximately 75 basis points.
In Fiscal 2018, the Company is adopting Accounting Standard
Update (ASU) 2016-09 for the accounting of employee share-based
payments, which was recently issued by the Financial Accounting
Standards Board (FASB). This will affect the Company’s effective
tax rate and increase its variability, with one of the key
variables being the price of our stock.
Excluding the impact of ASU 2016-09, the Fiscal 2018 tax rate is
estimated at 25%. Based on a stock price of $75 per share, the
adoption of ASU 2016-09 is expected to raise the Fiscal 2018 tax
rate to 28%.
The adoption of ASU 2016-09 is expected to be most impactful in
the first and second quarters of the fiscal year due to the timing
of vesting and exercise of certain stock compensation. Including
the impact of ASU 2016-09, the first quarter of Fiscal 2018 tax
rate is estimated at 33%.
We are planning capital expenditures of $300-320 million for
Fiscal 2018.
Fiscal Year 2018 Outlook – Non-GAAP Disclosure:
The Company is not able to provide a full reconciliation of the
non-GAAP financial measures to GAAP because certain material items
that impact these measures, such as the timing and exact amount of
charges related to our Way Forward plan, have not yet occurred or
are out of the Company’s control. Accordingly, a reconciliation of
our non-GAAP financial measure guidance to the corresponding GAAP
measures is not available without unreasonable effort. The Company
has identified the estimated impact of the items excluded from its
Fiscal 2018 guidance.
This Fiscal 2018 non-GAAP guidance excludes estimated pretax
charges related to our Way Forward plan and severance-related
payments associated with the CEO departure, which collectively are
anticipated to result in estimated charges of approximately $200
million.
Change in Reportable Segments
During the fourth quarter of Fiscal 2017, the Company changed
its reportable segments as a result of significant operational
changes implemented under the Way Forward plan. The Company’s new
reportable segments are as follows: North America, Europe and
Asia.
This new structure is consistent with how the management team
establishes the overall business strategy, allocates resources, and
assesses performance of the Company. In addition to these
reportable segments, the Company also has other non-reportable
segments, which primarily consists of our Club Monaco, Latin
America and licensing businesses.
Segment information under the Company’s new reportable segments
for the past eight quarters will be provided in an 8-K filed with
the SEC.
Conference Call
As previously announced, the Company will host a conference call
and live online webcast today, Thursday, May 18th, at 9:00 a.m.
Eastern. Listeners may access a live broadcast of the conference
call on the Company's investor relations website at
http://investor.ralphlauren.com or by dialing 517-623-4963 or
800-857-5209. To access the conference call, listeners should dial
in by 8:45 a.m. Eastern and request to be connected to the Ralph
Lauren Fourth Quarter and Full Year Fiscal 2017 conference
call.
An online archive of the broadcast will be available by
accessing the Company's investor relations website at
http://investor.ralphlauren.com. A telephone replay of the call
will be available from 12:00 P.M. Eastern, Thursday, May 18, 2017
through 6:00 P.M. Eastern, Thursday, May 25, 2017 by dialing
203-369-1240 or 866-454-2100 and entering passcode 3594.
Future announcements regarding the timing of future earnings
release dates and conference calls will be posted on the Company’s
investor relations website at http://investor.ralphlauren.com and
will not be issued through news wire services unless otherwise
noted by the Company.
ABOUT RALPH LAUREN
Ralph Lauren Corporation (NYSE:RL) is a global leader in the
design, marketing and distribution of premium lifestyle products in
four categories: apparel, home, accessories and fragrances. For 50
years, Ralph Lauren's reputation and distinctive image have been
consistently developed across an expanding number of products,
brands and international markets. The Company's brand names, which
include Ralph Lauren Purple Label, Ralph Lauren Collection, Double
RL, Polo Ralph Lauren, Polo Ralph Lauren Children’s, Ralph Lauren
Home, Lauren Ralph Lauren, RLX, American Living, Chaps and Club
Monaco, constitute one of the world's most widely recognized
families of consumer brands. For more information, go to
http://investor.ralphlauren.com.
RALPH LAUREN CORPORATION CONSOLIDATED BALANCE
SHEETS Prepared in accordance with U.S. Generally Accepted
Accounting Principles (in millions) (Audited)
April 1,
April 2, 2017 2016 ASSETS
Current assets: Cash and cash equivalents $ 668.3 $ 456.3
Short-term investments 684.7 629.4 Accounts receivable, net of
allowances 450.2 516.5 Inventories 791.5 1,124.6 Income tax
receivable 79.4 57.8 Prepaid expenses and other current assets
280.4 268.1 Total current assets
2,954.5 3,052.7 Property and equipment, net 1,316.0 1,583.2
Deferred tax assets 125.9 118.7 Goodwill 904.6 917.9 Intangible
assets, net 219.8 243.9 Other non-current assets
(a)
131.2 296.7
Total assets $
5,652.0 $ 6,213.1
LIABILITIES AND
EQUITY Current liabilities: Short-term debt $ - $ 116.1
Accounts payable 147.7 151.0 Income tax payable 29.5 33.0 Accrued
expenses and other current liabilities 982.7
898.2 Total current liabilities 1,159.9 1,198.3
Long-term debt 588.2 597.0 Non-current liability for
unrecognized tax benefits 62.7 80.6 Other non-current liabilities
541.6 593.7 Total liabilities
2,352.4 2,469.6 Equity: Common
stock 1.2 1.2 Additional paid-in-capital 2,308.8 2,257.5 Retained
earnings 5,751.9 6,015.0 Treasury stock, Class A, at cost (4,563.9
) (4,348.7 ) Accumulated other comprehensive loss (198.4 )
(181.5 ) Total equity 3,299.6
3,743.5
Total liabilities and equity $ 5,652.0
$ 6,213.1 Net Cash (incl. LT
Investments) 786.2 559.2 Cash & Investments (ST & LT)
1,374.4 1,272.3 Net Cash (excl. LT Investments) 764.8 372.6
Cash & ST Investments 1,353.0 1,085.7
(a) Includes non-current
investments of:
$ 21.4 $ 186.6
RALPH LAUREN
CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Prepared in accordance with U.S. Generally Accepted Accounting
Principles (in millions, except per share data)
(Unaudited)
Three Months Ended
April 1, April 2, 2017
2016 Net revenues $ 1,565.4 $ 1,871.1
Cost of goods sold
(a) (746.3 ) (857.8 )
Gross profit 819.1 1,013.3 Selling, general,
and administrative expenses
(a) (759.6 ) (895.3 )
Amortization of intangible assets (5.9 ) (6.3 ) Impairment
of assets (197.1 ) (24.5 ) Restructuring and other charges
(124.7 ) (19.8 )
Total other operating
expenses, net (1,087.3 ) (945.9 )
Operating income
(loss) (268.2 ) 67.4 Foreign currency gains 0.3 4.3
Interest expense (1.4 ) (7.5 ) Interest and other
income, net 0.7 1.0 Equity in losses of equity-method
investees - (3.9 )
Income (loss)
before income taxes (268.6 ) 61.3 Income tax benefit
(provision) 64.6 (20.0 )
Net income
(loss) $ (204.0 ) $ 41.3
Net income (loss) per
share - Basic $ (2.48 ) $ 0.49
Net income
(loss) per share - Diluted $ (2.48 ) $ 0.49
Weighted average shares outstanding - Basic 82.3
83.9 Weighted average shares outstanding -
Diluted 82.3 84.5 Dividends
declared per share $ 0.50 $ 0.50
(a)
Includes total depreciation expense of: $ (69.6 ) $ (75.6 )
RALPH LAUREN CORPORATION CONSOLIDATED STATEMENTS
OF OPERATIONS Prepared in accordance with U.S. Generally
Accepted Accounting Principles (in millions, except per
share data) (Audited)
Twelve Months Ended
April 1, April 2, 2017
2016 Net revenues $ 6,652.8 $ 7,405.2
Cost of goods sold
(a) (3,001.7 )
(3,218.5 )
Gross profit 3,651.1 4,186.7
Selling, general, and administrative expenses
(a) (3,149.4 )
(3,389.7 ) Amortization of intangible assets (24.1 ) (23.7 )
Impairment of assets (253.8 ) (48.8 ) Restructuring
and other charges (318.6 ) (142.6 )
Total
other operating expenses, net (3,745.9 ) (3,604.8 )
Operating income (loss) (94.8 ) 581.9 Foreign
currency gains (losses) 1.1 (3.8 ) Interest expense (12.4 )
(21.0 ) Interest and other income, net 6.4 5.6 Equity
in losses of equity-method investees (5.2 ) (10.9 )
Income (loss) before income taxes (104.9 ) 551.8
Income tax benefit (provision) 5.6
(155.4 )
Net income (loss) $ (99.3 ) $ 396.4
Net income (loss) per share - Basic $ (1.20 ) $ 4.65
Net income (loss) per share - Diluted $ (1.20
) $ 4.62 Weighted average shares outstanding - Basic
82.7 85.2 Weighted average
shares outstanding - Diluted 82.7 85.9
Dividends declared per share $ 2.00 $ 2.00
(a) Includes total depreciation expense of: $ (283.4
) $ (285.7 )
RALPH LAUREN CORPORATION OTHER
INFORMATION (in millions) (Unaudited)
SEGMENT INFORMATION Net revenues and operating income (loss)
for the periods ended April 1, 2017 and April 2, 2016 for each
segment were as follows:
Three Months Ended Twelve Months
Ended April 1, April 2, April 1, April
2, 2017 2016 2017 2016
Net revenues: Wholesale $ 777.3 $ 941.9 $ 2,797.6 $ 3,297.2
Retail 745.3 889.2 3,682.0 3,933.2 Licensing 42.8
40.0 173.2 174.8 Total
net revenues $ 1,565.4 $ 1,871.1 $ 6,652.8 $
7,405.2
Operating income (loss): Wholesale $
200.8 $ 254.2 $ 659.2 $ 821.2 Retail (102.6 ) (9.6 ) 145.4 359.2
Licensing 40.6 34.9 155.6
155.1 138.8 279.5 960.2 1,335.5 Unallocated
corporate expenses (282.3 ) (192.3 ) (736.4 ) (611.0 ) Unallocated
restructuring and other charges (124.7 ) (19.8 )
(318.6 ) (142.6 ) Total operating income (loss) $
(268.2 ) $ 67.4 $ (94.8 ) $ 581.9
RALPH LAUREN CORPORATION Constant Currency Financial
Measures (in millions) (Unaudited)
Comparable Store Sales Data (a)
Three Months Ended
April 1, 2017
% Change
Twelve Months Ended
April 1, 2017
% Change
As Reported Constant Currency As
Reported Constant Currency Total Ralph
Lauren (12 %) (11 %) (7 %) (7 %)
Operating Segment
Data Three Months Ended % Change April
1, 2017 April 2, 2016 As Reported Constant
Currency Wholesale net sales $ 777.3 $ 941.9 (17.5 %) (16.4 %)
Retail net sales 745.3 889.2 (16.2 %)
(15.2 %) Net sales 1,522.6 1,831.1 (16.8 %) (15.8 %) Licensing
revenue 42.8 40.0 7.0 % 7.0 % Net
revenues $ 1,565.4 $ 1,871.1 (16.3 %) (15.3 %)
Twelve Months Ended % Change April 1, 2017
April 2, 2016 As Reported Constant Currency
Wholesale net sales $ 2,797.6 $ 3,297.2 (15.2 %) (14.5 %) Retail
net sales 3,682.0 3,933.2 (6.4 %) (6.3
%) Net sales 6,479.6 7,230.4 (10.4 %) (10.1 %) Licensing revenue
173.2 174.8 (0.9 %) (1.4 %) Net
revenues $ 6,652.8 $ 7,405.2 (10.2 %) (9.9 %) (a)All
comparable store sales metrics were calculated on a 13-week basis
for the quarter and a 52-week basis for the year.
RALPH LAUREN CORPORATION Global Retail Store Network
April 1, April
2, 2017 2016
Global Directly
Operated Stores and Concessions
Ralph Lauren Stores 109 144 Polo Factory Stores 278 272
Club Monaco
Stores
79 77
Total Directly Operated Stores 466 493
Concessions 619 583
Global Licensed
Stores and Concessions
Ralph Lauren Licensed Stores 105 93
Club Monaco Licensed
Stores
59 58
Total Licensed Stores 164 151 Licensed
Concessions 99 117
RALPH LAUREN CORPORATION
Reconciliation of Certain Non-U.S. GAAP Financial Measures
(in millions, except per share data) (Unaudited)
Three Months Ended April 1,
2017 As
Reported
Total
Adjustments (a)
As
Adjusted
Net revenues $ 1,565.4 $ - $ 1,565.4 Gross profit 819.1 48.5 867.6
Gross profit margin 52.3 % 55.4 % Total other operating expenses,
net (1,087.3 ) 321.8 (765.5 ) Operating expense margin 69.5 % 48.9
% Operating income (loss) (268.2 ) 370.3 102.1 Operating margin
-17.1 % 6.5 % Income (loss) before income taxes (268.6 ) 370.3
101.7 Income tax benefit (provision) 64.6 (92.0 ) (27.4 ) Effective
tax rate 24.0 % 27.0 % Net income (loss) $ (204.0 ) $ 278.3 $ 74.3
Net income (loss) per diluted share $ (2.48 ) $ 0.89 Weighted
average shares outstanding - Basic 82.3 82.3 Weighted average
shares outstanding - Diluted 82.3 83.1 SEGMENT INFORMATION -
OPERATING INCOME (LOSS): Wholesale $ 200.8 $ 10.2 $ 211.0 Operating
margin 25.8 % 27.2 % Retail (102.6 ) 119.2 16.6 Operating margin
-13.8 % 2.2 % Licensing 40.6 - 40.6 Operating margin 94.6 % 94.6 %
Unallocated corporate expenses and restructuring and other charges,
net (407.0 ) 240.9 (166.1 ) Total
operating income (loss) $ (268.2 ) $ 370.3 $ 102.1
Twelve Months Ended April 1,
2017 As
Reported
Total
Adjustments (a)
As
Adjusted
Net revenues $ 6,652.8 $ - $ 6,652.8 Gross profit 3,651.1 197.9
3,849.0 Gross profit margin 54.9 % 57.9 % Total other operating
expenses, net (3,745.9 ) 572.4 (3,173.5 ) Operating expense margin
56.3 % 47.7 % Operating income (loss) (94.8 ) 770.3 675.5 Operating
margin -1.4 % 10.2 % Income (loss) before income taxes (104.9 )
770.3 665.4 Income tax benefit (provision) 5.6 (194.1 ) (188.5 )
Effective tax rate 5.3 % 28.3 % Net income (loss) $ (99.3 ) $ 576.2
$ 476.9 Net income (loss) per diluted share $ (1.20 ) $ 5.71
Weighted average shares outstanding - Basic 82.7 82.7 Weighted
average shares outstanding - Diluted 82.7 83.5 SEGMENT INFORMATION
- OPERATING INCOME (LOSS): Wholesale $ 659.2 $ 39.9 $ 699.1
Operating margin 23.6 % 25.0 % Retail 145.4 289.9 435.3 Operating
margin 3.9 % 11.8 % Licensing 155.6 4.9 160.5 Operating margin 89.7
% 92.6 % Unallocated corporate expenses and restructuring and other
charges, net (1,055.0 ) 435.6 (619.4 )
Total operating income (loss) $ (94.8 ) $ 770.3 $ 675.5
(a) Adjustments include charges of $326.5 million and
$726.5 million for the three and twelve months ended April 1, 2017,
respectively, incurred in connection with our restructuring plans,
consisting of restructuring charges, impairment of assets, and
inventory-related charges. Inventory-related charges are recorded
within cost of goods sold in the consolidated statements of
operations. Adjustments also include other charges of $24.6 million
recorded in connection with the anticipated settlement of certain
non-income tax issues and the departure of Mr. Larsson, additional
impairment of assets of $14.0 million related to underperforming
stores subject to potential future closure, and a goodwill
impairment charge of $5.2 million. Income tax benefit (provision)
includes the reversal of a $15.9 million income tax reserve
resulting from a change in tax law that impacted an interest
assessment on a prior year withholding tax.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release and oral statements made from time to time by
representatives of the Company contain certain "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include the
statements under “First Quarter and Full Year Fiscal 2018 Outlook,”
and statements regarding, among other things, our current
expectations about the Company's future results and financial
condition, revenues, store openings and closings, employee
reductions, margins, expenses and earnings and are indicated by
words or phrases such as "anticipate," "estimate," "expect,"
"project," "we believe" and similar words or phrases. These
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from the
future results, performance or achievements expressed in or implied
by such forward-looking statements. Forward-looking statements are
based largely on the Company's expectations and judgments and are
subject to a number of risks and uncertainties, many of which are
unforeseeable and beyond our control. The factors that could cause
actual results to materially differ include, among others: the loss
of key personnel, including Mr. Ralph Lauren, or other changes in
our executive and senior management team or to our operating
structure, and our ability to effectively transfer knowledge during
periods of transition; the potential impact to our business and
future strategic direction resulting from our transition to a new
Chief Executive Officer; our ability to successfully implement our
long-term growth strategy, which entails evolving our product,
marketing, and shopping experience to increase desirability and
relevance, and evolving our operating model to enable sustainable,
profitable sales growth by significantly reducing supply chain lead
times, improving our sourcing, and executing a disciplined
multi-channel distribution and expansion strategy; the impact to
our business resulting from investments and other costs incurred in
connection with the execution of our long-term growth strategy,
including restructuring-related charges, which may be dilutive to
our earnings in the short term; our ability to achieve anticipated
operating enhancements, sales growth, and/or cost reductions from
our restructuring; the impact to our business resulting from
potential costs and obligations related to the early closure of our
stores or termination of our long-term, non-cancellable leases; our
ability to effectively manage inventory levels and the increasing
pressure on our margins in a highly promotional retail environment;
our efforts to successfully enhance, upgrade, and/or transition our
global information technology systems and ecommerce platform; our
ability to secure our facilities and systems and those of our
third-party service providers from, among other things,
cybersecurity breaches, acts of vandalism, computer viruses, or
similar Internet or email events; a variety of legal, regulatory,
tax, political, and economic risks, including risks related to the
importation and exportation of products, tariffs, and other trade
barriers which our operations are currently subject to, or may
become subject to as a result of potential changes in legislation,
and other risks associated with our international operations, such
as compliance with the Foreign Corrupt Practices Act or violations
of other anti-bribery and corruption laws prohibiting improper
payments, and the burdens of complying with a variety of foreign
laws and regulations, including tax laws, trade and labor
restrictions, and related laws that may reduce the flexibility of
our business; the impact to our business resulting from the United
Kingdom's decision to exit the European Union and the uncertainty
surrounding the terms and conditions of such a withdrawal, as well
as the related impact to global stock markets and currency exchange
rates; changes in our tax obligations and effective tax rates due
to a variety of factors, including potential changes in tax laws
and regulations, accounting rules, or the mix and level of earnings
by jurisdiction; our exposure to currency exchange rate
fluctuations from both a transactional and translational
perspective; the impact to our business resulting from increases in
the costs of raw materials, transportation, and labor; the impact
to our business resulting from changes in consumers' ability or
preferences to purchase premium lifestyle products that we offer
for sale and our ability to forecast consumer demand, which could
result in either a build-up or shortage of inventory; our ability
to continue to maintain our brand image and reputation and protect
our trademarks; the impact of the volatile state of the global
economy, stock markets, and other global economic conditions on us,
our customers, our suppliers, and our vendors and on our ability
and their ability to access sources of liquidity; the potential
impact to our business resulting from the financial difficulties of
certain of our large wholesale customers, which may result in
consolidations, liquidations, restructurings, and other ownership
changes in the retail industry, as well as other changes in the
competitive marketplace, including the introduction of new products
or pricing changes by our competitors; the impact to our business
of events of unrest and instability that are currently taking place
in certain parts of the world, as well as from any terrorist
action, retaliation, and the threat of further action or
retaliation; our ability to continue to expand or grow our business
internationally and the impact of related changes in our customer,
channel, and geographic sales mix as a result; changes in the
business of, and our relationships with, major department store
customers and licensing partners; our intention to introduce new
products or enter into or renew alliances and exclusive
relationships; our ability to access sources of liquidity to
provide for our cash needs, including our debt obligations, payment
of dividends, capital expenditures, and potential repurchases of
our Class A common stock; our ability to open new retail stores,
concession shops, and e-commerce sites in an effort to expand our
direct-to-consumer presence; the potential impact to the trading
prices of our securities if our Class A common stock share
repurchase activity and/or cash dividend payments differ from
investors' expectations; our ability to maintain our credit profile
and ratings within the financial community; our ability to make
certain strategic acquisitions and successfully integrate the
acquired businesses into our existing operations; the potential
impact on our operations and on our suppliers and customers
resulting from natural or man-made disasters; and other risk
factors identified in the Company's Annual Report on Form 10-K,
Form 10-Q and Form 8-K reports filed with the Securities and
Exchange Commission. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
SUPPLEMENTAL FINANCIAL INFORMATION
Since Ralph Lauren Corporation is a global company, the
comparability of its operating results reported in U.S. Dollars is
also affected by foreign currency exchange rate fluctuations
because the underlying currencies in which it transacts change in
value over time compared to the U.S. Dollar. These rate
fluctuations can have a significant effect on the Company’s
reported results. As such, in addition to financial measures
prepared in accordance with generally accepted accounting
principles ("U.S. GAAP"), the Company’s discussions often contain
references to constant currency measures, which are calculated by
translating the current-year and prior-year reported amounts into
comparable amounts using a single foreign exchange rate for each
currency. The Company presents constant currency financial
information, which is a non-U.S. GAAP financial measure, as a
supplement to its reported operating results. The Company uses
constant currency information to provide a framework to assess how
its businesses performed excluding the effects of foreign currency
exchange rate fluctuations. Management believes this information is
useful to investors to facilitate comparisons of operating results
and better identify trends in the Company’s businesses. The
constant currency performance measures should be viewed in addition
to, and not in lieu of or superior to, the Company’s operating
performance measures calculated in accordance with U.S. GAAP.
Additionally, this earnings release includes certain non-U.S.
GAAP financial measures relating to charges recorded in connection
with the Company’s restructuring plans. Adjustments also include
other charges recorded in connection with the anticipated
settlement of certain non-income tax issues and the departure of
Mr. Stefan Larsson, additional impairment of assets related to
underperforming stores subject to potential future closure, and a
goodwill impairment charge recorded in connection with our change
in reportable segments. The income tax benefit (provision) has been
adjusted for the tax-related effect of these charges, as well as
for the reversal of an income tax reserve resulting from a change
in tax law that impacted an interest assessment on a prior year
withholding tax. Included in this earnings release is a
reconciliation between the non-U.S. GAAP financial measures and the
most directly comparable U.S. GAAP measures before and after these
charges. The related tax effects were calculated using the
respective statutory tax rates for each applicable jurisdiction.
The Company uses non-U.S. GAAP financial measures, among other
things, to evaluate its operating performance and in order to
represent the manner in which the Company conducts and views its
business. The Company believes that excluding items that are not
comparable from period to period helps investors and others compare
operating performance between two periods. The Company’s first
quarter and full year Fiscal 2018 excludes restructuring and other
related charges expected to be recorded in connection with the
Company’s Way Forward plan and Mr. Stefan Larsson’s departure.
While the Company considers the non-U.S. GAAP measures useful in
analyzing its results, they are not intended to replace, nor act as
a substitute for, any presentation included in the consolidated
financial statements prepared in conformity with U.S. GAAP and may
be different from non-U.S. GAAP measures reported by other
companies.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170518005593/en/
Ralph Lauren CorporationInvestor Relations:Evren Kopelman,
212-813-7862orCorporate Communications:Katie Ioanilli,
212-205-5947rl-press@ralphlauren.com
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