Delivers Better Than Expected Results in First Year of Next
Great Chapter Plan; Board of Directors Approves 10% Dividend
Increase
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 $0.39 on a reported
basis and $1.07 on an adjusted basis, excluding
restructuring-related and other charges, for the fourth quarter of
Fiscal 2019. This compared to earnings per diluted share of $0.50
on a reported basis and $0.90 on an adjusted basis, excluding
restructuring-related and other charges, for the fourth quarter of
Fiscal 2018.
For Fiscal 2019, earnings per diluted share was $5.27 on a
reported basis and $7.19 on an adjusted basis, excluding
restructuring-related and other charges. This compared to earnings
per diluted share of $1.97 on a reported basis and $6.03 on an
adjusted basis, excluding restructuring-related and other charges,
for the full year of Fiscal 2018.
The Company also announced that its Board of Directors declared
a 10% increase in the regular quarterly cash dividend on the
Company's Common Stock. The new quarterly cash dividend is $0.6875
per share for a total annual dividend amount of $2.75 per share.
The next quarterly dividend is payable on July 12, 2019 to
shareholders of record at the close of business on June 28,
2019.
“This year we marked an incredible milestone for our business
and our brands – 50 years of inspiration, passion and innovation,”
said Ralph Lauren, Executive Chairman and Chief Creative Officer.
“As we celebrate our rich history, we are even more inspired and
motivated to continue to build the future for our company, and I am
so proud of the work our teams are doing to deliver for consumers
around the world every day.”
“Our Next Great Chapter plan is off to a good start – in its
first year, we outperformed our commitments across key metrics,
including revenue, quality of sales, operating income and EPS,”
said Patrice Louvet, President & Chief Executive Officer. “It
has been an exciting year of progress and continuous learning in
our multi-year journey. We returned to revenue growth one year
ahead of plan, average unit retail was better than we expected
across all regions and channels as we continued to elevate the
brand, and we saw particular strength across our international
regions as we invested in product, marketing and distribution.
Looking ahead, we will continue to put the consumer at the center
of everything we do, elevate and energize our brands and drive
operational efficiency to achieve long-term, sustainable growth and
value creation.”
We delivered across the following strategic initiatives in the
fourth quarter and full year Fiscal 2019:
- Win Over a New Generation of
Consumers
- For Fiscal 2019, increased marketing
investments by 13% to last year, driven by unique and highly
impactful brand building campaigns and fashion shows including our
50th Anniversary Fashion Show, Ralph’s Café immersive fashion
experience at our Madison Avenue flagship store and ‘Family is Who
You Love’ campaign which launched in the fourth quarter
- Elevated our brand and connected with
new consumers through our collaboration with UK-based skate brand
Palace, Limited Edition launches throughout the year and new
distribution in key specialty retail doors
- Continued to leverage celebrities,
social influencers and cultural events that resonate with different
segments of the Ralph Lauren consumer base, including our most
recent Ralph Lauren Romance fragrance campaign featuring Taylor
Hill
- Energize Core Products and
Accelerate Under-Developed Categories
- Average unit retail across our
direct-to-consumer network was up 8% in both the fourth quarter and
full year Fiscal 2019 driven by our ongoing initiatives to elevate
the product assortment and improve quality of sales
- Renewed our core styles and focused on
our icons which continue to be key drivers of improving sales
trends
- Continued to build our high-potential
under-developed categories, with denim and outerwear sell-out
trends accelerating in the Fall/Holiday season, driven by an
improved product, merchandising and marketing focus
- Drive Targeted Expansion in Our
Regions and Channels
- Momentum in Asia continued with 13%
revenue growth and 5% comp growth in constant currency in Fiscal
2019, led by over 30% growth in Mainland China
- Europe outperformed our expectations in
Fiscal 2019 with 7% revenue growth in constant currency, driven by
10% growth in wholesale and positive retail comps in the second
half of the year
- Continued to expand our global
distribution with 135 new retail stores including over 90 stores in
Asia, and partnered with over 20 new digital pure play retailers
globally
- Lead with Digital
- Global digital revenue grew 11% to last
year in constant currency in Fiscal 2019, with strength across
every region
- Our directly-operated digital flagships
in North America and Europe returned to positive growth during the
year, supported by improvements in functionality, an enhanced
consumer experience, and higher quality of sales initiatives
- Expanded our partnerships with key
digital wholesale players across regions
- Operate with Discipline to Fuel
Growth
- Adjusted gross margin was up 90 basis
points in Fiscal 2019 driven by quality of sales
- Adjusted operating expenses, excluding
our marketing investment, were below revenue growth in Fiscal
2019
- Launched our direct-to-consumer shared
inventory initiative in North America in the fourth quarter,
driving increased efficiency in our distribution network and a
reduced warehouse footprint
- Increased geographic diversification
across our sourcing network and delivered strong progress on global
lead time reductions
Fourth Quarter Fiscal 2019 Income Statement Review
Net Revenue. In the fourth quarter of Fiscal 2019,
revenue declined 1.5% to $1.5 billion on a reported basis and was
up 1.2% in constant currency. Foreign currency negatively impacted
revenue growth by approximately 270 basis points in the fourth
quarter.
Revenue performance for the Company’s reportable segments in the
fourth quarter compared to the prior year period was as
follows:
- North America Revenue. North America
revenue in the fourth quarter decreased 7% to $708 million. North
America wholesale revenue was down 10% to last year, including
softness in select spring fashion concepts and planned reductions
in off-price sales. In retail, comparable store sales in North
America were down 4%, including a 7% decline in brick and mortar
stores and a 6% increase in digital commerce. Excluding the impact
of Easter timing, comparable store sales in North America were down
approximately 1% to last year.
- Europe Revenue. Europe revenue in the
fourth quarter increased 4% to $435 million on a reported basis and
increased 11% to last year in constant currency. In retail,
comparable store sales in Europe were up 5% on a constant currency
basis, driven by a 5% increase in brick and mortar stores and a 6%
increase in digital commerce. Europe wholesale revenue increased 4%
on a reported basis and increased 11% in constant currency.
- Asia Revenue. Asia revenue in the
fourth quarter increased 6% to $273 million on a reported basis and
increased 10% in constant currency, with strong performance across
every market, led by approximately 30% constant currency growth in
Mainland China. Comparable store sales in Asia increased 4% in
constant currency, reflecting growth in both brick and mortar and
digital commerce operations.
Gross Profit. Gross profit for the fourth quarter of
Fiscal 2019 was $901 million and gross margin was 59.9%. On an
adjusted basis, gross margin was 60.1%, 30 basis points above the
prior year.
The increase in adjusted gross margin was driven by initiatives
to improve quality of sales through reduced promotional activity
and improved pricing as well as favorable product, geographic and
channel sales mix. Foreign currency negatively impacted gross
margin by 20 basis points in the fourth quarter.
Operating Expenses. Operating expenses in the fourth
quarter of Fiscal 2019 were $874 million on a reported basis,
including $64 million in restructuring-related and other charges.
On an adjusted basis, excluding such charges, operating expenses
were $809 million, down 2% to prior year driven by cost savings
initiatives and lower marketing investments to last year, as the
timing of our full year Fiscal 2018 marketing spend was
significantly more concentrated in the fourth quarter.
Adjusted operating expense rate was 53.8%, 40 basis points below
the prior year period, excluding restructuring-related and other
charges, driven by cost savings initiatives and timing of marketing
spend.
Operating Income. Operating income for the fourth quarter
of Fiscal 2019 was $28 million on a reported basis, including
restructuring-related and other charges of $68 million, and
operating margin was 1.9%. Adjusted operating income was $96
million and adjusted operating margin was 6.4%, 80 basis points
above the prior year, excluding restructuring-related and other
charges from both periods. Foreign currency negatively impacted
operating margin by 30 basis points in the fourth quarter.
- North America Operating Income. North
America operating income in the fourth quarter was $109 million on
a reported and $112 million on an adjusted basis. Adjusted North
America operating margin was 15.9%, down 150 basis points to last
year as gross margin improvements were more than offset by higher
SG&A as a percentage of sales.
- Europe Operating Income. Europe
operating income in the fourth quarter was $98 million on a
reported and $103 million on an adjusted basis. Adjusted Europe
operating margin was 23.7%, 360 basis points higher than the prior
year period. In constant currency, the adjusted operating margin
expanded 340 basis points driven by gross margin expansion and
SG&A leverage.
- Asia Operating Income. Asia operating
income in the fourth quarter was $38 million on a reported basis
and $39 million on an adjusted basis. Adjusted Asia operating
margin was 14.3%, down 90 basis points to the prior year and down
80 basis points in constant currency.
Net Income and EPS. On a reported basis, net income in
the fourth quarter of Fiscal 2019 was $32 million or $0.39 per
diluted share. On an adjusted basis, net income was $85 million, or
$1.07 per diluted share, excluding restructuring-related and other
charges. This compared to a net income of $41 million, or $0.50 per
diluted share on a reported basis, and net income of $75 million,
or $0.90 per diluted share on an adjusted basis, for the fourth
quarter of Fiscal 2018.
In the fourth quarter of Fiscal 2019, the Company had an
effective tax rate of 10.6% on a reported and 17.5% on an adjusted
basis, excluding restructuring-related and other charges. This
compared to a reported and adjusted effective tax rate of (66%) and
13%, respectively, in the prior year period.
Full Year Fiscal 2019 Income Statement Review
Net Revenues. For Fiscal 2019, revenue increased 2% to
$6.3 billion on a reported basis and increased 3% in constant
currency, above our guidance.
- North America Revenue. For Fiscal 2019,
North America revenue decreased 1% on both a reported and constant
currency basis to $3.2 billion, including our planned reduction in
off-price sales, while retail comps were flat to last year.
- Europe Revenue. For Fiscal 2019, Europe
revenue increased 5% to $1.7 billion on a reported basis. In
constant currency, revenue increased 6% driven by wholesale and
retail growth.
- Asia Revenue. For Fiscal 2019, Asia
revenue increased 11% to $1.0 billion on a reported basis. In
constant currency, revenue increased 13% with double-digit growth
in retail and wholesale.
Gross Profit. Gross profit for Fiscal 2019 was $3.9
billion on a reported basis, including $7 million in
inventory-related charges, and gross margin was 61.6%. On an
adjusted basis, gross margin was 61.7%, 90 basis points higher than
the prior year, excluding inventory related charges from both
periods. Foreign currency negatively impacted gross margin by 20
basis points in Fiscal 2019.
Operating Expenses. For Fiscal 2019, operating expenses
were $3.3 billion on a reported basis, including $156 million in
restructuring-related and other charges. On an adjusted basis,
operating expenses were $3.2 billion, up 2% from the prior year.
Adjusted operating expense rate was 50.2%, 10 basis points above
Fiscal 2018, excluding restructuring-related and other charges from
both periods.
Operating Income. Operating income for Fiscal 2019 was
$562 million, including restructuring-related and other charges of
$163 million. On an adjusted basis, operating income was $725
million and operating margin was 11.5%, 80 basis points above the
prior year period, excluding restructuring-related and other
charges from both periods. Excluding currency impacts, adjusted
operating margin expanded 70 basis points in Fiscal 2019 compared
to last year.
- North America Operating Income. North
America operating income in Fiscal 2019 was $683 million and
operating margin was 21.3% on a reported basis, including
restructuring-related and other charges. On an adjusted basis,
North America operating income in Fiscal 2019 was $688 million and
operating margin was 21.5%, a 30 basis point improvement over last
year.
- Europe Operating Income. Europe
operating income in Fiscal 2019 was $390 million and operating
margin was 23.5% on a reported basis, including
restructuring-related and other charges. On an adjusted basis,
Europe operating income in Fiscal 2019 was $397 million and
operating margin was 23.9%, 120 basis points above last year.
- Asia Operating Income. Asia operating
income in Fiscal 2019 was $161 million and operating margin was
15.5% on a reported basis, including restructuring-related and
other charges. On an adjusted basis, Asia operating income in
Fiscal 2019 was $166 million and operating margin was 16.0%, 90
basis points above last year.
Net Income and EPS. In Fiscal 2019, on a reported basis,
net income was $431 million or $5.27 per diluted share. On an
adjusted basis, net income was $588 million, or $7.19 per diluted
share, excluding restructuring-related and other charges. This
compared to a net income of $163 million, or $1.97 per diluted
share on a reported basis, and net income of $498 million, or $6.03
per diluted share, excluding restructuring-related and other
charges, for Fiscal 2018.
For Fiscal 2019, on a reported basis, the Company had an
effective tax rate of 26% as compared to 67% in the prior year. The
adjusted effective tax rate was 21%, excluding
restructuring-related and other charges. This compared to an
adjusted effective tax rate of 24% for Fiscal 2018.
Balance Sheet and Cash Flow Review
The Company ended Fiscal 2019 with $2.0 billion in cash and
short and long-term investments and $689 million in total debt,
compared to $2.1 billion and $596 million, respectively, at the end
of Fiscal 2018.
Inventory at the end of Fiscal 2019 was $818 million, up 7%
compared to the prior year period. The increase reflected planned
investments to support global store expansion and earlier
deliveries versus the prior year to better align with customer
demand. Higher inventories also included increased shipments to our
Europe wholesale customers and factory stores as we continued to
restore our product assortment following significant pullbacks.
The Company had $198 million in capital expenditures in Fiscal
2019, compared to $162 million in the prior year period, primarily
related to our global retail and department store renovations, new
store openings, and continued enhancements to our global
information technology systems.
The Company repurchased approximately $70 million of Class A
Common Stock in the fourth quarter for a total of approximately
$470 million in Fiscal 2019.
Full Year Fiscal 2020 and First Quarter Outlook
The full year Fiscal 2020 and first quarter guidance excludes
restructuring-related and other charges, as described in the
“Non-U.S. GAAP Financial Measures” section of this press
release.
For Fiscal 2020, the Company expects net revenue to be up 2% to
3% on a constant currency basis. Foreign currency is expected to
negatively impact revenue growth by 90 to 100 basis points in
Fiscal 2020.
The Company expects operating margin for Fiscal 2020 to increase
40 to 60 basis points in constant currency, driven by modest gross
margin expansion and SG&A leverage. Foreign currency is
expected to negatively impact operating margin by about 10 to 20
basis points in Fiscal 2020.
In the first quarter of Fiscal 2020, the Company expects net
revenue to increase 3% to 5% in constant currency, benefiting from
the timing of Easter. Foreign currency is expected to negatively
impact revenue growth by about 190 to 200 basis points in the first
quarter of Fiscal 2020.
Operating margin for the first quarter of Fiscal 2020 is
expected to be up 30 to 50 basis points in constant currency.
Foreign currency is expected to negatively impact operating margin
by about 10 basis points in the first quarter of Fiscal 2020.
The full year Fiscal 2020 tax rate is expected to be about 22%.
First quarter of Fiscal 2020 tax rate is expected to be about
19%.
The Company is planning capital expenditures of approximately
$300 million for Fiscal 2020. Consistent with previous guidance,
the Company is planning to repurchase about $600 million of Class A
Common Stock shares in Fiscal 2020. Approximately $630 million
remained available under the Company’s authorized share repurchase
program at the end of Fiscal 2019.
With the expected repurchase activity in Fiscal 2020, the
Company's Board of Directors also approved additional shares to be
available for future stock repurchase activity, allowing the
Company to purchase up to an additional $600 million of Class A
Common Stock shares, subject to overall business and market
conditions.
Conference Call
As previously announced, the Company will host a conference call
and live online webcast today, Tuesday, May 14th, 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 2019 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, Tuesday, May 14, 2019
through 6:00 P.M. Eastern, Tuesday, May 21, 2019 by dialing
203-369-3800 or 800-388-4923 and entering passcode 8827.
ABOUT RALPH LAUREN
Ralph Lauren Corporation (NYSE:RL) is a global leader in the
design, marketing and distribution of premium lifestyle products in
five categories: apparel, accessories, home, fragrances, and
hospitality. For more than 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, Ralph Lauren
Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double
RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and
Club Monaco, among others, constitute one of the world's most
widely recognized families of consumer brands. For more
information, go to http://investor.ralphlauren.com.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release and oral statements made from time to time by
representatives of the Company may contain certain "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include the
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,” “can” 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; our ability to successfully implement our long-term
growth strategy; our ability to continue to expand and grow our
business internationally and the impact of related changes in our
customer, channel, and geographic sales mix as a result, as well as
our ability to accelerate growth in certain product categories; our
ability to open new retail stores and concession shops, as well as
enhance and expand our digital footprint and capabilities, all in
an effort to expand our direct-to-consumer presence; our ability to
respond to constantly changing fashion and retail trends and
consumer demands in a timely manner, develop products that resonate
with our existing customers and attract new customers, and execute
marketing and advertising programs that appeal to consumers; our
ability to effectively manage inventory levels and the increasing
pressure on our margins in a highly promotional retail environment;
our ability to continue to maintain our brand image and reputation
and protect our trademarks; our ability to competitively price our
products and create an acceptable value proposition for consumers;
the impact to our business resulting from changes in consumers'
ability, willingness, or preferences to purchase discretionary
items and luxury retail products, which tends to decline during
recessionary periods, and our ability to accurately forecast
consumer demand, the failure of which could result in either a
build-up or shortage of inventory; our ability to achieve
anticipated operating enhancements and cost reductions from our
restructuring plans, as well as the impact to our business
resulting from restructuring-related charges, which may be dilutive
to our earnings in the short term; 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; a variety of legal, regulatory, tax,
political, and economic risks, including risks related to the
importation and exportation of products 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 potential impact to our
business resulting from the imposition of additional duties,
tariffs, taxes, and other charges or barriers to trade, including
those resulting from current trade developments with China and the
related impact to global stock markets, as well as our ability to
implement mitigating sourcing strategies; 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; the impact to our
business resulting from increases in the costs of raw materials,
transportation, and labor, including wages, healthcare, and other
benefit-related costs; 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; our efforts to
successfully enhance, upgrade, and/or transition our global
information technology systems and digital commerce platforms;
changes in our tax obligations and effective tax rate due to a
variety of other factors, including potential additional changes in
U.S. or foreign tax laws and regulations, accounting rules, or the
mix and level of earnings by jurisdiction in future periods that
are not currently known or anticipated; our exposure to currency
exchange rate fluctuations from both a transactional and
translational perspective; 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 of economic, political, and
other conditions on us, our customers, suppliers, vendors, and
lenders; the potential impact to our business if any of our
distribution centers were to become inoperable or inaccessible; the
potential impact on our operations and on our suppliers and
customers resulting from natural or man-made disasters; 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 access sources of liquidity
to provide for our cash needs, including our debt obligations, tax
obligations, payment of dividends, capital expenditures, and
potential repurchases of our Class A common stock, as well as the
ability of our customers, suppliers, vendors, and lenders to access
sources of liquidity to provide for their own cash needs; 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 intention to introduce new products or brands, or
enter into or renew alliances; changes in the business of, and our
relationships with, major department store customers and licensing
partners; our ability to make certain strategic acquisitions and
successfully integrate the acquired businesses into our existing
operations; 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.
RALPH LAUREN CORPORATION CONSOLIDATED BALANCE
SHEETS Prepared in accordance with U.S. Generally Accepted
Accounting Principles (in millions) (Audited)
March 30, March
31, 2019 2018 ASSETS
Current assets: Cash and cash equivalents $ 584.1 $ 1,304.6
Short-term investments 1,403.4 699.4 Accounts receivable, net of
allowances 398.1 421.4 Inventories 817.8 761.3 Income tax
receivable 32.1 38.0 Prepaid expenses and other current assets
359.3 323.7 Total current assets
3,594.8 3,548.4 Property and equipment, net 1,039.2 1,186.3
Deferred tax assets 67.0 86.6 Goodwill 919.6 950.5 Intangible
assets, net 163.7 188.0 Other non-current assets
(a)
158.5 183.5
Total assets $
5,942.8 $ 6,143.3
LIABILITIES AND
EQUITY Current liabilities: Short-term debt $ - $ 10.1 Current
portion of long-term debt - 298.1 Accounts payable 202.3 165.6
Income tax payable 29.4 30.0 Accrued expenses and other current
liabilities 968.4 1,083.4 Total
current liabilities 1,200.1 1,587.2 Long-term debt 689.1
288.0 Income tax payable 146.7 124.8 Non-current liability for
unrecognized tax benefits 78.8 79.2 Other non-current liabilities
540.9 606.7 Total liabilities
2,655.6 2,685.9 Equity: Common
stock 1.3 1.3 Additional paid-in-capital 2,493.8 2,383.4 Retained
earnings 5,979.1 5,752.2 Treasury stock, Class A, at cost (5,083.6
) (4,581.0 ) Accumulated other comprehensive loss (103.4 )
(98.5 ) Total equity 3,287.2
3,457.4
Total liabilities and equity $ 5,942.8
$ 6,143.3 Net Cash (incl. LT
Investments) 1,343.3 1,494.0 Cash & Investments (ST & LT)
2,032.4 2,090.2 Net Cash (excl. LT Investments) 1,298.4
1,407.8 Cash & ST Investments 1,987.5 2,004.0
(a)
Includes non-current investments of: $ 44.9 $ 86.2
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 March 30, March
31, 2019 2018 North America $ 708.4
$ 759.3 Europe 434.9 420.0 Asia 273.5 256.8 Other non-reportable
segments 88.9 93.1
Net
revenues 1,505.7 1,529.2 Cost of goods sold
(604.2 ) (620.7 )
Gross profit 901.5 908.5
Selling, general, and administrative expenses (809.4 )
(828.6 ) Impairment of assets (12.5 ) (25.2 )
Restructuring and other charges (51.7 ) (29.3 )
Total other operating expenses, net (873.6 ) (883.1 )
Operating income 27.9 25.4 Interest expense
(5.1 ) (3.8 ) Interest income 11.3 4.8 Other income
(expense), net 1.2 (1.5 )
Income
before income taxes 35.3 24.9 Income tax benefit
(provision) (3.7 ) 16.4
Net
income $ 31.6 $ 41.3
Net income per
common share - Basic $ 0.40 $ 0.51
Net
income per common share - Diluted $ 0.39 $ 0.50
Weighted average common shares outstanding - Basic
79.0 81.7 Weighted average common
shares outstanding - Diluted 80.1 82.8
Dividends declared per share $ 0.625 $ 0.50
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 March 30, March
31, 2019 2018 North America $
3,202.9 $ 3,231.0 Europe 1,659.9 1,585.0 Asia 1,041.0 933.7 Other
non-reportable segments 409.2 432.6
Net revenues 6,313.0 6,182.3 Cost of goods
sold (2,427.0 ) (2,430.6 )
Gross profit
3,886.0 3,751.7 Selling, general, and administrative
expenses (3,168.3 ) (3,095.5 ) Impairment of assets (25.8 )
(50.0 ) Restructuring and other charges (130.1 )
(108.0 )
Total other operating expenses, net
(3,324.2 ) (3,253.5 )
Operating income 561.8 498.2
Interest expense (20.7 ) (18.2 ) Interest income 40.8
12.3 Other income (expense), net 0.6
(3.1 )
Income before income taxes 582.5 489.2
Income tax provision (151.6 ) (326.4 )
Net
income $ 430.9 $ 162.8
Net income per
common share - Basic $ 5.35 $ 1.99
Net
income per common share - Diluted $ 5.27 $ 1.97
Weighted average common shares outstanding - Basic
80.6 81.7 Weighted average common
shares outstanding - Diluted 81.7 82.5
Dividends declared per share $ 2.50 $ 2.00
RALPH LAUREN CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS Prepared in accordance with U.S.
Generally Accepted Accounting Principles (in millions)
(Audited) Twelve Months
Ended March 30, March 31, 2019 2018
Cash flows from operating activities: Net income $ 430.9 $
162.8 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization expense 281.3
295.2 Deferred income tax expense 8.5 84.1 Loss on sale of property
11.6 - Non-cash stock-based compensation expense 88.6 74.5 Non-cash
impairment of assets 25.8 50.0 Non-cash restructuring-related
inventory charges 7.2 7.6 Other non-cash charges 6.9 11.9 Changes
in operating assets and liabilities: Accounts receivable 10.1 34.5
Inventories (90.8 ) 57.8 Prepaid expenses and other current assets
(40.5 ) (15.1 ) Accounts payable and accrued liabilities (4.7 )
64.6 Income tax receivables and payables 29.7 165.1 Deferred income
(16.5 ) 1.4 Other balance sheet changes 35.7
(19.3 )
Net cash provided by operating activities
783.8 975.1
Cash flows from
investing activities: Capital expenditures (197.7 ) (161.6 )
Purchases of investments (3,030.8 ) (1,605.6 ) Proceeds from sales
and maturities of investments 2,357.5 1,582.7 Acquisitions and
ventures (4.5 ) (4.6 ) Proceeds from sale of property 20.0 -
Settlement of net investment hedges (23.8 ) -
Net cash used in investing activities (879.3 )
(189.1 )
Cash flows from financing activities:
Proceeds from issuance of short-term debt - 10.1 Repayments of
short-term debt (9.9 ) - Proceeds from the issuance of long-term
debt 398.1 - Repayments of long-term debt (300.0 ) - Payments of
capital lease obligations (19.6 ) (28.2 ) Payments of dividends
(190.7 ) (162.4 ) Repurchases of common stock, including shares
surrendered for tax withholdings (502.6 ) (17.1 ) Proceeds from
exercise of stock options 21.8 0.1 Other financing activities
(2.8 ) -
Net cash used in financing
activities (605.7 ) (197.5 ) Effect of
exchange rate changes on cash, cash equivalents, and restricted
cash (27.8 ) 55.2 Net increase (decrease) in
cash, cash equivalents, and restricted cash (729.0 ) 643.7 Cash,
cash equivalents, and restricted cash at beginning of period
1,355.5 711.8 Cash, cash equivalents, and
restricted cash at end of period $ 626.5 $ 1,355.5
RALPH LAUREN CORPORATION OTHER
INFORMATION (in millions) (Unaudited)
SEGMENT INFORMATION Net
revenues and operating income for the periods ended March 30, 2019
and March 31, 2018 for each segment were as follows:
Three Months Ended Twelve Months Ended March
30, March 31, March 30, March 31,
2019 2018 2019 2018 Net
revenues: North America $ 708.4 $ 759.3 $ 3,202.9 $ 3,231.0
Europe 434.9 420.0 1,659.9 1,585.0 Asia 273.5 256.8 1,041.0 933.7
Other non-reportable segments 88.9 93.1
409.2 432.6 Total net revenues $
1,505.7 $ 1,529.2 $ 6,313.0 $ 6,182.3
Operating income: North America $ 108.8 $ 128.3 $
682.8 $ 677.6 Europe 98.0 83.1 389.9 356.7 Asia 37.7 36.2 161.0
137.2 Other non-reportable segments 23.7 10.6
121.6 107.5 268.2 258.2 1,355.3
1,279.0 Unallocated corporate expenses (188.6 ) (203.5 )
(663.4 ) (672.8 ) Unallocated restructuring and other charges
(51.7 ) (29.3 ) (130.1 ) (108.0 ) Total
operating income $ 27.9 $ 25.4 $ 561.8 $ 498.2
RALPH LAUREN CORPORATION Constant
Currency Financial Measures (in millions)
(Unaudited)
Comparable Store Sales Data Three Months Ended
Twelve Months Ended March 30, 2019
% Change
March 31, 2018
% Change
Constant Currency Constant Currency North America
Digital commerce 6 % 10 % Excluding Digital commerce (7 %)
(2 %) Total North America (4 %) - % Europe Digital
commerce 6 % 6 % Excluding Digital commerce 5 % (1 %)
Total Europe 5 % (1 %) Asia Digital commerce 36 % 51 %
Excluding Digital commerce 4 % 4 % Total Asia 4 % 5 %
Total Ralph Lauren 1 % 1 %
Operating Segment Net Revenue Data Three
Months Ended % Change March 30, 2019 March 31,
2018 As Reported Constant Currency North America
$ 708.4 $ 759.3 (6.7 %) (6.5 %) Europe 434.9 420.0 3.5 % 11.1 %
Asia 273.5 256.8 6.5 % 9.9 % Other non-reportable segments
88.9 93.1 (4.6 %) (4.3 %) Net revenues $
1,505.7 $ 1,529.2 (1.5 %) 1.2 %
Twelve Months Ended % Change March 30, 2019
March 31, 2018 As Reported Constant Currency
North America $ 3,202.9 $ 3,231.0 (0.9 %) (0.8 %) Europe 1,659.9
1,585.0 4.7 % 6.5 % Asia 1,041.0 933.7 11.5 % 12.7 % Other
non-reportable segments 409.2 432.6
(5.4 %) (5.4 %) Net revenues $ 6,313.0 $ 6,182.3 2.1
% 2.8 %
RALPH LAUREN CORPORATION Revenue by
Sales Channel (in millions) (Unaudited)
Three Months Ended March 30, 2019
March 31, 2018 North
America
Europe Asia Other Total North
America
Europe Asia Other Total Sales
Channel: Wholesale $ 386.0 $ 242.7 $ 22.9 $ 4.6 $ 656.2 $ 429.7
$ 234.3 $ 20.2 $ 9.4 $ 693.6 Retail 322.4 192.2 250.6 42.7 807.9
329.6 185.7 236.6 40.0 791.9 Licensing - - -
41.6 41.6 - - - 43.7
43.7 Total net revenues $ 708.4 $ 434.9 $ 273.5 $ 88.9 $
1,505.7 $ 759.3 $ 420.0 $ 256.8 $ 93.1 $ 1,529.2
Twelve Months Ended March 30, 2019 March 31,
2018 North
America
Europe Asia Other Total North
America
Europe Asia Other Total Sales
Channel: Wholesale $ 1,514.4 $ 778.8 $ 71.1 $ 28.2 $ 2,392.5 $
1,571.4 $ 727.1 $ 59.6 $ 31.1 $ 2,389.2 Retail 1,688.5 881.1 969.9
208.3 3,747.8 1,659.6 857.9 874.1 224.8 3,616.4 Licensing -
- - 172.7 172.7 - -
- 176.7 176.7 Total net revenues $ 3,202.9 $
1,659.9 $ 1,041.0 $ 409.2 $ 6,313.0 $ 3,231.0 $ 1,585.0 $ 933.7 $
432.6 $ 6,182.3
RALPH LAUREN CORPORATION
Global Retail Store Network
March 30, March 31, 2019 2018
North
America
Ralph Lauren Stores 41 41 Polo Factory Stores 183 174
Total
Directly Operated Stores 224 215 Concessions 2 2
Europe
Ralph Lauren Stores 23 19 Polo Factory Stores 64 62
Total
Directly Operated Stores 87 81 Concessions 24 25
Asia
Ralph Lauren Stores 57 51 Polo Factory Stores 58 54
Total
Directly Operated Stores 115 105 Concessions 622
603
Other
Club Monaco Stores 75 71 Club Monaco Concessions 5 2
Global Directly
Operated Stores and Concessions
Ralph Lauren Stores 121 111 Polo Factory Stores 305 290 Club Monaco
Stores 75 71
Total Directly Operated Stores 501
472 Concessions 653 632
Global Licensed
Stores and Concessions
Ralph Lauren Licensed Stores 108 88 Club Monaco Licensed Stores 58
59
Total Licensed Stores 166 147 Licensed
Concessions 119 131
RALPH LAUREN CORPORATION
Reconciliation of Certain Non-U.S. GAAP Financial Measures
(in millions, except per share data) (Unaudited)
Three Months Ended
March 30, 2019 As
Reported
Total
Adjustments(a)(b)
As
Adjusted
Net revenues $ 1,505.7 $ - $ 1,505.7 Gross profit 901.5 4.1 905.6
Gross profit margin 59.9 % 60.1 % Total other operating expenses,
net (873.6 ) 64.2 (809.4 ) Operating expense margin 58.0 % 53.8 %
Operating income 27.9 68.3 96.2 Operating margin 1.9 % 6.4 % Income
before income taxes 35.3 68.3 103.6 Income tax provision (3.7 )
(14.5 ) (18.2 ) Effective tax rate 10.6 % 17.5 % Net income $ 31.6
$ 53.8 $ 85.4 Net income per diluted common share $ 0.39 $ 1.07
Weighted average common shares outstanding - Diluted 80.1 80.1
SEGMENT INFORMATION - OPERATING INCOME: North America $ 108.8 $ 3.6
$ 112.4 Operating margin 15.4 % 15.9 % Europe 98.0 5.0 103.0
Operating margin 22.5 % 23.7 % Asia 37.7 1.5 39.2 Operating margin
13.8 % 14.3 % Other non-reportable segments 23.7 1.2 24.9 Operating
margin 26.6 % 27.9 % Unallocated corporate expenses and
restructuring and other charges (240.3 ) 57.0
(183.3 ) Total operating income $ 27.9 $ 68.3
$ 96.2
Twelve Months Ended March 30,
2019 As
Reported
Total
Adjustments(a)(c)
As
Adjusted
Net revenues $ 6,313.0 $ - $ 6,313.0 Gross profit 3,886.0 7.2
3,893.2 Gross profit margin 61.6 % 61.7 % Total other operating
expenses, net (3,324.2 ) 155.9 (3,168.3 ) Operating expense margin
52.7 % 50.2 % Operating income 561.8 163.1 724.9 Operating margin
8.9 % 11.5 % Income before income taxes 582.5 163.1 745.6 Income
tax provision (151.6 ) (6.5 ) (158.1 ) Effective tax rate 26.0 %
21.2 % Net income $ 430.9 $ 156.6 $ 587.5 Net income per diluted
common share $ 5.27 $ 7.19 Weighted average common shares
outstanding - Diluted 81.7 81.7 SEGMENT INFORMATION - OPERATING
INCOME: North America $ 682.8 $ 5.0 $ 687.8 Operating margin 21.3 %
21.5 % Europe 389.9 6.8 396.7 Operating margin 23.5 % 23.9 % Asia
161.0 5.2 166.2 Operating margin 15.5 % 16.0 % Other non-reportable
segments 121.6 10.1 131.7 Operating margin 29.7 % 32.2 %
Unallocated corporate expenses and restructuring and other charges
(793.5 ) 136.0 (657.5 ) Total operating
income $ 561.8 $ 163.1 $ 724.9
RALPH LAUREN CORPORATION Reconciliation of Certain
Non-U.S. GAAP Financial Measures (in millions, except per
share data) (Unaudited)
Three Months Ended March 31, 2018
As
Reported
Total
Adjustments(a)(d)
As
Adjusted
Net revenues $ 1,529.2 $ - $ 1,529.2 Gross profit 908.5 6.3 914.8
Gross profit margin 59.4 % 59.8 % Total other operating expenses,
net (883.1 ) 54.5 (828.6 ) Operating expense margin 57.8 % 54.2 %
Operating income 25.4 60.8 86.2 Operating margin 1.7 % 5.6 % Income
before income taxes 24.9 60.8 85.7 Income tax benefit (provision)
16.4 (27.2 ) (10.8 ) Effective tax rate (66.0 %) 12.6 % Net income
$ 41.3 $ 33.6 $ 74.9 Net income per diluted common share $ 0.50 $
0.90 Weighted average common shares outstanding - Diluted 82.8 82.8
SEGMENT INFORMATION - OPERATING INCOME: North America $ 128.3 $ 4.1
$ 132.4 Operating margin 16.9 % 17.4 % Europe 83.1 1.4 84.5
Operating margin 19.8 % 20.1 % Asia 36.2 2.8 39.0 Operating margin
14.1 % 15.2 % Other non-reportable segments 10.6 13.7 24.3
Operating margin 11.3 % 26.1 % Unallocated corporate expenses and
restructuring and other charges (232.8 ) 38.8
(194.0 ) Total operating income $ 25.4 $ 60.8
$ 86.2
Twelve Months Ended March 31,
2018 As
Reported
Total
Adjustments(a)(e)
As
Adjusted
Net revenues $ 6,182.3 $ - $ 6,182.3 Gross profit 3,751.7 7.6
3,759.3 Gross profit margin 60.7 % 60.8 % Total other operating
expenses, net (3,253.5 ) 158.0 (3,095.5 ) Operating expense margin
52.6 % 50.1 % Operating income 498.2 165.6 663.8 Operating margin
8.1 % 10.7 % Income before income taxes 489.2 165.6 654.8 Income
tax provision (326.4 ) 169.1 (157.3 ) Effective tax rate 66.7 %
24.0 % Net income $ 162.8 $ 334.7 $ 497.5 Net income per diluted
common share $ 1.97 $ 6.03 Weighted average common shares
outstanding - Diluted 82.5 82.5 SEGMENT INFORMATION - OPERATING
INCOME: North America $ 677.6 $ 7.5 $ 685.1 Operating margin 21.0 %
21.2 % Europe 356.7 2.7 359.4 Operating margin 22.5 % 22.7 % Asia
137.2 3.9 141.1 Operating margin 14.7 % 15.1 % Other non-reportable
segments 107.5 22.8 130.3 Operating margin 24.9 % 30.1 %
Unallocated corporate expenses and restructuring and other charges
(780.8 ) 128.7 (652.1 ) Total operating
income $ 498.2 $ 165.6 $ 663.8
RALPH LAUREN CORPORATION Footnotes to Non-U.S. GAAP
Financial Measures (a) Adjustments for
inventory-related charges are recorded within cost of goods sold in
the consolidated statements of operations. Adjustments for
impairment-related charges are recorded within impairment of assets
in the consolidated statements of operations. Adjustments for
enactment-related charges recorded in connection with U.S. tax
reform and other income tax-related adjustments are recorded within
the income tax provision in the consolidated statements of
operations. Adjustments for all other charges are recorded within
restructuring and other charges in the consolidated statements of
operations.
(b) Adjustments for the three months
ended March 30, 2019 include (i) charges of $37.2 million recorded
in connection with the Company's restructuring plans, consisting of
restructuring charges, impairment of assets, and inventory-related
charges; (ii) additional impairment of assets of $9.3 million
related to underperforming stores as a result of on-going store
portfolio evaluation and the planned sale of a corporate asset; and
(iii) other charges of $21.8 million primarily related to the
Company's new sabbatical leave program and depreciation expense
associated with its former Polo store at 711 Fifth Avenue in New
York City.
(c) Adjustments for the twelve months
ended March 30, 2019 include (i) charges of $111.5 million recorded
in connection with the Company's restructuring plans, consisting of
restructuring charges, impairment of assets, inventory-related
charges, and a loss on sale of property; (ii) additional impairment
of assets of $15.1 million related to underperforming stores as a
result of on-going store portfolio evaluation and the planned sale
of a corporate asset; and (iii) other charges of $36.5 million
primarily related to the Company's new sabbatical leave program,
depreciation expense associated with its former Polo store at 711
Fifth Avenue in New York City, and its customs audit. The income
tax provision reflects enactment-related charges of $27.6 million
recorded in connection with U.S. tax reform.
(d)
Adjustments for the three months ended March 31, 2018 include (i)
charges of $23.8 million recorded in connection with the Way
Forward plan, consisting of restructuring charges, impairment of
assets, and inventory-related charges; (ii) additional impairment
of assets of $14.4 million related to underperforming stores as a
result of on-going store portfolio evaluation; (iii) an intangible
asset impairment charge of $8.8 million; and (iv) net other charges
of $13.8 million related to depreciation expense associated with
the Company's former Polo store at 711 Fifth Avenue in New York
City and its customs audit. The income tax benefit (provision)
reflects the reversal of enactment-related charges of $9.9 million
recorded in connection with U.S. tax reform.
(e)
Adjustments for the twelve months ended March 31, 2018 include (i)
charges of $102.8 million recorded in connection with the Way
Forward plan, consisting of restructuring charges, impairment of
assets, inventory-related charges, and accelerated stock-based
compensation expense; (ii) additional impairment of assets of $25.2
million related to underperforming stores as a result of on-going
store portfolio evaluation; (iii) an intangible asset impairment
charge of $8.8 million; and (iv) net other charges of $28.8 million
primarily related to depreciation expense associated with the
Company's former Polo store at 711 Fifth Avenue in New York City,
its customs audit, the departure of Mr. Stefan Larsson, and the
reversal of reserves associated with the settlement of certain
non-income tax issues. The income tax provision reflects
enactment-related charges of $221.4 million recorded in connection
with U.S. tax reform.
NON-U.S. GAAP FINANCIAL MEASURES
Since Ralph Lauren Corporation is a global company, the
comparability of its operating results reported in U.S. Dollars is
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
accounting principles generally accepted in the U.S. ("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 for assessing how its businesses performed
excluding the effects of foreign currency exchange rate
fluctuations. Management believes this information is useful to
investors for facilitating comparisons of operating results and
better identifying 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.
This earnings release also includes certain other non-U.S. GAAP
financial measures relating to the impact of charges and other
items as described herein. The Company uses non-U.S. GAAP financial
measures, among other things, to evaluate its operating performance
and to better represent the manner in which it 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. While the
Company considers 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.
Adjustments made during the fiscal periods presented include
charges recorded in connection with the Company’s restructuring
plans, as well as depreciation expense associated with the
Company’s former Polo store at 711 Fifth Avenue in New York City
recorded after the store closed during the first quarter of Fiscal
2018 in connection with the Way Forward plan. Although the Company
is no longer generating revenue or has any other economic activity
associated with its former Polo store, it continues to incur
depreciation expense due to its involvement at the time of
construction. Adjustments also include certain other charges
associated with other non-recurring events, as described in the
footnotes to the non-U.S. GAAP financial measures above. The income
tax provision has been adjusted for the tax-related effects of
these charges, which were calculated using the respective statutory
tax rates for each applicable jurisdiction, as well as
enactment-related charges recorded in connection with U.S. tax
reform, commonly referred to as the Tax Cuts and Jobs Act. Included
in this earnings release are reconciliations between the non-U.S.
GAAP financial measures and the most directly comparable U.S. GAAP
measures before and after these adjustments.
Additionally, the Company’s full year Fiscal 2020 and first
quarter Fiscal 2020 guidance excludes certain anticipated
restructuring-related and other charges. The Company is not able to
provide a full reconciliation of these non-U.S. GAAP financial
measures to U.S. GAAP because certain material items that impact
these measures, such as the timing and exact amount of charges
related to our restructuring plans, have not yet occurred or are
out of the Company’s control. Accordingly, a reconciliation of our
non-U.S. GAAP based financial measure guidance to the most directly
comparable U.S. GAAP measures is not available without unreasonable
effort. However, the Company has identified the estimated impact of
certain items excluded from its financial outlook. Specifically,
the Company’s financial outlook excludes estimated remaining pretax
charges of approximately $25 million to $50 million related to its
Fiscal 2019 Restructuring Plan.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190514005258/en/
Investor Relations:Corinna Van der Ghinst,
212-813-7868IR@ralphlauren.comOrCorporate
Communications:rl-press@ralphlauren.com
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