- Third Quarter Revenues Grew 1% to $1.8 Billion on a Reported
Basis and 2% in Constant Currency
- Earnings Per Diluted Share Increased Triple-Digits on a
Reported Basis and Double-Digits on an Adjusted Basis
- Operating Income Increased 16% on a Reported Basis and 3% on an
Adjusted Basis with Operating Margin Expansion
- The Company Repurchased $98 Million of Class A Common Stock
During the Third Quarter
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 $4.41 on a reported
basis and $2.86 on an adjusted basis, excluding
restructuring-related and other charges as well as the impact of
tax reform, for the third quarter of Fiscal 2020. This compared to
earnings per diluted share of $1.48 on a reported basis and $2.32
on an adjusted basis for the third quarter of Fiscal 2019.
"Creating style that endures and inspires our consumers guides
everything we do,” said Ralph Lauren, Executive Chairman and Chief
Creative Officer. "I am encouraged by how our global teams continue
to deliver on this mission as we elevate our iconic brand all over
the world.”
"We continue to make strong progress on our Next Great Chapter
plan amid a volatile backdrop, with third quarter results ahead of
our overall expectations, including better than expected revenues,
operating margin, and double-digit EPS growth," said Patrice
Louvet, President and Chief Executive Officer. "Over the important
holiday season, our teams consistently executed across each of our
strategic priorities, enabling us to elevate our brand and deliver
for our consumers across every touch point.”
We drove the following strategic initiatives in the third
quarter of Fiscal 2020:
- Win Over a New Generation of Consumers
- Increased marketing investment by 16% to last year to drive
brand awareness and engagement over the holiday season, led by
high-impact, 360° campaigns for our Ralph Lauren portfolio
- Elevated our brand and connected with consumers through our
Polo Sport Outdoors Limited Edition launch, "7 Days, 7 Drops"
holiday program on the North America Polo app, and amplification of
localized brand moments such as our live-streaming show featuring
Ayunga and a WeChat mini-program for Singles' Day in China
- Energize Core Products and Accelerate Under-Developed
Categories
- Average unit retail across our direct-to-consumer network was
up 6% in the third quarter, on top of a 9% increase last year,
consistent with our expectation of improving AUR growth throughout
Fiscal 2020
- Continued momentum in both core and under-developed categories,
led by solid sell-in and sell-out performance in our fleece and
outerwear programs this holiday
- Drive Targeted Expansion in Our Regions and Channels
- Drove positive growth in every region led by Europe and Asia,
with constant currency growth of 5% in each region, and slight
growth in North America. Excluding Hong Kong, Asia revenues were up
9% in constant currency
- Momentum in key long-term growth markets continued with
constant currency revenue growth of more than 30% in the Chinese
mainland, partly offset by a decline of approximately 30% in Hong
Kong due to business disruptions
- Lead With Digital
- Global digital revenue grew low double-digits to last year in
constant currency, exceeding our expectations across all three
regions, driven by double-digit growth in Europe and Asia with
North America improving to high single-digit growth
- Continued expansion of digital partnerships and capabilities,
including the launch of our mobile app in the UK, Buy Online-Ship
From Store fulfillment in China, and improvements in mobile and
personalization on ralphlauren.com
- Operate With Discipline to Fuel Growth
- Adjusted operating margins expanded 10 basis points in the
quarter, with 60 basis points of gross margin expansion partly
offset by continued investments in marketing and global store
expansion
- Inventories were flat in constant currency at the end of the
third quarter, reflecting strong sell-throughs, improved product
assortment, and supply chain initiatives
- Announced a commitment to power all of our globally owned and
operated offices, distribution centers and stores with 100%
renewable electricity by 2025
Third Quarter Fiscal 2020 Income Statement Review
Net Revenue. In the third quarter of Fiscal 2020, revenue
increased by 1% to $1.8 billion on a reported basis and was up 2%
in constant currency, with growth across all regions led by Europe
and Asia. Foreign currency negatively impacted revenue growth by
approximately 60 basis points in the third quarter.
Revenue performance for the Company’s reportable segments in the
third quarter compared to the prior year period was as follows:
- North America Revenue. North America revenue in the third
quarter increased slightly to $911 million. In retail, comparable
store sales in North America were up 4%, driven by a 4% increase in
brick and mortar stores and a 6% increase at ralphlauren.com. North
America wholesale revenue decreased 8%.
- Europe Revenue. Europe revenue in the third quarter increased
3% to $438 million on a reported basis and 5% in constant currency.
In retail, comparable store sales in Europe were up 3%, driven by a
2% increase in brick and mortar stores and a 15% increase in
digital commerce. Europe wholesale revenue increased 2% on a
reported basis and 5% in constant currency.
- Asia Revenue. Asia revenue in the third quarter increased 5% to
$290 million on both a reported and constant currency basis, driven
by solid growth in retail. Comparable store sales in Asia decreased
1%, with growth in both brick and mortar and digital commerce
operations more than offset by a decline in Hong Kong. Excluding
Hong Kong, comparable store sales increased 2%.
Gross Profit. Gross profit for the third quarter of
Fiscal 2020 was $1.1 billion and gross margin was 62.2%. Adjusted
gross margin was 60 basis points above the prior year on both a
reported and constant currency basis. Gross margin benefited from
better pricing and promotions as well as favorable channel and
geographic mix.
Operating Expenses. Operating expenses in the third
quarter of Fiscal 2020 were $865 million on a reported basis,
including $21 million in restructuring-related and other charges.
On an adjusted basis, excluding such charges, operating expenses
were $843 million, up 2% to last year.
Adjusted operating expense rate was 48.2%, 50 basis points above
the prior year period, excluding restructuring-related and other
charges. This increase was primarily due to increased marketing
investments and new store expansion.
Operating Income. Operating income for the third quarter
of Fiscal 2020 was $224 million on a reported basis, including
restructuring-related and other charges of $21 million, and
operating margin was 12.8%. Adjusted operating income was $246
million and adjusted operating margin was 14.0%, 10 basis points
above the prior year, excluding restructuring-related and other
charges from both periods.
- North America Operating Income. North America operating income
in the third quarter was $203 million on both a reported and
adjusted basis. Adjusted North America operating margin was 22.3%,
down 30 basis points from last year.
- Europe Operating Income. Europe operating income in the third
quarter was $112 million on both a reported and adjusted basis.
Adjusted Europe operating margin was 25.6%, up 300 basis points to
the prior year period on both a reported and constant currency
basis.
- Asia Operating Income. Asia operating income in the third
quarter was $47 million on a reported basis and $49 million on
adjusted basis. Adjusted Asia operating margin was 16.9%, down 50
basis points to the prior year. In constant currency, adjusted
operating margin decreased 70 basis points, primarily reflecting
the impact of Hong Kong.
Net Income and EPS. On a reported basis, net income in
the third quarter of Fiscal 2020 was $334 million, or $4.41 per
diluted share. On an adjusted basis, net income was $217 million,
or $2.86 per diluted share, excluding the impact of tax reform and
restructuring-related and other charges. This compared to net
income of $120 million, or $1.48 per diluted share on a reported
basis, and net income of $188 million, or $2.32 per diluted share
on an adjusted basis, for the third quarter of Fiscal 2019.
In the third quarter of Fiscal 2020, the Company had an
effective tax rate of approximately (45%) on a reported basis and
14% on an adjusted basis, excluding the impact of tax reform and
restructuring-related and other charges. This compared to an
effective tax rate of approximately 40% on a reported basis and 23%
on an adjusted basis in the prior year period. The lower adjusted
effective tax rate compared to the prior year primarily reflected
the settlement of certain international income tax audits.
Balance Sheet and Cash Flow Review
The Company ended the third quarter of Fiscal 2020 with $1.9
billion in cash and short and long-term investments and $694
million in total debt, compared to $2.1 billion and $687 million,
respectively, at the end of the third quarter of Fiscal 2019.
Inventory at the end of the third quarter of Fiscal 2020 was
$905 million, down 1% compared to the prior year period.
The Company repurchased approximately $98 million of Class A
Common Stock during the third quarter. Approximately $732 million
remained available under the Company’s authorized share repurchase
programs at the end of the third quarter.
Full Year Fiscal 2020 and Fourth Quarter Outlook
The full year Fiscal 2020 and fourth 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 growth in the
range of 2% to 3% on a constant currency basis. Foreign currency is
expected to negatively impact revenue growth by approximately 110
to 130 basis points in Fiscal 2020. This outlook continues to
include the impact of tariffs and business disruptions in Hong Kong
but does not include potential impact from the coronavirus outbreak
in Asia, given the dynamic situation that we are monitoring closely
with regards to our employees, consumers, and supply chain.
The Company now expects operating margin expansion for Fiscal
2020 to be at the high end of our previous guidance of 40 to 60
basis points in constant currency. Foreign currency is expected to
negatively impact operating margin by about 10 basis points in
Fiscal 2020.
In the fourth quarter of Fiscal 2020, the Company expects net
revenue to be up slightly on both a constant currency and reported
basis. Foreign currency is expected to negatively impact revenue
growth by approximately 50 basis points in the fourth quarter of
Fiscal 2020.
Operating margin for the fourth quarter of Fiscal 2020 is
expected to be up slightly on both a constant currency and reported
basis. Foreign currency is expected to have a minimal impact on
operating margin in the fourth quarter.
The Company now expects the full year Fiscal 2020 tax rate to be
approximately 20%. The tax rate for the fourth quarter of Fiscal
2020 is estimated at approximately 26%.
Conference Call
As previously announced, the Company will host a conference call
and live online webcast today, Tuesday, February 4th, 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 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 Third Quarter 2020 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, February 4,
2020 through 6:00 P.M. Eastern, Tuesday, February 11, 2020 by
dialing 203-369-3078 or 888-566-0632 and entering passcode
1957.
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, footwear & 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 https://corporate.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, earnings, and citizenship and sustainability
goals and are indicated by words or phrases such as "anticipate,"
"outlook," "estimate," "expect," "project," "we believe," "can,"
"will," 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 exit from the European
Union and the uncertainty surrounding its future relationship with
the European Union, including trade agreements, 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 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, including business disruptions in Hong Kong resulting from
ongoing protests and political unrest; 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 man-made or
natural disasters, such as severe weather, geological events, and
epidemic diseases such as the coronavirus outbreak, and other
catastrophic events; 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 achieve our goals regarding
environmental, social, and governance practices; 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
(Unaudited)
December 28, 2019
March 30, 2019
December 29, 2018
(millions)
ASSETS
Current assets:
Cash and cash equivalents
$
1,079.9
$
584.1
$
680.5
Short-term investments
828.5
1,403.4
1,382.5
Accounts receivable, net of allowances
349.4
398.1
304.0
Inventories
904.6
817.8
914.5
Income tax receivable
32.3
32.1
34.4
Prepaid expenses and other current
assets
254.2
359.3
380.5
Total current assets
3,448.9
3,594.8
3,696.4
Property and equipment, net
1,028.2
1,039.2
1,079.3
Operating lease right-of-use assets
1,573.4
—
—
Deferred tax assets
240.6
67.0
76.5
Goodwill
917.1
919.6
924.8
Intangible assets, net
146.2
163.7
169.5
Other non-current assets(a)
91.5
158.5
145.5
Total assets
$
7,445.9
$
5,942.8
$
6,092.0
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
$
298.1
$
—
$
—
Accounts payable
267.6
202.3
169.1
Income tax payable
69.1
29.4
67.6
Current operating lease liabilities
287.5
—
—
Accrued expenses and other current
liabilities
853.1
968.4
1,037.0
Total current liabilities
1,775.4
1,200.1
1,273.7
Long-term debt
396.3
689.1
686.8
Long-term operating lease liabilities
1,637.5
—
—
Income tax payable
132.7
146.7
152.2
Non-current liability for unrecognized tax
benefits
70.6
78.8
88.5
Other non-current liabilities
316.9
540.9
536.9
Total liabilities
4,329.4
2,655.6
2,738.1
Equity:
Common stock
1.3
1.3
1.3
Additional paid-in-capital
2,566.7
2,493.8
2,470.5
Retained earnings
6,292.8
5,979.1
5,996.3
Treasury stock, Class A, at cost
(5,625.7
)
(5,083.6
)
(5,012.9
)
Accumulated other comprehensive loss
(118.6
)
(103.4
)
(101.3
)
Total equity
3,116.5
3,287.2
3,353.9
Total liabilities and equity
$
7,445.9
$
5,942.8
$
6,092.0
Net Cash (incl. LT Investments)
$
1,214.0
$
1,343.3
$
1,421.9
Cash & Investments (ST & LT)
1,908.4
2,032.4
2,108.7
Net Cash (excl. LT Investments)
1,214.0
1,298.4
1,376.2
Cash & ST Investments
1,908.4
1,987.5
2,063.0
(a) Includes non-current investments
of:
$
—
$
44.9
$
45.7
RALPH LAUREN
CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
Prepared in accordance with
U.S. Generally Accepted Accounting Principles
(Unaudited)
Three Months Ended
December 28, 2019
December 29, 2018
(millions, except per share
data)
North America
$
910.6
$
908.7
Europe
437.8
425.0
Asia
289.6
274.8
Other non-reportable segments
112.7
117.3
Net revenues
1,750.7
1,725.8
Cost of goods sold
(661.6
)
(666.3
)
Gross profit
1,089.1
1,059.5
Selling, general, and administrative
expenses
(843.3
)
(823.4
)
Impairment of assets
(14.4
)
(2.2
)
Restructuring and other charges
(7.0
)
(40.1
)
Total other operating expenses,
net
(864.7
)
(865.7
)
Operating income
224.4
193.8
Interest expense
(4.2
)
(5.2
)
Interest income
7.3
9.9
Other income, net
2.9
1.0
Income before income taxes
230.4
199.5
Income tax benefit (provision)
103.7
(79.5
)
Net income
$
334.1
$
120.0
Net income per common share:
Basic
$
4.47
$
1.50
Diluted
$
4.41
$
1.48
Weighted average common shares
outstanding:
Basic
74.7
80.2
Diluted
75.8
81.2
Dividends declared per share
$
0.6875
$
0.625
RALPH LAUREN
CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
Prepared in accordance with
U.S. Generally Accepted Accounting Principles
(Unaudited)
Nine Months Ended
December 28, 2019
December 29, 2018
(millions, except per share
data)
North America
$
2,511.2
$
2,494.5
Europe
1,278.8
1,245.0
Asia
803.5
767.5
Other non-reportable segments
292.2
300.3
Net revenues
4,885.7
4,807.3
Cost of goods sold
(1,826.8
)
(1,822.8
)
Gross profit
3,058.9
2,984.5
Selling, general, and administrative
expenses
(2,385.3
)
(2,358.9
)
Impairment of assets
(21.7
)
(13.3
)
Restructuring and other charges
(51.1
)
(78.4
)
Total other operating expenses,
net
(2,458.1
)
(2,450.6
)
Operating income
600.8
533.9
Interest expense
(12.8
)
(15.6
)
Interest income
28.5
29.5
Other expense, net
(2.9
)
(0.6
)
Income before income taxes
613.6
547.2
Income tax benefit (provision)
19.7
(147.9
)
Net income
$
633.3
$
399.3
Net income per common share:
Basic
$
8.28
$
4.92
Diluted
$
8.13
$
4.85
Weighted average common shares
outstanding:
Basic
76.5
81.1
Diluted
77.9
82.3
Dividends declared per share
$
2.0625
$
1.875
RALPH LAUREN
CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
Prepared in accordance with
U.S. Generally Accepted Accounting Principles
(Unaudited)
Nine Months Ended
December 28, 2019
December 29, 2018
(millions)
Cash flows from operating
activities:
Net income
$
633.3
$
399.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
201.0
212.0
Deferred income tax expense (benefit)
(155.7
)
13.7
Loss on sale of property
—
11.6
Non-cash stock-based compensation
expense
72.9
65.3
Non-cash impairment of assets
21.7
13.3
Non-cash restructuring-related inventory
charges
1.0
3.1
Other non-cash charges
1.6
7.6
Changes in operating assets and
liabilities:
Accounts receivable
46.9
105.9
Inventories
(90.0
)
(179.3
)
Prepaid expenses and other current
assets
(30.4
)
(75.7
)
Accounts payable and accrued
liabilities
56.3
24.9
Income tax receivables and payables
16.1
82.7
Deferred income
0.6
(10.6
)
Other balance sheet changes
(27.3
)
9.3
Net cash provided by operating
activities
748.0
683.1
Cash flows from investing
activities:
Capital expenditures
(216.0
)
(149.2
)
Purchases of investments
(890.1
)
(2,627.8
)
Proceeds from sales and maturities of
investments
1,510.3
1,975.2
Acquisitions and ventures
0.9
(4.5
)
Proceeds from sale of property
20.8
20.0
Settlement of net investment hedges
—
(23.8
)
Net cash provided by (used in)
investing activities
425.9
(810.1
)
Cash flows from financing
activities:
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 finance lease obligations
(10.6
)
(14.8
)
Payments of dividends
(153.2
)
(141.6
)
Repurchases of common stock, including
shares surrendered for tax withholdings
(542.1
)
(431.9
)
Proceeds from exercise of stock
options
—
21.8
Other financing activities
(0.9
)
(2.8
)
Net cash used in financing
activities
(706.8
)
(481.1
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(4.2
)
(23.9
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
462.9
(632.0
)
Cash, cash equivalents, and restricted
cash at beginning of period
626.5
1,355.5
Cash, cash equivalents, and restricted
cash at end of period
$
1,089.4
$
723.5
RALPH LAUREN
CORPORATION
SEGMENT INFORMATION
(Unaudited)
Effective beginning in the first quarter
of Fiscal 2020, operating results related to the Company's business
in Latin America are included within its Europe segment due to a
change in the way in which the Company manages this business.
Previously, such results were included within the Company's other
non-reportable segments. All prior period segment information has
been recast to reflect this change on a comparative basis.
Three Months Ended
Nine Months Ended
December 28, 2019
December 29, 2018
December 28, 2019
December 29, 2018
(millions)
Net revenues:
North America
$
910.6
$
908.7
$
2,511.2
$
2,494.5
Europe
437.8
425.0
1,278.8
1,245.0
Asia
289.6
274.8
803.5
767.5
Other non-reportable segments
112.7
117.3
292.2
300.3
Total net revenues
$
1,750.7
$
1,725.8
$
4,885.7
$
4,807.3
Operating income:
North America
$
202.7
$
204.3
$
560.5
$
574.0
Europe
111.9
92.6
331.9
294.2
Asia
46.6
47.9
135.6
123.3
Other non-reportable segments
29.5
41.4
85.2
95.6
390.7
386.2
1,113.2
1,087.1
Unallocated corporate expenses
(159.3
)
(152.3
)
(461.3
)
(474.8
)
Unallocated restructuring and other
charges
(7.0
)
(40.1
)
(51.1
)
(78.4
)
Total operating income
$
224.4
$
193.8
$
600.8
$
533.9
RALPH LAUREN
CORPORATION
CONSTANT CURRENCY FINANCIAL
MEASURES
(Unaudited)
Comparable Store Sales Data
December 28, 2019
Three Months Ended
Nine Months Ended
% Change
% Change
Constant Currency
Constant Currency
North America:
Digital commerce
6
%
3
%
Excluding digital commerce
4
%
2
%
Total North America
4
%
2
%
Europe:
Digital commerce
15
%
16
%
Excluding digital commerce
2
%
2
%
Total Europe
3
%
3
%
Asia:
Digital commerce
36
%
25
%
Excluding digital commerce
(2
%)
1
%
Total Asia
(1
%)
2
%
Total Ralph Lauren Corporation
2
%
2
%
Operating Segment Net Revenues
Data
Three Months Ended
% Change
December 28, 2019
December 29, 2018
As
Reported
Constant
Currency
(millions)
North America
$
910.6
$
908.7
0.2
%
0.2
%
Europe
437.8
425.0
3.0
%
5.4
%
Asia
289.6
274.8
5.4
%
5.1
%
Other non-reportable segments
112.7
117.3
(3.8
%)
(3.8
%)
Net revenues
$
1,750.7
$
1,725.8
1.4
%
2.0
%
Nine Months Ended
% Change
December 28, 2019
December 29, 2018
As
Reported
Constant
Currency
(millions)
North America
$
2,511.2
$
2,494.5
0.7
%
0.7
%
Europe
1,278.8
1,245.0
2.7
%
6.8
%
Asia
803.5
767.5
4.7
%
5.8
%
Other non-reportable segments
292.2
300.3
(2.7
%)
(2.5
%)
Net revenues
$
4,885.7
$
4,807.3
1.6
%
2.9
%
RALPH LAUREN
CORPORATION
NET REVENUES BY SALES
CHANNEL
(Unaudited)
Three Months Ended
December 28, 2019
December 29, 2018
North
America
Europe
Asia
Other
Total
North
America
Europe
Asia
Other
Total
(millions)
Sales Channel:
Retail
$
575.0
$
257.2
$
274.1
$
63.9
$
1,170.2
$
543.2
$
248.7
$
261.4
$
68.3
$
1,121.6
Wholesale
335.6
180.6
15.5
2.9
534.6
365.5
176.3
13.4
1.3
556.5
Licensing
—
—
—
45.9
45.9
—
—
—
47.7
47.7
Net revenues
$
910.6
$
437.8
$
289.6
$
112.7
$
1,750.7
$
908.7
$
425.0
$
274.8
$
117.3
$
1,725.8
Nine Months Ended
December 28, 2019
December 29, 2018
North
America
Europe
Asia
Other
Total
North
America
Europe
Asia
Other
Total
(millions)
Sales Channel:
Retail
$
1,436.0
$
714.3
$
753.9
$
158.8
$
3,063.0
$
1,366.1
$
688.9
$
719.3
$
165.6
$
2,939.9
Wholesale
1,075.2
564.5
49.6
6.6
1,695.9
1,128.4
556.1
48.2
3.6
1,736.3
Licensing
—
—
—
126.8
126.8
—
—
—
131.1
131.1
Net revenues
$
2,511.2
$
1,278.8
$
803.5
$
292.2
$
4,885.7
$
2,494.5
$
1,245.0
$
767.5
$
300.3
$
4,807.3
RALPH LAUREN
CORPORATION
GLOBAL RETAIL STORE
NETWORK
(Unaudited)
December 28, 2019
December 29, 2018
North
America
Ralph Lauren Stores
41
42
Polo Factory Stores
191
185
Total Directly Operated Stores
232
227
Concessions
2
2
Europe
Ralph Lauren Stores
30
23
Polo Factory Stores
64
64
Total Directly Operated Stores
94
87
Concessions
29
25
Asia
Ralph Lauren Stores
67
55
Polo Factory Stores
63
56
Total Directly Operated Stores
130
111
Concessions
620
619
Other
Club Monaco Stores
76
76
Club Monaco Concessions
4
5
Global Directly
Operated Stores and Concessions
Ralph Lauren Stores
138
120
Polo Factory Stores
318
305
Club Monaco Stores
76
76
Total Directly Operated Stores
532
501
Concessions
655
651
Global Licensed
Stores
Total Licensed Stores
257
250
RALPH LAUREN
CORPORATION
RECONCILIATION OF NON-U.S.
GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
December 28, 2019
As
Reported
Total
Adjustments(a)(b)
As
Adjusted
(millions, except per share
data)
Net revenues
$
1,750.7
$
—
$
1,750.7
Gross profit
1,089.1
—
1,089.1
Gross profit margin
62.2
%
62.2
%
Total other operating expenses, net
(864.7
)
21.4
(843.3
)
Operating expense margin
49.4
%
48.2
%
Operating income
224.4
21.4
245.8
Operating margin
12.8
%
14.0
%
Income before income taxes
230.4
21.4
251.8
Income tax benefit (provision)
103.7
(138.7
)
(35.0
)
Effective tax rate
(45.1
%)
13.9
%
Net income
$
334.1
$
(117.3
)
$
216.8
Net income per diluted common share
$
4.41
$
2.86
Weighted average common shares outstanding
- Diluted
75.8
75.8
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
202.7
$
0.4
$
203.1
Operating margin
22.3
%
22.3
%
Europe
111.9
—
111.9
Operating margin
25.6
%
25.6
%
Asia
46.6
2.4
49.0
Operating margin
16.1
%
16.9
%
Other non-reportable segments
29.5
8.6
38.1
Operating margin
26.2
%
33.8
%
Unallocated corporate expenses and
restructuring & other charges
(166.3
)
10.0
(156.3
)
Total operating income
$
224.4
$
21.4
$
245.8
Nine Months Ended
December 28, 2019
As
Reported
Total
Adjustments(a)(c)
As
Adjusted
(millions, except per share
data)
Net revenues
$
4,885.7
$
—
$
4,885.7
Gross profit
3,058.9
1.0
3,059.9
Gross profit margin
62.6
%
62.6
%
Total other operating expenses, net
(2,458.1
)
72.8
(2,385.3
)
Operating expense margin
50.3
%
48.8
%
Operating income
600.8
73.8
674.6
Operating margin
12.3
%
13.8
%
Income before income taxes
613.6
73.8
687.4
Income tax benefit (provision)
19.7
(150.4
)
(130.7
)
Effective tax rate
(3.2
%)
19.0
%
Net income
$
633.3
$
(76.6
)
$
556.7
Net income per diluted common share
$
8.13
$
7.15
Weighted average common shares outstanding
- Diluted
77.9
77.9
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
560.5
$
0.4
$
560.9
Operating margin
22.3
%
22.3
%
Europe
331.9
0.1
332.0
Operating margin
26.0
%
26.0
%
Asia
135.6
3.3
138.9
Operating margin
16.9
%
17.3
%
Other non-reportable segments
85.2
12.4
97.6
Operating margin
29.2
%
33.4
%
Unallocated corporate expenses and
restructuring & other charges
(512.4
)
57.6
(454.8
)
Total operating income
$
600.8
$
73.8
$
674.6
RALPH LAUREN
CORPORATION
RECONCILIATION OF NON-U.S.
GAAP FINANCIAL MEASURES (Continued)
(Unaudited)
Three Months Ended
December 29, 2018
As
Reported
Total
Adjustments(a)(d)
As
Adjusted
(millions, except per share
data)
Net revenues
$
1,725.8
$
—
$
1,725.8
Gross profit
1,059.5
3.1
1,062.6
Gross profit margin
61.4
%
61.6
%
Total other operating expenses, net
(865.7
)
42.3
(823.4
)
Operating expense margin
50.2
%
47.7
%
Operating income
193.8
45.4
239.2
Operating margin
11.2
%
13.9
%
Income before income taxes
199.5
45.4
244.9
Income tax provision
(79.5
)
22.6
(56.9
)
Effective tax rate
39.8
%
23.2
%
Net income
$
120.0
$
68.0
$
188.0
Net income per diluted common share
$
1.48
$
2.32
Weighted average common shares outstanding
- Diluted
81.2
81.2
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
204.3
$
1.1
$
205.4
Operating margin
22.5
%
22.6
%
Europe
92.6
3.4
96.0
Operating margin
21.8
%
22.6
%
Asia
47.9
—
47.9
Operating margin
17.4
%
17.4
%
Other non-reportable segments
41.4
0.5
41.9
Operating margin
35.3
%
35.8
%
Unallocated corporate expenses and
restructuring & other charges
(192.4
)
40.4
(152.0
)
Total operating income
$
193.8
$
45.4
$
239.2
Nine Months Ended
December 29, 2018
As
Reported
Total
Adjustments(a)(e)
As
Adjusted
(millions, except per share
data)
Net revenues
$
4,807.3
$
—
$
4,807.3
Gross profit
2,984.5
3.1
2,987.6
Gross profit margin
62.1
%
62.1
%
Total other operating expenses, net
(2,450.6
)
91.7
(2,358.9
)
Operating expense margin
51.0
%
49.1
%
Operating income
533.9
94.8
628.7
Operating margin
11.1
%
13.1
%
Income before income taxes
547.2
94.8
642.0
Income tax provision
(147.9
)
8.0
(139.9
)
Effective tax rate
27.0
%
21.8
%
Net income
$
399.3
$
102.8
$
502.1
Net income per diluted common share
$
4.85
$
6.10
Weighted average common shares outstanding
- Diluted
82.3
82.3
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
574.0
$
1.4
$
575.4
Operating margin
23.0
%
23.1
%
Europe
294.2
4.9
299.1
Operating margin
23.6
%
24.0
%
Asia
123.3
3.7
127.0
Operating margin
16.1
%
16.5
%
Other non-reportable segments
95.6
5.8
101.4
Operating margin
31.9
%
33.8
%
Unallocated corporate expenses and
restructuring & other charges
(553.2
)
79.0
(474.2
)
Total operating income
$
533.9
$
94.8
$
628.7
RALPH LAUREN CORPORATION FOOTNOTES TO
RECONCILIATION OF 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 Swiss tax
reform and the Tax Cuts and Jobs Act (the "TCJA") are recorded
within the income tax benefit (provision) in the consolidated
statement 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
December 28, 2019 include (i) charges of $7.0 million recorded in
connection with the Company's restructuring plans, consisting of
restructuring charges and impairment of assets; (ii) additional
impairment of assets of $11.4 million related to underperforming
stores as a result of on-going store portfolio evaluation; and
(iii) other charges of $3.0 million primarily related to rent and
occupancy costs associated with certain previously exited real
estate locations for which the related lease agreements have not
yet expired. Additionally, the income tax benefit (provision)
reflects a one-time benefit of $134.1 million recorded in
connection with Swiss tax reform.
(c)
Adjustments for the nine months ended
December 28, 2019 include (i) charges of $31.6 million recorded in
connection with the Company's restructuring plans, consisting of
restructuring charges, impairment of assets, inventory-related
charges, and accelerated stock-based compensation expense; (ii)
additional impairment of assets of $15.2 million related to
underperforming stores as a result of on-going store portfolio
evaluation; and (iii) other charges of $27.0 million primarily
related to the charitable donation of the net cash proceeds
received from the sale of the Company's corporate jet, and rent and
occupancy costs associated with certain previously exited real
estate locations for which the related lease agreements have not
yet expired. Additionally, the income tax benefit (provision)
reflects a one-time benefit of $134.1 million recorded in
connection with Swiss tax reform.
(d)
Adjustments for the three months ended
December 29, 2018 include (i) charges of $41.4 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 $0.5 million related to underperforming stores as a
result of on-going store portfolio evaluation; and (iii) other
charges of $3.5 million related to depreciation expense associated
with the Company's former Polo store at 711 Fifth Avenue in New
York City. Additionally, the income tax provision reflects TCJA
enactment-related charges of $32.3 million.
(e)
Adjustments for the nine months ended
December 29, 2018 include (i) charges of $74.3 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 $5.8 million related to underperforming stores as a
result of on-going store portfolio evaluation; and (iii) other
charges of $14.7 million primarily related to depreciation expense
associated with the Company's former Polo store at 711 Fifth Avenue
in New York City and its customs audit. Additionally, the income
tax provision reflects TCJA enactment-related charges of $27.6
million.
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 business 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 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 benefit (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. The income tax benefit (provision)
has also been adjusted for certain one-time benefits and
enactment-related charges recorded in connection with Swiss tax
reform and the TCJA, respectively. 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 fourth
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 its restructuring plans, have not yet occurred or are
out of the Company's control. Accordingly, a reconciliation of the
Company's 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 pretax charges of approximately $5 million to $20 million
related to its Fiscal 2019 Restructuring Plan that have not yet
been incurred.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200204005147/en/
Ralph Lauren Investor Relations: Corinna Van der Ghinst
ir@ralphlauren.com or Corporate Communications:
rl-press@ralphlauren.com
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