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 $1.75 on a reported
basis and $1.99 on an adjusted basis, excluding
restructuring-related and other charges that were primarily related
to activities associated with the Company’s Way Forward plan, for
the second quarter of Fiscal 2018. This compared to earnings per
diluted share of $0.55 on a reported basis and $1.90 on an adjusted
basis, excluding restructuring-related and other charges, for the
second quarter of Fiscal 2017.
“I am pleased with the progress we are making as we continue to
strengthen the foundations of our business and elevate the
expression of our iconic brand,” said Ralph Lauren, Executive
Chairman and Chief Creative Officer. “Patrice has already proven to
be an invaluable partner who is embracing our core values, bringing
unique expertise and uniting and empowering our capable teams.”
“We are focused on creating value for all of our stakeholders by
continuing to drive productivity and re-igniting quality growth,”
said Patrice Louvet, President and Chief Executive Officer. "While
there is a lot of work to be done, I am encouraged by the early
progress we are making across multiple fronts to strengthen our
brand and better connect with consumers.”
We delivered across the following key initiatives in the second
quarter:
- Elevating Our Brand Through Improved
Quality of Sales and Distribution
- Average unit retail across our
direct-to-consumer network was up 5% to last year
- Discount rates were down across all
regions in retail
- Adjusted gross margin was up 300 basis
points compared to last year
- Continued to close unproductive
distribution in retail and wholesale and significantly reduced
off-price shipments and began to upgrade our store
environments
- Evolving Product and Marketing
to Increase Reach and Appeal with New Consumers
- Evolved our product assortment by
renewing our core styles and focusing on our icons, which drove
improvements in Polo Fall seasonal product sell-out trend
- Increased marketing reach and
effectiveness with significant growth in digital and social media
impressions with the Stadium launch and September Fashion Show
- Released limited edition products that
create more reasons for consumers to engage with us and inject
energy and excitement into our brand
- Expanding Our Digital and
International Presence
- In Asia, expanded our high-ROI
concession network and delivered 3% constant currency comp
growth
- Continued to drive sales growth in our
wholesale digital business globally
- Launched on T-mall, JD.com and WeChat
in China
- Working In New Ways to Drive
Productivity and Agility
- Reduced operating expenses by 5% on an
adjusted basis to increase efficiencies
- Lowered inventory levels by 26% to last
year and improved inventory turns
- Continued the progress to achieve lead
time goals and increased SKU productivity
Second Quarter Fiscal 2018 Income Statement Review
Net Revenues. In the second quarter of Fiscal 2018,
revenue decreased by 9% to $1.7 billion on a reported basis, driven
by initiatives to increase quality of sales, reduce promotional
activity, and elevate our distribution, as well as brand exits and
lower consumer demand.
The second quarter revenue decline is in line with the Company’s
guidance of a 9%-10% revenue decline, excluding approximately 40
basis points of negative foreign currency impact. Foreign currency
benefited revenue growth by approximately 40 basis points in the
second quarter, which is better than guidance, as foreign exchange
rates moved favorably during the quarter.
Revenue performance for the Company’s reportable segments in the
second quarter compared to the prior year period was as
follows:
- North America Revenue. North America
revenue in the second quarter decreased 16% to $877 million. The
decline was due to lower sales in both the retail and wholesale
channels, driven by distribution and brand exits, a strategic
reduction in shipments and promotional activity to increase quality
of sales, as well as due to lower consumer demand. On a constant
currency basis, comparable store sales in North America were down
9%, including a 6% decline in brick and mortar stores and an 18%
decrease in e-commerce, primarily due to a planned reduction in
promotional activity and lower traffic.
- Europe Revenue. Europe revenue in the
second quarter increased 4% to $463 million on a reported basis and
was flat in constant currency. On a constant currency basis,
comparable store sales in Europe were down 6%, driven by a 5%
decline in brick and mortar stores and an 11% decline in
e-commerce, as the Company intensified its focus on driving quality
of sales with a pullback in promotions.
- Asia Revenue. Asia revenue in the
second quarter was flat compared with the prior year period on a
reported basis at $217 million and increased 4% in constant
currency, driven by strength in both retail and wholesale channels.
Comparable store sales increased 3% in constant currency driven by
improved traffic and conversion.
Gross Profit. Gross profit for the second quarter of
Fiscal 2018 was $996 million on both a reported basis and an
adjusted basis, excluding restructuring-related and other charges.
Gross margin was 59.8% on a reported and 59.9% on an adjusted
basis, and 300 basis points above the prior year on an adjusted
basis.
The gross margin increase was driven by initiatives to improve
quality of sales through reduced promotional activity, favorable
geographic and channel mix shifts, and improved product costs.
Foreign currency benefited gross margin by 10 basis points in the
second quarter.
Operating Expenses. Operating expenses in the second
quarter of Fiscal 2018 were $802 million on a reported basis,
including $30 million in restructuring-related and other charges.
On an adjusted basis, excluding such charges, operating expenses
were $773 million, down 5% compared to the prior year, primarily as
a result of store closures and other expense savings initiatives
associated with our restructuring activities.
Adjusted operating expense rate was 46.4%, 190 basis points
above the prior year period, excluding restructuring-related and
other charges from both periods. This increase was due to fixed
expense deleverage and an unfavorable channel mix shift, as a
greater portion of our revenue was generated by our international
retail businesses, which typically carry higher operating
expense.
Operating Income. Operating income in the second quarter
of Fiscal 2018 was $193 million, including restructuring-related
and other charges of $30 million. On an adjusted basis, operating
income of $224 million decreased 1% and operating margin was 13.4%,
100 basis points above the prior year period, excluding
restructuring-related and other charges from both periods. The
higher operating margin was attributable to gross margin expansion.
Foreign currency benefited operating margin by 30 basis points in
the second quarter.
The adjusted operating margin was above the Company’s guidance
of 40-60 basis points of expansion excluding foreign currency
pressure of 40 basis points. The outperformance was driven by our
quality of sales initiatives that over-delivered our
expectations.
- North America Operating Income. North
America operating income in the second quarter was $203 million on
both a reported and an adjusted basis. Adjusted North America
operating margin was 23.2%, 150 basis point above last year, driven
by gross margin improvement attributable to quality of sales
initiatives.
- Europe Operating Income. Europe
operating income in the second quarter was $126 million on both a
reported and an adjusted basis. Adjusted Europe operating margin
was 27.1%, which was 350 basis points higher than the prior year
period and 370 basis points higher in constant currency, driven
primarily by gross margin improvement attributable to quality of
sales initiatives.
- Asia Operating Income. Asia operating
income in the second quarter was $26 million on a reported basis
and $27 million on an adjusted basis. Adjusted Asia operating
margin was 12.6%, up 750 basis points to prior year and 580 basis
points higher in constant currency, driven by both gross margin
improvement and operating expense leverage.
Net Income and EPS. On a reported basis, net income in
the second quarter of Fiscal 2018 was $144 million or $1.75 per
diluted share. On an adjusted basis, net income was $164 million,
or $1.99 per diluted share, excluding restructuring-related and
other charges. This compared to a net income of $46 million, or
$0.55 per diluted share on a reported basis, and net income of $158
million, or $1.90 per diluted share on an adjusted basis, for the
second quarter of Fiscal 2017.
In the second quarter of Fiscal 2018, the Company had an
effective tax rate of approximately 25% on a reported basis and
approximately 26% on an adjusted basis, excluding
restructuring-related and other charges, above guidance of 24%, due
to discrete one-time items. This compared to a reported and an
adjusted effective tax rate of 38% and 29%, respectively, in the
prior year period.
Balance Sheet and Cash Flow Review
The Company ended the second quarter of Fiscal 2018 with $1.7
billion in cash, short and long term investments and $590 million
in total debt, compared to $1.1 billion and $692 million,
respectively, at the end of second quarter of Fiscal 2017.
Inventory at the end of second quarter Fiscal 2018 was $865
million, down 26% to the prior year period, driven by both
restructuring actions and improvement in operating processes,
including a proactive pullback in receipts and moving towards a
demand driven supply chain.
The Company had $33 million in capital expenditures in the
second quarter of Fiscal 2018, compared to $88 million in the prior
year period, primarily driven by lower IT and infrastructure
investments and an increased focus on return on investment.
Full Year and Third Quarter Fiscal 2018 Outlook
As a reminder, the full year Fiscal 2018 and third quarter
guidance excludes restructuring-related and other charges expected
to be recorded primarily in connection with the Company’s Way
Forward plan.
For Fiscal 2018, the Company continues to expect net revenue to
decrease 8% to 9%, excluding the impact of foreign currency.
Foreign currency is now expected to have approximately 80 basis
points of benefit to revenue growth in Fiscal 2018 versus previous
guidance of minimal impact, given recent movements in foreign
exchange rates.
Based on the first half performance, the Company now expects
operating margin for Fiscal 2018 to be 9.5%-10.5%, excluding the
impact of foreign currency, and versus previous guidance of
9.0%-10.5%. Foreign currency is now expected to have minimal impact
on operating margin for Fiscal 2018, versus previous guidance of
40-50 basis points of pressure, due to recent movements in foreign
exchange rates.
In the third quarter of Fiscal 2018, the Company expects net
revenue to be down 6%-8%, excluding the impact of foreign currency.
Foreign currency is expected to have approximately 160-170 basis
points of benefit to revenue growth in the third quarter of Fiscal
2018.
Operating margin for the third quarter of Fiscal 2018 is
expected to be down 50-70 basis points, excluding the impact of
foreign currency. Foreign currency is estimated to benefit
operating margin by approximately 10-20 basis points in the third
quarter.
The full year Fiscal 2018 tax rate is estimated at approximately
25%, and the third quarter of Fiscal 2018 tax rate is estimated at
approximately 23%, including the impact of ASU 2016-09.
We expect capital expenditures of approximately $225 million for
Fiscal 2018, lower than our previous guidance of $300 million, as
we shift capital investments behind consumer-facing initiatives
that have demonstrated a proof of concept and healthy rates of
return.
Fiscal Year 2018 Outlook – Non-GAAP Disclosure:
The Company is not able to provide a full reconciliation of the
non-GAAP financial measures to GAAP because certain material items
that impact these measures, such as the timing and exact amount of
charges related to our Way Forward plan, have not yet occurred or
are out of the Company’s control. Accordingly, a reconciliation of
our non-GAAP financial measure guidance to the corresponding GAAP
measures is not available without unreasonable effort. The Company
has identified the estimated impact of the items excluded from its
Fiscal 2018 guidance.
This Fiscal 2018 non-GAAP guidance excludes estimated pretax
restructuring-related and other charges expected to be recorded
primarily in connection with the Company’s Way Forward plan of
approximately $200 million.
Conference Call
As previously announced, the Company will host a conference call
and live online webcast today, Thursday, November 2nd, 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 Second Quarter Fiscal 2018 conference call.
An online archive of the broadcast will be available by
accessing the Company's investor relations website at
http://investor.ralphlauren.com. A telephone replay of the call
will be available from 12:00 P.M. Eastern, Thursday, November 2,
2017 through 6:00 P.M. Eastern, Thursday, November 9, 2017 by
dialing 203-369-1625 or 866-485-4174 and entering passcode
8851.
Future announcements regarding the timing of future earnings
release dates and conference calls will be posted on the Company’s
investor relations website at http://investor.ralphlauren.com and
will not be issued through news wire services unless otherwise
noted by the Company.
ABOUT RALPH LAUREN
Ralph Lauren Corporation (NYSE:RL) is a global leader in the
design, marketing and distribution of premium lifestyle products in
four categories: apparel, home, accessories and fragrances. For 50
years, Ralph Lauren's reputation and distinctive image have been
consistently developed across an expanding number of products,
brands and international markets. The Company's brand names, which
include Ralph Lauren, 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 contain certain "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include the
statements under “Full Year and Third Quarter Fiscal 2018 Outlook,”
and statements regarding, among other things, our current
expectations about the Company's future results and financial
condition, revenues, store openings and closings, employee
reductions, margins, expenses and earnings and are indicated by
words or phrases such as "anticipate," "estimate," "expect,"
"project," "we believe" and similar words or phrases. These
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from the
future results, performance or achievements expressed in or implied
by such forward-looking statements. Forward-looking statements are
based largely on the Company's expectations and judgments and are
subject to a number of risks and uncertainties, many of which are
unforeseeable and beyond our control. The factors that could cause
actual results to materially differ include, among others: the loss
of key personnel, including Mr. Ralph Lauren, or other changes
in our executive and senior management team or to our operating
structure, and our ability to effectively transfer knowledge during
periods of transition; the potential impact to our business and
future strategic direction resulting from our transition to our new
Chief Executive Officer; our ability to successfully implement our
long-term growth strategy and achieve anticipated operating
enhancements and cost reductions from our restructuring plans; the
impact to our business resulting from investments and other costs
incurred in connection with the execution of our long-term growth
strategy, including restructuring-related charges, which may be
dilutive to our earnings in the short term; our ability to
effectively manage inventory levels and the increasing pressure on
our margins in a highly promotional retail environment; the impact
to our business resulting from potential costs and obligations
related to the early closure of our stores or termination of our
long-term, non-cancellable leases; our efforts to successfully
enhance, upgrade, and/or transition our global information
technology systems and e-commerce platform; our ability to secure
our facilities and systems and those of our third-party service
providers from, among other things, cybersecurity breaches, acts of
vandalism, computer viruses, or similar Internet or email events; a
variety of legal, regulatory, tax, political, and economic risks,
including risks related to the importation and exportation of
products, tariffs, and other trade barriers which our operations
are currently subject to, or may become subject to as a result of
potential changes in legislation, and other risks associated with
our international operations, such as compliance with the Foreign
Corrupt Practices Act or violations of other anti-bribery and
corruption laws prohibiting improper payments, and the burdens of
complying with a variety of foreign laws and regulations, including
tax laws, trade and labor restrictions, and related laws that may
reduce the flexibility of our business; changes in our tax
obligations and effective tax rates due to a variety of factors,
including potential changes in tax laws and regulations, accounting
rules, or the mix and level of earnings by jurisdiction; our
exposure to currency exchange rate fluctuations from both a
transactional and translational perspective; the impact to our
business resulting from increases in the costs of raw materials,
transportation, and labor; the potential impact to our business
resulting from the financial difficulties of certain of our large
wholesale customers, which may result in consolidations,
liquidations, restructurings, and other ownership changes in the
retail industry, as well as other changes in the competitive
marketplace, including the introduction of new products or pricing
changes by our competitors; the impact to our business resulting
from changes in consumers' ability or preferences to purchase
premium lifestyle products that we offer for sale and our ability
to forecast consumer demand, which could result in either a
build-up or shortage of inventory; our ability to maintain our
credit profile and ratings within the financial community; our
ability to access sources of liquidity to provide for our cash
needs, including our debt obligations, payment of dividends,
capital expenditures, and potential repurchases of our Class A
common stock, 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; the impact of the volatile state of the global
economy, stock markets, and other global economic conditions on us,
our customers, suppliers, vendors, and lenders; 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 open new retail stores, concession
shops, and e-commerce sites in an effort to expand our
direct-to-consumer presence; our ability to continue to expand or
grow our business internationally and the impact of related changes
in our customer, channel, and geographic sales mix as a result; our
ability to continue to maintain our brand image and reputation and
protect our trademarks; our intention to introduce new products or
enter into or renew alliances and exclusive relationships; changes
in the business of, and our relationships with, major department
store customers and licensing partners; the potential impact on our
operations and on our suppliers and customers resulting from
natural or man-made disasters; 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; and 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) (Unaudited)
September 30, April 1, October 1,
2017 2017 2016
ASSETS Current assets: Cash and cash
equivalents $ 1,111.6 $ 668.3 $ 434.2 Short-term investments 507.1
684.7 531.4 Accounts receivable, net of allowances 470.3 450.2
490.2 Inventories 864.6 791.5 1,172.5 Income tax receivable 70.5
79.4 59.1 Prepaid expenses and other current assets 300.3
280.4 288.4 Total current
assets 3,324.4 2,954.5 2,975.8 Property and equipment, net
1,240.5 1,316.0 1,564.0 Deferred tax assets 143.2 125.9 118.3
Goodwill 933.0 904.6 935.7 Intangible assets, net 207.7 219.8 234.6
Other non-current assets
(a) 179.5 131.2
238.9
Total assets $ 6,028.3
$ 5,652.0 $ 6,067.3
LIABILITIES AND
EQUITY Current liabilities: Short-term debt $ - $ - $ 95.0
Current portion of long-term debt 298.6 - - Accounts payable 172.8
147.7 158.6 Income tax payable 56.7 29.5 19.6 Accrued expenses and
other current liabilities 1,062.0 982.7
943.6 Total current liabilities 1,590.1
1,159.9 1,216.8 Long-term debt 291.8 588.2 597.4 Non-current
liability for unrecognized tax benefits 75.2 62.7 74.3 Other
non-current liabilities 561.6 541.6
580.9 Total liabilities 2,518.7
2,352.4 2,469.4 Equity: Common
stock 1.3 1.2 1.2 Additional paid-in-capital 2,348.2 2,308.8
2,284.4 Retained earnings 5,874.0 5,751.9 5,956.2 Treasury stock,
Class A, at cost (4,578.5 ) (4,563.9 ) (4,463.6 ) Accumulated other
comprehensive loss (135.4 ) (198.4 ) (180.3 )
Total equity 3,509.6 3,299.6
3,597.9
Total liabilities and equity $
6,028.3 $ 5,652.0 $ 6,067.3
Net Cash (incl. LT Investments) 1,110.9 786.2 395.6 Cash
& Investments (ST & LT) 1,701.3 1,374.4 1,087.9 Net
Cash (excl. LT Investments) 1,028.4 764.8 273.3 Cash & ST
Investments 1,618.8 1,353.0 965.6
(a) Includes
non-current investments of: $ 82.6 $ 21.4 $ 122.3
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
September 30, October 1, 2017
2016 North America $ 876.7 $
1,044.8 Europe 463.0 445.8 Asia 216.8 216.5 Other non-reportable
segments 107.7 113.5
Net
revenues 1,664.2 1,820.6 Cost of goods sold
(a)
(668.4 ) (866.4 )
Gross profit 995.8
954.2 Selling, general, and administrative
expenses
(a) (766.7 ) (803.3 ) Amortization of
intangible assets (6.0 ) (6.1 ) Impairment of assets (11.2 )
(27.0 ) Restructuring and other charges
(a)
(18.6 ) (41.5 )
Total other operating expenses,
net (802.5 ) (877.9 )
Operating income 193.3 76.3
Foreign currency gains 1.7 1.1 Interest expense (4.6
) (4.1 ) Interest and other income, net 2.0 2.3
Equity in losses of equity-method investees (1.2 )
(1.9 )
Income before income taxes 191.2 73.7
Income tax provision (47.4 ) (28.0 )
Net
income $ 143.8 $ 45.7
Net income per
share - Basic $ 1.76 $ 0.55
Net income
per share - Diluted $ 1.75 $ 0.55 Weighted
average shares outstanding - Basic 81.7 82.7
Weighted average shares outstanding - Diluted
82.3 83.2 Dividends declared per share
$ 0.50 $ 0.50
(a) Includes total
depreciation expense of: $ (67.8 ) $ (69.5 )
RALPH
LAUREN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Prepared in accordance with U.S. Generally Accepted Accounting
Principles (in millions, except per share data)
(Unaudited)
Six Months Ended
September 30, October 1, 2017
2016 North America $ 1,586.4 $
1,900.4 Europe 786.5 823.4 Asia 425.9 427.6 Other non-reportable
segments 212.5 221.4
Net
revenues 3,011.3 3,372.8 Cost of goods sold
(a)
(1,164.3 ) (1,524.0 )
Gross profit
1,847.0 1,848.8 Selling, general, and administrative
expenses
(a) (1,475.1 ) (1,618.0 ) Amortization of
intangible assets (12.0 ) (12.1 ) Impairment of assets (20.9
) (46.4 ) Restructuring and other charges
(a)
(55.4 ) (127.2 )
Total other operating expenses,
net (1,563.4 ) (1,803.7 )
Operating income 283.6
45.1 Foreign currency gains 1.8 3.5 Interest expense
(9.6 ) (7.5 ) Interest and other income, net 4.3 3.2
Equity in losses of equity-method investees (2.1 )
(3.8 )
Income before income taxes 278.0 40.5
Income tax provision (74.7 ) (17.1 )
Net
income $ 203.3 $ 23.4
Net income per
share - Basic $ 2.49 $ 0.28
Net income
per share - Diluted $ 2.47 $ 0.28 Weighted
average shares outstanding - Basic 81.6 83.0
Weighted average shares outstanding - Diluted
82.4 83.7 Dividends declared per share
$ 1.00 $ 1.00
(a) Includes total
depreciation expense of: $ (134.7 ) $ (141.9 )
RALPH LAUREN CORPORATION CONSOLIDATED STATEMENTS OF CASH
FLOWS Prepared in accordance with U.S. Generally Accepted
Accounting Principles (in millions) (Unaudited)
Six Months Ended September 30,
October 1, 2017 2016
Cash flows from operating activities: Net income $
203.3 $ 23.4 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
expense 146.7 154.0 Deferred income tax benefit (25.3 ) (8.7 )
Equity in loss of equity-method investees 2.1 3.8 Non-cash
stock-based compensation expense 39.4 31.9 Non-cash impairment of
assets 20.9 46.4 Non-cash restructuring-related inventory charges
1.3 135.0 Other non-cash charges 2.3 9.9 Changes in operating
assets and liabilities: Accounts receivable (17.4 ) 21.9
Inventories (53.4 ) (172.6 ) Prepaid expenses and other current
assets (1.9 ) (26.6 ) Accounts payable and accrued expenses 72.2
59.8 Income tax receivables and payables 51.4 (22.0 ) Deferred
income 3.0 (12.2 ) Other balance sheet changes (7.6 )
(11.4 )
Net cash provided by operating activities
437.0 232.6
Cash flows from
investing activities: Capital expenditures (74.7 ) (165.4 )
Purchases of investments (426.3 ) (392.4 ) Proceeds from sales and
maturities of investments 591.3 546.6 Acquisitions and ventures
(3.6 ) (2.5 )
Net cash provided by (used in)
investing activities 86.7 (13.7 )
Cash flows from financing activities: Proceeds from issuance
of short-term debt - 2,945.3 Repayments of short-term debt -
(2,966.4 ) Payments of capital lease obligations (14.2 ) (13.3 )
Payments of dividends (81.1 ) (82.6 ) Repurchases of common stock,
including shares surrendered for tax withholdings (14.6 ) (114.9 )
Proceeds from exercise of stock options 0.1
4.0
Net cash used in financing activities
(109.8 ) (227.9 ) Effect of exchange rate changes on
cash, cash equivalents, and restricted cash 33.2
(12.9 ) Net increase (decrease) in cash, cash equivalents,
and restricted cash 447.1 (21.9 ) Cash, cash equivalents, and
restricted cash at beginning of period 711.8
502.1 Cash, cash equivalents, and restricted cash at end of
period $ 1,158.9 $ 480.2
RALPH LAUREN CORPORATION
OTHER INFORMATION (in millions) (Unaudited)
SEGMENT INFORMATION Net revenues and operating income
(loss) for the periods ended September 30, 2017 and October 1, 2016
for each segment were as follows:
Three Months Ended
Six Months Ended September 30, October 1,
September 30, October 1, 2017
2016 2017
2016 Net revenues: North America $
876.7 $ 1,044.8 $ 1,586.4 $ 1,900.4 Europe 463.0 445.8 786.5 823.4
Asia 216.8 216.5 425.9 427.6 Other non-reportable segments
107.7 113.5 212.5 221.4
Total net revenues $ 1,664.2 $ 1,820.6 $
3,011.3 $ 3,372.8
Operating income
(loss): North America $ 202.7 $ 202.4 $ 353.2 $ 368.2 Europe
125.5 100.4 192.6 175.4 Asia 26.5 (65.8 ) 56.7 (103.6 ) Other
non-reportable segments 26.3 30.0
59.3 57.8 381.0 267.0 661.8 497.8
Unallocated corporate expenses (169.1 ) (149.2 ) (322.8 )
(325.5 ) Unallocated restructuring and other charges (18.6 )
(41.5 ) (55.4 ) (127.2 ) Total operating
income $ 193.3 $ 76.3 $ 283.6 $ 45.1
RALPH LAUREN CORPORATION Constant Currency
Financial Measures (in millions) (Unaudited)
Comparable Store Sales Data Three Months Ended
September 30, 2017
% Change
Six Months Ended
September 30, 2017
% Change
As Reported Constant Currency As Reported
Constant Currency North America E-commerce (18 %) (18 %) (20
%) (20 %) Excluding E-commerce (6 %) (6 %) (5 %) (5
%) Total North America (8 %) (9 %) (8 %) (8 %) Europe
E-commerce (8 %) (11 %) (7 %) (9 %) Excluding E-commerce (2
%) (5 %) (7 %) (7 %) Total Europe (3 %) (6 %) (7 %) (7 %)
Asia(a) (1 %) 3 % 0 % 3 % Total Ralph Lauren
(5 %) (6 %) (6 %) (6 %) (a) Comparable store
sales for our Asia segment were comprised primarily of sales made
through our stores and concession shops.
Operating
Segment Net Revenue Data Three Months Ended %
Change September 30, 2017 October 1, 2016 As
Reported Constant Currency North America $ 876.7 $
1,044.8 (16.1 %) (16.2 %) Europe 463.0 445.8 3.9 % 0.3 % Asia 216.8
216.5 0.2 % 4.3 % Other non-reportable segments 107.7
113.5 (5.2 %) (4.6 %) Net revenues $ 1,664.2 $
1,820.6 (8.6 %) (9.0 %)
Six Months
Ended % Change September 30, 2017 October 1,
2016 As Reported Constant Currency North America
$ 1,586.4 $ 1,900.4 (16.5 %) (16.5 %) Europe 786.5 823.4 (4.5 %)
(4.5 %) Asia 425.9 427.6 (0.4 %) 2.4 % Other non-reportable
segments 212.5 221.4 (4.0 %) (3.3 %)
Net revenues $ 3,011.3 $ 3,372.8 (10.7 %) (10.3 %)
RALPH LAUREN CORPORATION
Global Retail Store Network September 30,
October 1, 2017 2016
North
America
Ralph Lauren Stores 44 50 Polo Factory Stores 171 168
Total
Directly Operated Stores 215 218 Concessions 2 1
Europe
Ralph Lauren Stores 20 26 Polo Factory Stores 63 59
Total
Directly Operated Stores 83 85 Concessions 25 36
Asia
Ralph Lauren Stores 45 52 Polo Factory Stores 48 48
Total
Directly Operated Stores 93 100 Concessions 593
582
Other
Club Monaco Stores 78 82 Club Monaco Concessions 2 2
Global Directly
Operated Stores and Concessions
Ralph Lauren Stores 109 128 Polo Factory Stores 282 275 Club Monaco
Stores 78 82
Total Directly Operated Stores 469
485 Concessions 622 621
Global Licensed
Stores and Concessions
Ralph Lauren Licensed Stores 84 102 Club Monaco Licensed Stores 62
59
Total Licensed Stores 146 161 Licensed
Concessions 122 97
RALPH LAUREN CORPORATION Reconciliation of Certain
Non-U.S. GAAP Financial Measures (in millions, except per
share data) (Unaudited) Three Months Ended
September 30, 2017 As
Reported
Total
Adjustments(a)(b)
As
Adjusted
Net revenues $ 1,664.2 $ - $ 1,664.2 Gross profit 995.8 0.6 996.4
Gross profit margin 59.8 % 59.9 % Total other operating expenses,
net (802.5 ) 29.8 (772.7 ) Operating expense margin 48.2 % 46.4 %
Operating income 193.3 30.4 223.7 Operating margin 11.6 % 13.4 %
Income before income taxes 191.2 30.4 221.6 Income tax provision
(47.4 ) (10.1 ) (57.5 ) Effective tax rate 24.8 % 25.9 % Net income
$ 143.8 $ 20.3 $ 164.1 Net income per diluted share $ 1.75 $ 1.99
Weighted average shares outstanding - Basic 81.7 81.7 Weighted
average shares outstanding - Diluted 82.3 82.3 SEGMENT INFORMATION
- OPERATING INCOME: North America $ 202.7 $ 0.4 $ 203.1 Operating
margin 23.1 % 23.2 % Europe 125.5 0.1 125.6 Operating margin 27.1 %
27.1 % Asia 26.5 0.8 27.3 Operating margin 12.2 % 12.6 % Other
non-reportable segments 26.3 8.9 35.2 Operating margin 24.4 % 32.8
% Unallocated corporate expenses and restructuring and other
charges, net (187.7 ) 20.2 (167.5 )
Total operating income $ 193.3 $ 30.4 $ 223.7
Six Months Ended September 30, 2017
As
Reported
Total
Adjustments(a)(c)
As
Adjusted
Net revenues $ 3,011.3 $ - $ 3,011.3 Gross profit 1,847.0 1.3
1,848.3 Gross profit margin 61.3 % 61.4 % Total other operating
expenses, net (1,563.4 ) 76.3 (1,487.1 ) Operating expense margin
51.9 % 49.4 % Operating income 283.6 77.6 361.2 Operating margin
9.4 % 12.0 % Income before income taxes 278.0 77.6 355.6 Income tax
provision (74.7 ) (25.7 ) (100.4 ) Effective tax rate 26.9 % 28.2 %
Net income $ 203.3 $ 51.9 $ 255.2 Net income per diluted share $
2.47 $ 3.10 Weighted average shares outstanding - Basic 81.6 81.6
Weighted average shares outstanding - Diluted 82.4 82.4 SEGMENT
INFORMATION - OPERATING INCOME: North America $ 353.2 $ 1.7 $ 354.9
Operating margin 22.3 % 22.4 % Europe 192.6 1.3 193.9 Operating
margin 24.5 % 24.7 % Asia 56.7 0.9 57.6 Operating margin 13.3 %
13.5 % Other non-reportable segments 59.3 9.0 68.3 Operating margin
27.9 % 32.2 % Unallocated corporate expenses and restructuring and
other charges, net (378.2 ) 64.7 (313.5
) Total operating income $ 283.6 $ 77.6 $ 361.2
RALPH LAUREN CORPORATION Reconciliation of Certain
Non-U.S. GAAP Financial Measures (in millions, except per
share data) (Unaudited) Three Months Ended
October 1, 2016 As
Reported
Total
Adjustments(a)(d)
As
Adjusted
Net revenues $ 1,820.6 $ - $ 1,820.6 Gross profit 954.2 81.0
1,035.2 Gross profit margin 52.4 % 56.9 % Total other operating
expenses, net (877.9 ) 68.5 (809.4 ) Operating expense margin 48.2
% 44.5 % Operating income 76.3 149.5 225.8 Operating margin 4.2 %
12.4 % Income before income taxes 73.7 149.5 223.2 Income tax
provision (28.0 ) (36.9 ) (64.9 ) Effective tax rate 38.0 % 29.0 %
Net income $ 45.7 $ 112.6 $ 158.3 Net income per diluted share $
0.55 $ 1.90 Weighted average shares outstanding - Basic 82.7 82.7
Weighted average shares outstanding - Diluted 83.2 83.2 SEGMENT
INFORMATION - OPERATING INCOME/(LOSS): North America $ 202.4 $ 24.8
$ 227.2 Operating margin 19.4 % 21.7 % Europe 100.4 4.8 105.2
Operating margin 22.5 % 23.6 % Asia (65.8 ) 76.8 11.0 Operating
margin (30.4 %) 5.1 % Other non-reportable segments 30.0 1.6 31.6
Operating margin 26.4 % 27.9 % Unallocated corporate expenses and
restructuring and other charges, net (190.7 ) 41.5
(149.2 ) Total operating income $ 76.3 $ 149.5
$ 225.8
Six Months Ended
October 1, 2016 As
Reported
Total
Adjustments(a)(d)
As
Adjusted
Net revenues $ 3,372.8 $ - $ 3,372.8 Gross profit 1,848.8 135.0
1,983.8 Gross profit margin 54.8 % 58.8 % Total other operating
expenses, net (1,803.7 ) 173.6 (1,630.1 ) Operating expense margin
53.5 % 48.3 % Operating income 45.1 308.6 353.7 Operating margin
1.3 % 10.5 % Income before income taxes 40.5 308.6 349.1 Income tax
provision (17.1 ) (84.2 ) (101.3 ) Effective tax rate 42.2 % 29.0 %
Net income $ 23.4 $ 224.4 $ 247.8 Net income per diluted share $
0.28 $ 2.96 Weighted average shares outstanding - Basic 83.0 83.0
Weighted average shares outstanding - Diluted 83.7 83.7 SEGMENT
INFORMATION - OPERATING INCOME/(LOSS): North America $ 368.2 $ 32.5
$ 400.7 Operating margin 19.4 % 21.1 % Europe 175.4 14.1 189.5
Operating margin 21.3 % 23.0 % Asia (103.6 ) 129.6 26.0 Operating
margin (24.2 %) 6.1 % Other non-reportable segments 57.8 4.6 62.4
Operating margin 26.1 % 28.2 % Unallocated corporate expenses and
restructuring charges, net (452.7 ) 127.8
(324.9 ) Total operating income $ 45.1 $ 308.6
$ 353.7
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 all other charges are recorded in restructuring and
other charges in the consolidated statements of operations.
(b) Adjustments for the three months ended September 30,
2017 include (i) charges of $20.0 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 $9.1 million related to
underperforming stores as a result of on-going store portfolio
evaluation; and (iii) net other charges of $1.3 million related to
depreciation expense associated with the Company's former Polo
store at 711 Fifth Avenue in New York City and the reversal of
reserves associated with the settlement of certain non-income tax
issues.
(c) Adjustments for the six months ended
September 30, 2017 include (i) charges of $57.0 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 $9.1 million related to
underperforming stores as a result of on-going store portfolio
evaluation; and (iii) net other charges of $11.5 million primarily
related to depreciation expense associated with the Company's
former Polo store at 711 Fifth Avenue in New York City, the
departure of Mr. Stefan Larsson, and the reversal of reserves
associated with the settlement of certain non-income tax issues.
(d) Adjustments for the three-month and six-month
periods ended October 1, 2016 include charges of $149.5 million and
$308.6 million, respectively, recorded in connection with the
Company’s restructuring plans, consisting of restructuring charges,
impairment of assets, and inventory-related charges.
SUPPLEMENTAL FINANCIAL INFORMATION
Since Ralph Lauren Corporation is a global company, the
comparability of its operating results reported in U.S. Dollars is
also affected by foreign currency exchange rate fluctuations
because the underlying currencies in which it transacts change in
value over time compared to the U.S. Dollar. These rate
fluctuations can have a significant effect on the Company’s
reported results. As such, in addition to financial measures
prepared in accordance with generally accepted accounting
principles ("U.S. GAAP"), the Company’s discussions often contain
references to constant currency measures, which are calculated by
translating the current-year and prior-year reported amounts into
comparable amounts using a single foreign exchange rate for each
currency. The Company presents constant currency financial
information, which is a non-U.S. GAAP financial measure, as a
supplement to its reported operating results. The Company uses
constant currency information to provide a framework to assess how
its businesses performed excluding the effects of foreign currency
exchange rate fluctuations. Management believes this information is
useful to investors to facilitate comparisons of operating results
and better identify trends in the Company’s businesses. The
constant currency performance measures should be viewed in addition
to, and not in lieu of or superior to, the Company’s operating
performance measures calculated in accordance with U.S. GAAP.
Additionally, this earnings release includes certain non-U.S.
GAAP financial measures relating to charges recorded in connection
with the Company’s restructuring plans, 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
additional impairment of assets related to underperforming stores
as a result of the Company’s on-going store portfolio evaluation
and net other charges primarily related to the departure of the
Company’s former CEO, Mr. Stefan Larsson, and the reversal of
reserves associated with the settlement of certain non-income tax
issues. 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. 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 charges. The
Company uses non-U.S. GAAP financial measures, among other things,
to evaluate its operating performance and in order to represent the
manner in which the Company conducts and views its business. The
Company believes that excluding items that are not comparable from
period to period helps investors and others compare operating
performance between two periods. The Company’s full year and third
quarter Fiscal 2018 guidance excludes restructuring and other
related charges, as previously described. While the Company
considers the non-U.S. GAAP measures useful in analyzing its
results, they are not intended to replace, nor act as a substitute
for, any presentation included in the consolidated financial
statements prepared in conformity with U.S. GAAP and may be
different from non-U.S. GAAP measures reported by other
companies.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171102005752/en/
Ralph Lauren CorporationInvestor Relations:Evren Kopelman,
212-813-7862orCorporate Communications:Lindsay Knoll,
212-650-4401rl-press@ralphlauren.com
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