Delivers on Guidance, Expands Operating
Margin for Fiscal 2018 and Welcomes Two New Directors to the
Board
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 $0.50 on a reported
basis and $0.90 on an adjusted basis, excluding
restructuring-related, tax reform and other charges, for the fourth
quarter of Fiscal 2018. This compared to earnings per diluted share
of ($2.48) on a reported basis and $0.89 on an adjusted basis,
excluding restructuring-related and other charges, for the fourth
quarter of Fiscal 2017.
For Fiscal 2018, earnings per diluted share was $1.97 on a
reported basis and $6.03 on an adjusted basis, excluding
restructuring-related, tax reform and other charges. This compared
to earnings per diluted share of ($1.20) on a reported basis and
$5.71 on an adjusted basis, excluding restructuring-related and
other charges, for the full year of Fiscal 2017.
“As we reflect on the year, I am incredibly proud of what the
team is doing to elevate and energize our brand around the world,”
said Ralph Lauren, Executive Chairman and Chief Creative Officer.
“Patrice and I have developed a strong partnership over the past
year and I am confident that we are on the right path as we kick
off our 50th anniversary celebration and build the future of our
iconic Company and brand.”
“We delivered on our commitments for the fourth quarter and full
year, and we made strong operational progress,” said Patrice
Louvet, President and Chief Executive Officer. “We start the new
year with a solid foundation – including a clear strategic plan to
deliver long-term growth and value creation, an engaged global
organization, and a strong balance sheet. We look forward to
discussing our plan in more detail at our Investor Day on June 7th.
Ralph and I are also pleased to welcome Michael George, who has
recently joined our Board of Directors, and Angela Ahrendts, who
will be nominated for election to join our Board in August.”
We delivered across the following key initiatives in the fourth
quarter and full year Fiscal 2018:
- Elevating Our Brand Through Improved
Quality of Sales, Distribution and Product
- Average unit retail across our
direct-to-consumer network was up 4% for the full year, with growth
in every quarter
- Discount rates were down across all
regions and all channels in the fourth quarter and the full
year
- Adjusted gross margin was up 290 basis
points for the full year, with growth in every quarter
- Continued to close unproductive
distribution and reduce off-price penetration within wholesale, and
began to upgrade our store environments
- Evolving Product, Marketing and
Shopping Experience to Increase Reach and Appeal with New
Consumers
- Renewed our core styles and focused on
our icons, driving sequential improvement in the sell-out trend in
key categories for Spring season-to-date
- Improved assortment discipline and
productivity with revenue per SKU up 16% and gross profit per SKU
up 22% to last year in Fiscal 2018
- Increased marketing investment by 10%
to last year with significant growth in digital and social media
reach as we amplified our sponsorship of the Winter Olympics, our
February Fashion Show, and Snow Beach Limited Edition launch and
introduced our new Spring Polo campaign featuring our iconic Polo
shirt in the fourth quarter
- Expanding Our Digital and
International Presence
- In Asia, we expanded our store network
and delivered 4% constant currency comp growth in the fourth
quarter and 3% for the full year
- For Fiscal 2018, we continued to build
a winning digital ecosystem, including our directly-operated
platforms, wholesale digital, pure plays and social commerce
- Working In New Ways to Drive
Productivity and Agility
- Reduced adjusted operating expenses in
Fiscal 2018 through increased efficiencies
- Achieved our goal of having 90% of our
products on 9-month lead times and continued our progress to
further speed up lead times
- Lowered inventories by 4% on a reported
basis and by 7% in constant currency at the end of Fiscal 2018,
below our planned revenue growth for the upcoming first quarter of
Fiscal 2019
Fourth Quarter Fiscal 2018 Income Statement Review
Net Revenues – Fourth Quarter Fiscal 2018. In the fourth
quarter of Fiscal 2018, revenue decreased by 2% to $1.5 billion on
a reported basis and was down 7% in constant currency, 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 fourth quarter revenue decline was better than our guidance
of an 8%-10% constant currency revenue decline. Foreign currency
benefited revenue growth by approximately 440 basis points in the
fourth quarter, above our guidance of 330 basis points of benefit,
as foreign exchange rates moved favorably during the 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 14% on both a constant
currency and reported basis to $759 million. The decline was due to
lower sales in the wholesale channel, driven by distribution and
brand exits, strategic reductions in shipments and promotional
activity to increase quality of sales, as well as lower consumer
demand. In retail, comparable store sales in North America were
flat in constant currency, as a 6% increase in brick and mortar
stores was offset by an 18% decrease in ralphlauren.com, primarily
due to a planned reduction in promotion frequency and depth.
- Europe Revenue. Europe revenue in the
fourth quarter increased 13% to $420 million on a reported basis
and declined 1% in constant currency. On a constant currency basis,
comparable store sales in Europe were down 6%, driven by an 8%
decline in brick and mortar stores and partially offset by an 8%
increase in digital commerce. Brick & mortar comparables were
pressured by traffic challenges in select markets, continued
quality of sales initiatives, and planned inventory reductions.
Average unit retail and gross margins were both up in the fourth
quarter as a result of our quality of sales initiatives.
- Asia Revenue. Asia revenue in the
fourth quarter increased 17% to $257 million on a reported basis
and increased 11% in constant currency, driven by strength in both
retail and wholesale channels. Comparable store sales increased 4%
in constant currency driven by improved average unit retail and the
number of transactions.
Gross Profit. Gross profit for the fourth quarter of
Fiscal 2018 was $909 million on a reported basis, including
inventory-related charges of $6 million, and gross margin was
59.4%. Adjusted gross profit, excluding such charges, was $915
million and adjusted gross margin was 59.8%, 440 basis points above
the prior year, excluding inventory-related charges from both
periods.
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 and
product mix. Foreign currency benefited gross margin by 90 basis
points in the fourth quarter.
Operating Expenses. Operating expenses in the fourth
quarter of Fiscal 2018 were $883 million on a reported basis,
including $54 million in restructuring-related and other charges.
On an adjusted basis, excluding such charges, operating expenses
were $829 million, up from the prior year, as savings from expense
initiatives funded an over 50% increase in planned marketing
investment. Excluding the planned increase in marketing and the
impact of currency, SG&A expenses were approximately flat to
last year.
Adjusted operating expense rate was 54.2%, 550 basis points
above the prior year period, excluding restructuring-related and
other charges from both periods. This increase was due to the
increased marketing investment and an unfavorable geographic and
channel mix shift, as a greater portion of our revenue was
generated by our international retail businesses, which typically
carry a higher operating expense rate.
Operating Income. Operating income for the fourth quarter
of Fiscal 2018 was $25 million on a reported basis, including
restructuring-related and other charges of $61 million, and
operating margin was 1.7%. Adjusted operating income was $86
million and adjusted operating margin was 5.6%, 110 basis points
below the prior year, excluding restructuring-related and other
charges from both periods, as expense deleverage more than offset
gross margin expansion due to increased marketing investment.
On a constant currency basis, adjusted operating margin was down
240 basis points. This was at the top end of the Company’s guidance
of down 240-260 basis points in constant currency. The currency
impact of 130 basis points was above our guidance of 90 basis
points of benefit as exchange rates moved favorably during the
quarter.
- North America Operating Income. North
America operating income in the fourth quarter was $128 million on
a reported basis and $132 million on an adjusted basis. Adjusted
North America operating margin was 17.4%, flat with last year, with
gross margin improvement offset by higher operating expense as a
percent of sales due to higher marketing investment in the
quarter.
- Europe Operating Income. Europe
operating income in the fourth quarter was $83 million on a
reported basis and $85 million on an adjusted basis. Adjusted
Europe operating margin was 20.1%, which was 20 basis points higher
than the prior year period. In constant currency, the adjusted
operating margin declined by 220 basis points, as gross margin
improvement was more than offset by the increased marketing
investment in the quarter.
- Asia Operating Income. Asia operating
income in the fourth quarter was $36 million on a reported basis
and $39 million on an adjusted basis. Adjusted Asia operating
margin was 15.2%, up 210 basis points to the prior year and 80
basis points higher in constant currency, driven by gross margin
improvement.
Net Income (Loss) and EPS. On a reported basis, net
income in the fourth quarter of Fiscal 2018 was $41 million or
$0.50 per diluted share. On an adjusted basis, net income was $75
million, or $0.90 per diluted share, excluding
restructuring-related, tax reform and other charges. This compared
to a net loss of $204 million, or ($2.48) per diluted share on a
reported basis, and net income of $74 million, or $0.89 per diluted
share on an adjusted basis, for the fourth quarter of Fiscal
2017.
In the fourth quarter of Fiscal 2018, the Company had an
effective tax rate of (66%) on a reported basis and 13% on an
adjusted basis, excluding restructuring and related other charges,
which was above the Company’s guidance of 3%, primarily due to
higher-than-expected pretax income in jurisdictions with higher tax
rates and timing of certain audit settlements. This compared to a
reported and an adjusted effective tax rate of 24% and 27%,
respectively, in the prior year period.
Full Year Fiscal 2018 Income Statement Review
Net Revenues. For Fiscal 2018, revenue decreased 7% to
$6.2 billion on a reported basis and decreased 8% in constant
currency, consistent with our guidance.
- North America Revenue. For Fiscal 2018,
North America revenue decreased 15% on both a reported and constant
currency basis to $3.2 billion, primarily due to lower sales in the
wholesale channel, as well as comparable store sales.
- Europe Revenue. For Fiscal 2018, Europe
revenue increased 3% to $1.6 billion on a reported basis. In
constant currency, revenue declined 3% on a planned reduction in
promotional activity.
- Asia Revenue. For Fiscal 2018, Asia
revenue increased 6% on both a reported and constant currency basis
to $934 million.
Gross Profit. Gross profit for Fiscal 2018 was $3.8
billion on a reported basis, including $8 million in
inventory-related charges and gross margin was 60.7%. On an
adjusted basis, gross margin was 60.8%, 290 basis points higher
than the prior year, excluding inventory related charges from both
periods. Foreign currency benefited gross margin by 20 basis points
in Fiscal 2018.
Operating Expenses. For Fiscal 2018, operating expenses
were $3.3 billion on a reported basis, including $158 million in
restructuring-related and other charges. On an adjusted basis,
operating expenses were $3.1 billion, down 2% from the prior year.
Adjusted operating expense rate was 50.1%, 240 basis points above
Fiscal 2017, excluding restructuring-related and other charges from
both periods.
Operating Income. Operating income for Fiscal 2018 was
$498 million, including restructuring-related and other charges of
$166 million. On an adjusted basis, operating income was $664
million and operating margin was 10.7%, 50 basis points above the
prior year period, excluding restructuring-related and other
charges from both periods. This was consistent with our guidance.
Excluding currency impacts, adjusted operating margin expanded 20
basis points in Fiscal 2018 compared to last year.
- North America Operating Income. North
America operating income in Fiscal 2018 was $678 million and
operating margin was 21.0%, on a reported basis, including
approximately $7 million in restructuring-related and other
charges. On an adjusted basis, North America operating income in
Fiscal 2018 was $685 million and operating margin was 21.2%, a 100
basis point improvement over last year.
- Europe Operating Income. Europe
operating income in Fiscal 2018 was $357 million and operating
margin was 22.5%, on a reported basis, including
restructuring-related and other charges. On an adjusted basis,
Europe operating income in Fiscal 2018 was $359 million and
operating margin was 22.7%, 140 basis points above last year.
- Asia Operating Income. Asia operating
income in Fiscal 2018 was $137 million and operating margin was
14.7%, on a reported basis, including restructuring-related and
other charges. On an adjusted basis, Asia operating income in
Fiscal 2018 was $141 million and operating margin was 15.1%, 450
basis points above last year.
Net Income (Loss) and EPS. In Fiscal 2018, on a reported
basis, net income was $163 million or $1.97 per diluted share. On
an adjusted basis, net income was $498 million, or $6.03 per
diluted share, excluding restructuring-related, tax reform, and
other charges. This compared to a net loss of $99 million, or
($1.20) per diluted share on a reported basis, and net income of
$477 million, or $5.71 per diluted share, excluding
restructuring-related and other charges, for Fiscal 2017.
For Fiscal 2018, on a reported basis, the Company had an
effective tax rate of 67% as compared to 5% in the prior year. The
adjusted effective tax rate was approximately 24%, excluding
restructuring-related, tax reform, and other charges. This compared
to an adjusted effective tax rate of 28% for Fiscal 2017. The
reduction is primarily driven by a higher mix of pretax income from
jurisdictions with lower tax rates as well as the lower U.S.
federal statutory rate.
Balance Sheet and Cash Flow Review
The Company ended Fiscal 2018 with $2.1 billion in cash and
short and long term investments and $596 million in total debt,
compared to $1.4 billion and $588 million, respectively, at the end
of Fiscal 2017.
Inventory at the end of Fiscal 2018 was $761 million, down 4%
compared to the prior year period, driven primarily by improvement
in operating processes, including a proactive pullback in receipts
and moving towards a demand driven supply chain.
The Company had $162 million in capital expenditures in Fiscal
2018, compared to $284 million in the prior year period, primarily
related to our global retail and department store renovations, new
store openings, and the continued enhancements to our global
information technology systems.
Full Year Fiscal 2019 and First Quarter Outlook
The full year Fiscal 2019 and first quarter guidance excludes
restructuring-related and other charges.
For Fiscal 2019, net revenue is expected to decrease low
single-digits in constant currency. Foreign currency is expected to
have minimal impact on revenue growth in Fiscal 2019.
The Company expects operating margin for Fiscal 2019 to be up
slightly in constant currency driven by gross margin expansion.
Foreign currency is expected to have minimal impact on operating
margin in Fiscal 2019.
In the first quarter of Fiscal 2019, the Company expects net
revenue to be flat to down slightly in constant currency. Foreign
currency is expected to benefit revenue growth by approximately
150-200 basis points in the first quarter of Fiscal 2019.
Operating margin for the first quarter of Fiscal 2019 is
expected to be up slightly in constant currency. Foreign currency
is estimated to benefit operating margin by 20-40 basis points in
the first quarter.
The full year Fiscal 2019 tax rate is estimated at approximately
22%. First quarter of Fiscal 2019 tax rate is estimated at
approximately 18%.
We are planning capital expenditures of approximately $275
million for Fiscal 2019.
Fiscal Year 2019 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 2019 guidance.
This Fiscal 2019 non-GAAP guidance excludes estimated pretax
charges of approximately $100 million related to our Way Forward
plan.
Conference Call
As previously announced, the Company will host a conference call
and live online webcast today, Wednesday, May 23rd, at 9:00 a.m.
Eastern. Listeners may access a live broadcast of the conference
call on the Company's investor relations website at
http://investor.ralphlauren.com or by dialing 517-623-4963 or
800-857-5209. To access the conference call, listeners should dial
in by 8:45 a.m. Eastern and request to be connected to the Ralph
Lauren Fourth Quarter and Full Year Fiscal 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, Wednesday, May 23, 2018
through 6:00 P.M. Eastern, Wednesday, May 30, 2018 by dialing
203-369-0105 or 866-356-4359 and entering passcode 8154.
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 Fiscal 2019 and First Quarter 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; 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 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 open new retail stores, concession
shops, and digital commerce sites in an effort to expand our
direct-to-consumer presence; the impact to our business resulting
from changes in consumers' ability, willingness, or preferences to
purchase premium lifestyle products that we offer for sale and our
ability to forecast consumer demand, which could result in either a
build-up or shortage of inventory; our ability to continue to
maintain our brand image and reputation and protect our trademarks;
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; the impact of
economic, political, and other conditions on us, our customers,
suppliers, vendors, and lenders; 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
platform; 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 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; the impact to our business
resulting from the recently enacted U.S. tax legislation commonly
referred to as the Tax Cuts and Jobs Act, including related changes
to our tax obligations and effective tax rate in future periods, as
well as the enactment-related charges that were recorded during
Fiscal 2018 on a provisional basis based on a reasonable estimate
and are subject to change, all of which could differ materially
from our current expectations and/or investors' expectations; 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; 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 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
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, 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 intention to
introduce new products 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 31, April 1, 2018
2017 ASSETS Current assets: Cash and cash
equivalents $ 1,304.6 $ 668.3 Short-term investments 699.4 684.7
Accounts receivable, net of allowances 421.4 450.2 Inventories
761.3 791.5 Income tax receivable 38.0 79.4 Prepaid expenses and
other current assets 323.7 280.4
Total current assets 3,548.4 2,954.5 Property and equipment,
net 1,186.3 1,316.0 Deferred tax assets 86.6 125.9 Goodwill 950.5
904.6 Intangible assets, net 188.0 219.8 Other non-current
assets
(a) 183.5 131.2
Total assets $ 6,143.3 $ 5,652.0
LIABILITIES AND EQUITY Current liabilities: Short-term debt
$ 10.1 $ - Current portion of long-term debt 298.1 - Accounts
payable 165.6 147.7 Income tax payable 30.0 29.5 Accrued expenses
and other current liabilities 1,083.4 982.7
Total current liabilities 1,587.2 1,159.9
Long-term debt 288.0 588.2 Income tax payable 124.8 - Non-current
liability for unrecognized tax benefits 79.2 62.7 Other non-current
liabilities 606.7 541.6 Total
liabilities 2,685.9 2,352.4
Equity: Common stock 1.3 1.2 Additional paid-in-capital 2,383.4
2,308.8 Retained earnings 5,752.2 5,751.9 Treasury stock, Class A,
at cost (4,581.0 ) (4,563.9 ) Accumulated other comprehensive loss
(98.5 ) (198.4 ) Total equity 3,457.4
3,299.6
Total liabilities and
equity $ 6,143.3 $ 5,652.0 Net Cash (incl.
LT Investments) 1,494.0 786.2 Cash & Investments (ST & LT)
2,090.2 1,374.4 Net Cash (excl. LT Investments) 1,407.8
764.8 Cash & ST Investments 2,004.0 1,353.0
(a)
Includes non-current investments of: $ 86.2 $ 21.4
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 31, April 1, 2018
2017 North America $ 759.3 $ 881.8 Europe 420.0 370.8
Asia 256.8 219.7 Other non-reportable segments 93.1
93.1
Net revenues 1,529.2 1,565.4 Cost of
goods sold (620.7) (746.3)
Gross profit
908.5 819.1 Selling, general, and administrative expenses
(828.6) (763.0) Impairment of assets (25.2) (197.1)
Restructuring and other charges (29.3) (124.7)
Total other operating expenses, net (883.1) (1,084.8)
Operating income (loss) 25.4 (265.7) Interest expense
(3.8) (1.3) Interest income 4.8 2.0 Other expense,
net (1.5) (3.5)
Income (loss) before income
taxes 24.9 (268.5) Income tax benefit 16.4
64.5
Net income (loss) $ 41.3 $ (204.0)
Net
income (loss) per share - Basic $ 0.51 $ (2.48)
Net
income (loss) per share - Diluted $ 0.50 $ (2.48)
Weighted average shares outstanding - Basic 81.7 82.3
Weighted average shares outstanding - Diluted 82.8
82.3 Dividends declared per share $ 0.50 $ 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 31, April 1, 2018
2017 North America $ 3,231.0 $ 3,783.0 Europe
1,585.0 1,543.4 Asia 933.7 882.5 Other non-reportable segments
432.6 443.9
Net revenues
6,182.3 6,652.8 Cost of goods sold (2,430.6 )
(3,001.7 )
Gross profit 3,751.7 3,651.1
Selling, general, and administrative expenses (3,095.5 ) (3,171.0 )
Impairment of assets (50.0 ) (253.8 ) Restructuring
and other charges (108.0 ) (318.6 )
Total
other operating expenses, net (3,253.5 ) (3,743.4 )
Operating income (loss) 498.2 (92.3 ) Interest
expense (18.2 ) (12.4 ) Interest income 12.3 7.3
Other expense, net (3.1 ) (7.5 )
Income
(loss) before income taxes 489.2 (104.9 ) Income tax
benefit (provision) (326.4 ) 5.6
Net
income (loss) $ 162.8 $ (99.3 )
Net income
(loss) per share - Basic $ 1.99 $ (1.20 )
Net
income (loss) per share - Diluted $ 1.97 $ (1.20 )
Weighted average shares outstanding - Basic 81.7
82.7 Weighted average shares
outstanding - Diluted 82.5 82.7
Dividends declared per share $ 2.00 $ 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 31, April 1, 2018
2017 Cash flows from operating activities: Net income
(loss) $ 162.8 $ (99.3 ) Adjustments to reconcile net income (loss)
to net cash provided by operating activities: Depreciation and
amortization expense 295.2 307.5 Deferred income tax expense
(benefit) 84.1 (38.9 ) Equity in loss of equity-method investees
4.5 5.2 Non-cash stock-based compensation expense 74.5 63.6
Non-cash impairment of assets 50.0 253.8 Non-cash
restructuring-related inventory charges 7.6 197.9 Other non-cash
charges 7.4 29.2 Changes in operating assets and liabilities:
Accounts receivable 34.5 54.1 Inventories 57.8 120.4 Prepaid
expenses and other current assets (15.1 ) (27.8 ) Accounts payable
and accrued liabilities 64.6 112.9 Income tax receivables and
payables 165.1 (34.0 ) Deferred income 1.4 (20.7 ) Other balance
sheet changes (19.3 ) 28.7
Net cash
provided by operating activities 975.1
952.6
Cash flows from investing activities:
Capital expenditures (161.6 ) (284.0 ) Purchases of investments
(1,605.6 ) (860.4 ) Proceeds from sales and maturities of
investments 1,582.7 942.4 Acquisitions and ventures (4.6 )
(6.1 )
Net cash used in investing activities
(189.1 ) (208.1 )
Cash flows from financing
activities: Proceeds from issuance of short-term debt 10.1
3,735.2 Repayments of short-term debt - (3,851.3 ) Payments of
capital lease obligations (28.2 ) (27.3 ) Payments of dividends
(162.4 ) (164.8 ) Repurchases of common stock, including shares
surrendered for tax withholdings (17.1 ) (215.2 ) Proceeds from
exercise of stock options 0.1 5.0
Net cash used in financing activities (197.5 )
(518.4 ) Effect of exchange rate changes on cash, cash
equivalents, and restricted cash 55.2 (16.4 )
Net increase in cash, cash equivalents, and restricted cash 643.7
209.7 Cash, cash equivalents, and restricted cash at beginning of
period 711.8 502.1 Cash, cash
equivalents, and restricted cash at end of period $ 1,355.5
$ 711.8
RALPH LAUREN CORPORATION
OTHER INFORMATION (in millions) (Unaudited)
SEGMENT INFORMATION Net revenues and operating income
(loss) for the periods ended March 31, 2018 and April 1, 2017 for
each segment were as follows:
Three Months
Ended Twelve Months Ended March 31,
April 1, March 31,
April 1, 2018 2017 2018 2017
Net revenues: North America $ 759.3 $ 881.8 $ 3,231.0
$ 3,783.0 Europe 420.0 370.8 1,585.0 1,543.4 Asia 256.8 219.7 933.7
882.5 Other non-reportable segments 93.1 93.1
432.6 443.9 Total net revenues $
1,529.2 $ 1,565.4 $ 6,182.3 $ 6,652.8
Operating income (loss): North America $ 128.3 $ 92.2
$ 677.6 $ 666.8 Europe 83.1 66.0 356.7 305.2 Asia 36.2 (6.0 ) 137.2
(86.3 ) Other non-reportable segments 10.6
(10.0 ) 107.5 81.0 258.2 142.2 1,279.0
966.7 Unallocated corporate expenses (203.5 ) (283.2 )
(672.8 ) (740.4 ) Unallocated restructuring and other charges
(29.3 ) (124.7 ) (108.0 ) (318.6 )
Total operating income (loss) $ 25.4 $ (265.7 ) $ 498.2
$ (92.3 )
RALPH LAUREN CORPORATION
Constant Currency Financial Measures (in millions)
(Unaudited) Comparable Store Sales Data
Three Months Ended March 31,
2018 % Change
Twelve Months EndedMarch 31,
2018% Change
As Reported Constant Currency
As Reported Constant Currency North
America Digital commerce (18 %) (18 %) (22 %) (22 %) Excluding
Digital commerce 7 % 6 % (3 %) (3 %) Total North
America 0 % (0 %) (7 %) (7 %) Europe Digital commerce 24 % 8
% 4 % (2 %) Excluding Digital commerce 4 % (8 %) (4
%) (8 %) Total Europe 7 % (6 %) (3 %) (7 %) Asia(a) 9
% 4 % 3 % 3 % Total Ralph Lauren 4 % (1 %) (4
%) (5 %) (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 March 31,
2018 April 1, 2017 As Reported Constant
Currency North America $ 759.3 $ 881.8 (13.9 %) (14.1 %) Europe
420.0 370.8 13.3 % (1.0 %) Asia 256.8 219.7 16.9 % 10.6 % Other
non-reportable segments 93.1 93.1 (0.0
%) (0.3 %) Net revenues $ 1,529.2 $ 1,565.4 (2.3 %)
(6.7 %)
Twelve Months Ended % Change March
31, 2018 April 1, 2017 As Reported Constant
Currency North America $ 3,231.0 $ 3,783.0 (14.6 %) (14.7 %)
Europe 1,585.0 1,543.4 2.7 % (2.6 %) Asia 933.7 882.5 5.8 % 5.6 %
Other non-reportable segments 432.6 443.9
(2.5 %) (2.6 %) Net revenues $ 6,182.3 $ 6,652.8
(7.1 %) (8.4 %)
RALPH LAUREN
CORPORATION Global Retail Store Network
March 31, April 1, 2018
2017
North
America
Ralph Lauren Stores 41 46 Polo Factory Stores 174 170
Total
Directly Operated Stores 215 216 Concessions 2 1
Europe
Ralph Lauren Stores 19 21 Polo Factory Stores 62 61
Total
Directly Operated Stores 81 82 Concessions 25 31
Asia
Ralph Lauren Stores 51 42 Polo Factory Stores 54 47
Total
Directly Operated Stores 105 89 Concessions 603
586
Other
Club Monaco Stores 71 79 Club Monaco Concessions 2 2
Global Directly
Operated Stores and Concessions
Ralph Lauren Stores 111 109 Polo Factory Stores 290 278 Club Monaco
Stores 71 79
Total Directly Operated Stores 472
466 Concessions 632 620
Global Licensed
Stores and Concessions
Ralph Lauren Licensed Stores 88 105 Club Monaco Licensed Stores 59
59
Total Licensed Stores 147 164 Licensed
Concessions 131 99
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)(b)
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 share $ 0.50 $ 0.90
Weighted average shares outstanding - Basic 81.7 81.7 Weighted
average 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, net (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)(c)
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
share $ 1.97 $ 6.03 Weighted average shares outstanding - Basic
81.7 81.7 Weighted average 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, net (780.8 ) 128.7
(652.1 ) Total operating income $ 498.2 $
165.6 $ 663.8
RALPH LAUREN
CORPORATION Reconciliation of Certain Non-U.S. GAAP
Financial Measures (in millions, except per share data)
(Unaudited) Three Months Ended
April 1, 2017 As
Reported
Total
Adjustments(a)(d)
As
Adjusted
Net revenues $ 1,565.4 $ - $ 1,565.4 Gross profit 819.1 48.5 867.6
Gross profit margin 52.3 % 55.4 % Total other operating expenses,
net (1,084.8 ) 321.8 (763.0 ) Operating expense margin 69.3 % 48.7
% Operating income (loss) (265.7 ) 370.3 104.6 Operating margin
(17.0 %) 6.7 % Income (loss) before income taxes (268.5 ) 370.3
101.8 Income tax benefit (provision) 64.5 (92.1 ) (27.6 ) Effective
tax rate 24.0 % 27.0 % Net income (loss) $ (204.0 ) $ 278.2 $ 74.2
Net income (loss) per diluted share $ (2.48 ) $ 0.89 Weighted
average shares outstanding - Basic 82.3 82.3 Weighted average
shares outstanding - Diluted 82.3 83.1 SEGMENT INFORMATION -
OPERATING INCOME/(LOSS): North America $ 92.2 $ 61.6 $ 153.8
Operating margin 10.5 % 17.4 % Europe 66.0 7.5 73.5 Operating
margin 17.8 % 19.9 % Asia (6.0 ) 35.0 29.0 Operating margin (2.7 %)
13.1 % Other non-reportable segments (10.0 ) 25.3 15.3 Operating
margin (10.7 %) 16.5 % Unallocated corporate expenses and
restructuring and other charges, net (407.9 ) 240.9
(167.0 ) Total operating income (loss) $ (265.7 ) $
370.3 $ 104.6
Twelve Months
Ended April 1, 2017 As
Reported
Total
Adjustments(a)(d)
As
Adjusted
Net revenues $ 6,652.8 $ - $ 6,652.8 Gross profit 3,651.1 197.9
3,849.0 Gross profit margin 54.9 % 57.9 % Total other operating
expenses, net (3,743.4 ) 572.4 (3,171.0 ) Operating expense margin
56.3 % 47.7 % Operating income (loss) (92.3 ) 770.3 678.0 Operating
margin (1.4 %) 10.2 % Income (loss) before income taxes (104.9 )
770.3 665.4 Income tax benefit (provision) 5.6 (194.1 ) (188.5 )
Effective tax rate 5.3 % 28.3 % Net income (loss) $ (99.3 ) $ 576.2
$ 476.9 Net income (loss) per diluted share $ (1.20 ) $ 5.71
Weighted average shares outstanding - Basic 82.7 82.7 Weighted
average shares outstanding - Diluted 82.7 83.5 SEGMENT INFORMATION
- OPERATING INCOME/(LOSS): North America $ 666.8 $ 96.4 $ 763.2
Operating margin 17.6 % 20.2 % Europe 305.2 23.2 328.4 Operating
margin 19.8 % 21.3 % Asia (86.3 ) 179.6 93.3 Operating margin (9.8
%) 10.6 % Other non-reportable segments 81.0 35.5 116.5 Operating
margin 18.2 % 26.2 % Unallocated corporate expenses and
restructuring charges, net (1,059.0 ) 435.6
(623.4 ) Total operating income (loss) $ (92.3 ) $ 770.3
$ 678.0
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 the Tax Cuts and Jobs Act (the "TCJA") and other
income tax-related adjustments 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 March 31,
2018 include (i) charges of $23.9 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 shop-within-shops 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
pending customs audit. The income tax benefit (provision) reflects
the reversal of enactment-related charges of $9.9 million recorded
in connection with the TCJA.
(c) Adjustments for the
twelve months ended March 31, 2018 include (i) charges of $102.9
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 and shop-within-shops 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 pending 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 the TCJA.
(d) Adjustments
for the three-month and twelve-month periods ended April 1, 2017
include charges of $326.5 million and $726.5 million, respectively,
incurred in connection with our restructuring plans, consisting of
restructuring charges, impairment of assets, and inventory-related
charges. Additionally, both the three-month and twelve-month
periods ended April 1, 2017 include (i) additional impairment of
assets of $14.0 million related to underperforming stores that were
subject to potential future closure; (ii) a goodwill impairment
charge of $5.2 million; and (iii) other charges of $24.6 million
recorded in connection with the anticipated settlement of certain
non-income tax issues and the departure of Mr. Stefan Larsson. The
income tax benefit (provision) for both the three-month and
twelve-month periods ended April 1, 2017 includes the reversal of a
$15.9 million income tax reserve resulting from a change in tax law
that impacted an interest assessment on a prior year withholding
tax.
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
and shop-within-shops, impairments of goodwill and other intangible
assets, and net 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) for
both the three-month and twelve-month periods ended March 31, 2018
has also been adjusted for enactment-related charges recorded in
connection with the Tax Cuts and Jobs Act. In addition, the income
tax benefit (provision) for both the three-month and twelve-month
periods ended April 1, 2017 has been adjusted for the reversal of
an income tax reserve resulting from a change in tax law that
impacted an interest assessment on a prior year withholding tax.
Included in this earnings release 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 Fiscal 2019 and first
quarter Fiscal 2019 guidance excludes restructuring-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: https://www.businesswire.com/news/home/20180523005391/en/
Investor Relations:Evren Kopelman, 212-813-7862orCorporate
Communications:Lindsay Knoll,
212-650-4401rl-press@ralphlauren.com
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