Ralph Lauren Reports Third Quarter Fiscal 2019 Results
“Our passionate teams are focused on staying true to the authentic expression of the
“Solid execution on our key initiatives, especially during the important holiday period, delivered better-than-expected results for the third quarter as we drove higher average unit retail and continued to improve quality of sales overall,” said
We delivered across the following strategic initiatives in the third quarter of Fiscal 2019:
- Win Over a New Generation of Consumers
- Increased marketing investment by 18% to last year, with a focus on driving brand awareness and engagement over the holiday season
- Elevated our brand and connected with new consumers through our collaboration with
UK -based streetwear brand Palace and our Winter Stadium Limited Edition launch - Continued to leverage celebrity and social influencers that resonate with different segments of the
Ralph Lauren consumer base, including custom designs for the wedding ofNick Jonas andPriyanka Chopra and newRalph Lauren Romance fragrance ambassadorTaylor Hill
- Energize Core Products and Accelerate Under-Developed Categories
- Average unit retail across our direct-to-consumer network was up 9% through elevating the product assortment and continued quality of sales initiatives
- Denim and outerwear category sell-out trends were encouraging, driven by an improved merchandising and distribution focus
- Our limited edition Polo collections continued to gain traction as we leveraged our Polo mobile app in the U.S. and marketing programs globally
- Drive Targeted Expansion in Our Regions and Channels
-
North America sales increased 3% to last year, with 4% retail comps more than offsetting planned reductions to the off-price wholesale channel - Solid growth in international markets, with double-digit revenue growth in both
Europe andAsia on a reported and constant currency basis - Momentum in
Asia continued with 11% revenue growth and 4% comps in constant currency, led by 19% constant currency growth in GreaterChina and strength acrossJapan ,South Korea andAustralia - Continued to expand our global distribution with new retail stores and digital pure players
-
- Lead With Digital
- Global digital revenue grew 20% to last year in constant currency, driven by strength across all regions
- Growth in our directly-operated digital flagships exceeded our expectations, with a digital comp increase of 21% in
North America as we anniversaried our platform upgrade and 13% inEurope . These improvements were driven by brand building initiatives, an enhanced consumer experience, and higher quality of sales – all enabled by our new platform - Reinforced our brand presence in
China through continued expansion of ourChina digital commerce site launched in September and pure-play partnerships
- Operate With Discipline to Fuel Growth
- Adjusted gross margin was up 90 basis points driven by quality of sales
- Adjusted operating expenses, excluding our marketing investment, were slightly below third quarter revenue growth despite a significant acceleration in digital commerce sales
- Continued to consolidate our real estate footprint with the completed sale of our Beechwood facility in
North Carolina , driving increased efficiency in ourNorth America distribution network
Third Quarter Fiscal 2019 Income Statement Review
Net Revenue. In the third quarter of Fiscal 2019, revenue increased by 5.1% to
Revenue performance for the Company’s reportable segments in the third quarter compared to the prior year period was:
- North America Revenue.
North America revenue in the third quarter increased 3% to$909 million .North America wholesale revenue was down 3% to last year reflecting planned reductions in off-price sales. In retail, comparable store sales inNorth America were up 4%, including flat comps in brick and mortar stores and a 21% increase in digital commerce. - Europe Revenue.
Europe revenue in the third quarter increased 10% to$415 million on a reported basis and increased 13% to last year in constant currency. In retail, comparable store sales inEurope were up 4% on a constant currency basis, driven by a 3% increase in brick and mortar store comps and a 13% increase in digital commerce.Europe wholesale revenue increased 16% on a reported basis and increased 20% in constant currency. As previously discussed, third quarter results partly benefited from a shift in timing of shipments that will negatively impact fourth quarter results. - Asia Revenue.
Asia revenue in the third quarter increased 10% to$275 million on a reported basis and increased 11% in constant currency, with strong performance across every market, including 19% constant currency growth inGreater China . Comparable store sales inAsia increased 4% in constant currency, reflecting growth in both brick and mortar and digital commerce operations.
Gross Profit. Gross profit for the third quarter of Fiscal 2019 was
The increase in adjusted gross margin was driven by initiatives to improve quality of sales through reduced promotional activity and improved pricing as well as favorable product and channel sales mix. Foreign currency benefited gross margin by 30 basis points in the third quarter.
Operating Expenses. Operating expenses in the third quarter of Fiscal 2019 were
Adjusted operating expense rate was 47.7%, 20 basis points above the prior year period, excluding restructuring-related and other charges. This increase was due to increased marketing investment, new store expansion, and channel mix shift as a greater portion of our revenue was generated by our retail businesses, which typically carry a higher operating expense rate.
Operating Income. Operating income for the third quarter of Fiscal 2019 was
- North America Operating Income.
North America operating income in the third quarter was$204 million on a reported and$205 million on an adjusted basis.Adjusted North America operating margin was 22.6%, up 20 basis points to last year. - Europe Operating Income.
Europe operating income in the third quarter was$91 million on a reported and$93 million on an adjusted basis. AdjustedEurope operating margin was 22.4%, 100 basis points higher than the prior year period. In constant currency, the adjusted operating margin declined by 40 basis points, as strong sales leverage was more than offset by gross margin contraction. - Asia Operating Income.
Asia operating income in the third quarter was$48 million on both a reported and adjusted basis. AdjustedAsia operating margin was 17.4%, down 30 basis points to the prior year and down 10 basis points in constant currency, as gross margin expansion was more than offset by an increase in SG&A due to new store openings and higher marketing investments.
Net Income and EPS. On a reported basis, net income in the third quarter of Fiscal 2019 was
In the third quarter of Fiscal 2019, the Company had an effective tax rate of 39.8% on a reported and 23.2% on an adjusted basis, excluding restructuring-related and other charges. This compared to a reported and adjusted effective tax rate of 143.9% and 21.6%, respectively, in the prior year period.
Balance Sheet and Cash Flow Review
The Company ended the third quarter of Fiscal 2019 with
Inventory at the end of the third quarter of Fiscal 2019 was
The Company repurchased approximately
Full Year Fiscal 2019 and Fourth Quarter Outlook
The full year Fiscal 2019 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 2019, the Company now expects net revenue to be up slightly on a constant currency basis. Foreign currency is expected to have approximately 80 to 90 basis points of negative impact on revenue growth in Fiscal 2019.
The Company now expects operating margin for Fiscal 2019 to increase 60 basis points in constant currency, up from 40 to 60 basis points previously, driven by gross margin expansion. Foreign currency is expected to have minimal impact on operating margin in Fiscal 2019.
In the fourth quarter of Fiscal 2019, the Company expects net revenue to be down slightly in constant currency due to a planned reduction in off-price sales. Foreign currency is expected to pressure revenue growth by about 300 basis points in the fourth quarter of Fiscal 2019.
Operating margin for the fourth quarter of Fiscal 2019 is expected to be up about 70 basis points in constant currency. Foreign currency is expected to have about 60 basis points of negative impact on operating margin in the fourth quarter.
We expect the full year Fiscal 2019 tax rate to be approximately 21%. The tax rate for the fourth quarter of Fiscal 2019 is estimated at 16% to 17%.
The Company now expects capital expenditures of approximately
Conference Call
As previously announced, the Company will host a conference call and live online webcast today,
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
ABOUT
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 statements under “Full Year Fiscal 2019 and Fourth Quarter Outlook” and the statements regarding, among other things, our current expectations about the Company's future results and financial condition, revenues, store openings and closings, employee reductions, margins, expenses and earnings and are indicated by words or phrases such as "anticipate," "estimate," "expect," "project," "we believe,” “can” and similar words or phrases. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from the future results, performance or achievements expressed in or implied by such forward-looking statements. Forward-looking statements are based largely on the Company's expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. The factors that could cause actual results to materially differ include, among others: the loss of key personnel, including Mr. Ralph Lauren, or other changes in our executive and senior management team or to our operating structure, and our ability to effectively transfer knowledge during periods of transition; our ability to successfully implement our long-term growth strategy 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; 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
RALPH LAUREN CORPORATION | |||||||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||||||||
(in millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
December 29, | March 31, | December 30, | |||||||||||||
2018 | 2018 | 2017 | |||||||||||||
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 680.5 | $ | 1,304.6 | $ | 1,175.7 | |||||||||
Short-term investments | 1,382.5 | 699.4 | 862.3 | ||||||||||||
Accounts receivable, net of allowances | 304.0 | 421.4 | 295.2 | ||||||||||||
Inventories | 914.5 | 761.3 | 825.4 | ||||||||||||
Income tax receivable | 34.4 | 38.0 | 69.8 | ||||||||||||
Prepaid expenses and other current assets | 380.5 | 323.7 | 304.8 | ||||||||||||
Total current assets | 3,696.4 | 3,548.4 | 3,533.2 | ||||||||||||
Non-current investments | 45.7 | 86.2 | 83.3 | ||||||||||||
Property and equipment, net | 1,079.3 | 1,186.3 | 1,215.9 | ||||||||||||
Deferred tax assets | 76.5 | 86.6 | 133.1 | ||||||||||||
Goodwill | 924.8 | 950.5 | 935.0 | ||||||||||||
Intangible assets, net | 169.5 | 188.0 | 201.5 | ||||||||||||
Other non-current assets(a) | 145.5 | 183.5 | 180.3 | ||||||||||||
Total assets | $ | 6,092.0 | $ | 6,143.3 | $ | 6,199.0 | |||||||||
LIABILITIES AND EQUITY | |||||||||||||||
Current liabilities: | |||||||||||||||
Short-term debt | $ | - | $ | 10.1 | $ | - | |||||||||
Current portion of long-term debt | - | 298.1 | 298.3 | ||||||||||||
Accounts payable | 169.1 | 165.6 | 184.3 | ||||||||||||
Income tax payable | 67.6 | 30.0 | 138.5 | ||||||||||||
Accrued expenses and other current liabilities | 1,037.0 | 1,083.4 | 1,089.1 | ||||||||||||
Total current liabilities | 1,273.7 | 1,587.2 | 1,710.2 | ||||||||||||
Long-term debt | 686.8 | 288.0 | 290.3 | ||||||||||||
Income tax payable | 152.2 | 124.8 | 150.8 | ||||||||||||
Non-current liability for unrecognized tax benefits | 88.5 | 79.2 | 76.4 | ||||||||||||
Other non-current liabilities | 536.9 | 606.7 | 563.8 | ||||||||||||
Total liabilities | 2,738.1 | 2,685.9 | 2,791.5 | ||||||||||||
Equity: | |||||||||||||||
Common stock | 1.3 | 1.3 | 1.3 | ||||||||||||
Additional paid-in-capital | 2,470.5 | 2,383.4 | 2,365.1 | ||||||||||||
Retained earnings | 5,996.3 | 5,752.2 | 5,751.5 | ||||||||||||
Treasury stock, Class A, at cost | (5,012.9 | ) | (4,581.0 | ) | (4,579.8 | ) | |||||||||
Accumulated other comprehensive loss | (101.3 | ) | (98.5 | ) | (130.6 | ) | |||||||||
Total equity | 3,353.9 | 3,457.4 | 3,407.5 | ||||||||||||
Total liabilities and equity | $ | 6,092.0 | $ | 6,143.3 | $ | 6,199.0 | |||||||||
Net Cash (incl. LT Investments) | 1,421.9 | 1,494.0 | 1,532.7 | ||||||||||||
Cash & Investments (ST & LT) | 2,108.7 | 2,090.2 | 2,121.3 | ||||||||||||
Net Cash (excl. LT Investments) | 1,376.2 | 1,407.8 | 1,449.4 | ||||||||||||
Cash & ST Investments | 2,063.0 | 2,004.0 | 2,038.0 | ||||||||||||
(a) Includes non-current investments of: | $ | 45.7 | $ | 86.2 | $ | 83.3 |
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 | ||||||||||
December 29, | December 30, | |||||||||
2018 | 2017 | |||||||||
North America | $ | 908.7 | $ | 886.4 | ||||||
Europe | 415.2 | 378.5 | ||||||||
Asia | 274.8 | 251.0 | ||||||||
Other non-reportable segments | 127.1 | 125.9 | ||||||||
Net revenues | 1,725.8 | 1,641.8 | ||||||||
Cost of goods sold | (666.3 | ) | (645.6 | ) | ||||||
Gross profit | 1,059.5 | 996.2 | ||||||||
Selling, general, and administrative expenses | (823.4 | ) | (779.8 | ) | ||||||
Impairment of assets | (2.2 | ) | (3.9 | ) | ||||||
Restructuring and other charges | (40.1 | ) | (23.3 | ) | ||||||
Total other operating expenses, net | (865.7 | ) | (807.0 | ) | ||||||
Operating income | 193.8 | 189.2 | ||||||||
Interest expense | (5.2 | ) | (4.8 | ) | ||||||
Interest income | 9.9 | 3.3 | ||||||||
Other income (expense), net | 1.0 | (1.4 | ) | |||||||
Income before income taxes | 199.5 | 186.3 | ||||||||
Income tax provision | (79.5 | ) | (268.1 | ) | ||||||
Net income (loss) | $ | 120.0 | $ | (81.8 | ) | |||||
Net income (loss) per common share - Basic | $ | 1.50 | $ | (1.00 | ) | |||||
Net income (loss) per common share - Diluted | $ | 1.48 | $ | (1.00 | ) | |||||
Weighted average common shares outstanding - Basic | 80.2 | 81.7 | ||||||||
Weighted average common shares outstanding - Diluted | 81.2 | 81.7 | ||||||||
Dividends declared per share | $ | 0.625 | $ | 0.50 | ||||||
RALPH LAUREN CORPORATION | ||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||
(in millions, except per share data) | ||||||||||
(Unaudited) | ||||||||||
Nine Months Ended | ||||||||||
December 29, | December 30, | |||||||||
2018 | 2017 | |||||||||
North America | $ | 2,494.5 | $ | 2,471.7 | ||||||
Europe | 1,225.0 | 1,165.0 | ||||||||
Asia | 767.5 | 676.9 | ||||||||
Other non-reportable segments | 320.3 | 339.5 | ||||||||
Net revenues | 4,807.3 | 4,653.1 | ||||||||
Cost of goods sold | (1,822.8 | ) | (1,809.9 | ) | ||||||
Gross profit | 2,984.5 | 2,843.2 | ||||||||
Selling, general, and administrative expenses | (2,358.9 | ) | (2,266.9 | ) | ||||||
Impairment of assets | (13.3 | ) | (24.8 | ) | ||||||
Restructuring and other charges | (78.4 | ) | (78.7 | ) | ||||||
Total other operating expenses, net | (2,450.6 | ) | (2,370.4 | ) | ||||||
Operating income | 533.9 | 472.8 | ||||||||
Interest expense | (15.6 | ) | (14.4 | ) | ||||||
Interest income | 29.5 | 7.6 | ||||||||
Other expense, net | (0.6 | ) | (1.7 | ) | ||||||
Income before income taxes | 547.2 | 464.3 | ||||||||
Income tax provision | (147.9 | ) | (342.8 | ) | ||||||
Net income | $ | 399.3 | $ | 121.5 | ||||||
Net income per common share - Basic | $ | 4.92 | $ | 1.49 | ||||||
Net income per common share - Diluted | $ | 4.85 | $ | 1.47 | ||||||
Weighted average common shares outstanding - Basic | 81.1 | 81.7 | ||||||||
Weighted average common shares outstanding - Diluted | 82.3 | 82.5 | ||||||||
Dividends declared per share | $ | 1.875 | $ | 1.50 | ||||||
RALPH LAUREN CORPORATION | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||
(in millions) | ||||||||||
(Unaudited) | ||||||||||
Nine Months Ended | ||||||||||
December 29, | December 30, | |||||||||
2018 | 2017 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 399.3 | $ | 121.5 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization expense | 212.0 | 219.4 | ||||||||
Deferred income tax expense (benefit) | 13.7 | (8.0 | ) | |||||||
Loss on sale of property | 11.6 | - | ||||||||
Non-cash stock-based compensation expense | 65.3 | 56.3 | ||||||||
Non-cash impairment of assets | 13.3 | 24.8 | ||||||||
Non-cash restructuring-related inventory charges | 3.1 | 1.3 | ||||||||
Other non-cash charges | 7.6 | 10.3 | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | 105.9 | 158.9 | ||||||||
Inventories | (179.3 | ) | (11.6 | ) | ||||||
Prepaid expenses and other current assets | (75.7 | ) | (4.2 | ) | ||||||
Accounts payable and accrued liabilities | 24.9 | 105.0 | ||||||||
Income tax receivables and payables | 82.7 | 279.7 | ||||||||
Deferred income | (10.6 | ) | 3.8 | |||||||
Other balance sheet changes | 9.3 | (6.1 | ) | |||||||
Net cash provided by operating activities | 683.1 | 951.1 | ||||||||
Cash flows from investing activities: | ||||||||||
Capital expenditures | (149.2 | ) | (123.0 | ) | ||||||
Purchases of investments | (2,627.8 | ) | (985.5 | ) | ||||||
Proceeds from sales and maturities of investments | 1,975.2 | 795.3 | ||||||||
Acquisitions and ventures | (4.5 | ) | (4.6 | ) | ||||||
Proceeds from sale of property | 20.0 | - | ||||||||
Settlement of net investment hedges | (23.8 | ) | - | |||||||
Net cash used in investing activities | (810.1 | ) | (317.8 | ) | ||||||
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 capital lease obligations | (14.8 | ) | (21.2 | ) | ||||||
Payments of dividends | (141.6 | ) | (121.7 | ) | ||||||
Repurchases of common stock, including shares surrendered for tax withholdings | (431.9 | ) | (15.9 | ) | ||||||
Proceeds from exercise of stock options | 21.8 | 0.1 | ||||||||
Other financing activities | (2.8 | ) | - | |||||||
Net cash used in financing activities | (481.1 | ) | (158.7 | ) | ||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (23.9 | ) | 36.8 | |||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (632.0 | ) | 511.4 | |||||||
Cash, cash equivalents, and restricted cash at beginning of period | 1,355.5 | 711.8 | ||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 723.5 | $ | 1,223.2 | ||||||
RALPH LAUREN CORPORATION | ||||||||||||||||||||
OTHER INFORMATION | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||||||
Net revenues and operating income for the periods ended December 29, 2018 and December 30, 2017 for each segment were as follows: | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
December 29, | December 30, | December 29, | December 30, | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Net revenues: | ||||||||||||||||||||
North America | $ | 908.7 | $ | 886.4 | $ | 2,494.5 | $ | 2,471.7 | ||||||||||||
Europe | 415.2 | 378.5 | 1,225.0 | 1,165.0 | ||||||||||||||||
Asia | 274.8 | 251.0 | 767.5 | 676.9 | ||||||||||||||||
Other non-reportable segments | 127.1 | 125.9 | 320.3 | 339.5 | ||||||||||||||||
Total net revenues | $ | 1,725.8 | $ | 1,641.8 | $ | 4,807.3 | $ | 4,653.1 | ||||||||||||
Operating income: | ||||||||||||||||||||
North America | $ | 204.3 | $ | 196.6 | $ | 574.0 | $ | 549.3 | ||||||||||||
Europe | 91.4 | 81.0 | 291.9 | 273.6 | ||||||||||||||||
Asia | 47.9 | 44.3 | 123.3 | 101.0 | ||||||||||||||||
Other non-reportable segments | 42.6 | 37.1 | 97.9 | 96.9 | ||||||||||||||||
386.2 | 359.0 | 1,087.1 | 1,020.8 | |||||||||||||||||
Unallocated corporate expenses | (152.3 | ) | (146.5 | ) | (474.8 | ) | (469.3 | ) | ||||||||||||
Unallocated restructuring and other charges | (40.1 | ) | (23.3 | ) | (78.4 | ) | (78.7 | ) | ||||||||||||
Total operating income | $ | 193.8 | $ | 189.2 | $ | 533.9 | $ | 472.8 | ||||||||||||
RALPH LAUREN CORPORATION | ||||||||||||||||||
Constant Currency Financial Measures | ||||||||||||||||||
(in millions) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Comparable Store Sales Data | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
December 29, 2018 % Change | December 29, 2018 % Change | |||||||||||||||||
Constant Currency | Constant Currency | |||||||||||||||||
North America | ||||||||||||||||||
Digital commerce | 21 | % | 11 | % | ||||||||||||||
Excluding Digital commerce | - | % | (1 | %) | ||||||||||||||
Total North America | 4 | % | 1 | % | ||||||||||||||
Europe | ||||||||||||||||||
Digital commerce | 13 | % | 6 | % | ||||||||||||||
Excluding Digital commerce | 3 | % | (3 | %) | ||||||||||||||
Total Europe | 4 | % | (2 | %) | ||||||||||||||
Asia | ||||||||||||||||||
Digital commerce | 62 | % | 60 | % | ||||||||||||||
Excluding Digital commerce | 4 | % | 5 | % | ||||||||||||||
Total Asia | 4 | % | 5 | % | ||||||||||||||
Total Ralph Lauren | 4 | % | 1 | % | ||||||||||||||
Operating Segment Net Revenue Data | ||||||||||||||||||
Three Months Ended | % Change | |||||||||||||||||
December 29, 2018 | December 30, 2017 | As Reported | Constant Currency | |||||||||||||||
North America | $ | 908.7 | $ | 886.4 | 2.5 | % | 2.6 | % | ||||||||||
Europe | 415.2 | 378.5 | 9.7 | % | 13.3 | % | ||||||||||||
Asia | 274.8 | 251.0 | 9.5 | % | 11.4 | % | ||||||||||||
Other non-reportable segments | 127.1 | 125.9 | 0.9 | % | 1.0 | % | ||||||||||||
Net revenues | $ | 1,725.8 | $ | 1,641.8 | 5.1 | % | 6.3 | % | ||||||||||
Nine Months Ended | % Change | |||||||||||||||||
December 29, 2018 | December 30, 2017 | As Reported | Constant Currency | |||||||||||||||
North America | $ | 2,494.5 | $ | 2,471.7 | 0.9 | % | 1.0 | % | ||||||||||
Europe | 1,225.0 | 1,165.0 | 5.2 | % | 4.8 | % | ||||||||||||
Asia | 767.5 | 676.9 | 13.4 | % | 13.7 | % | ||||||||||||
Other non-reportable segments | 320.3 | 339.5 | (5.7 | %) | (5.7 | %) | ||||||||||||
Net revenues | $ | 4,807.3 | $ | 4,653.1 | 3.3 | % | 3.3 | % | ||||||||||
RALPH LAUREN CORPORATION | ||||||||||||||||||||||||||||||||||||||||
Revenue by Sales Channel | ||||||||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||||||||||
December 29, 2018 | December 30, 2017 | |||||||||||||||||||||||||||||||||||||||
North America | Europe | Asia | Other | Total | North America | Europe | Asia | Other | Total | |||||||||||||||||||||||||||||||
Sales Channel: | ||||||||||||||||||||||||||||||||||||||||
Wholesale | $ | 365.5 | $ | 166.5 | $ | 13.4 | $ | 11.1 | $ | 556.5 | $ | 377.1 | $ | 143.7 | $ | 13.6 | $ | 8.4 | $ | 542.8 | ||||||||||||||||||||
Retail | 543.2 | 248.7 | 261.4 | 68.3 | 1,121.6 | 509.3 | 234.8 | 237.4 | 73.2 | 1,054.7 | ||||||||||||||||||||||||||||||
Licensing | - | - | - | 47.7 | 47.7 | - | - | - | 44.3 | 44.3 | ||||||||||||||||||||||||||||||
Total net revenues | $ | 908.7 | $ | 415.2 | $ | 274.8 | $ | 127.1 | $ | 1,725.8 | $ | 886.4 | $ | 378.5 | $ | 251.0 | $ | 125.9 | $ | 1,641.8 | ||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
December 29, 2018 | December 30, 2017 | |||||||||||||||||||||||||||||||||||||||
North America | Europe | Asia | Other | Total | North America | Europe | Asia | Other | Total | |||||||||||||||||||||||||||||||
Sales Channel: | ||||||||||||||||||||||||||||||||||||||||
Wholesale | $ | 1,128.4 | $ | 536.1 | $ | 48.2 | $ | 23.6 | $ | 1,736.3 | $ | 1,141.7 | $ | 492.8 | $ | 39.4 | $ | 21.7 | $ | 1,695.6 | ||||||||||||||||||||
Retail | 1,366.1 | 688.9 | 719.3 | 165.6 | 2,939.9 | 1,330.0 | 672.2 | 637.5 | 184.8 | 2,824.5 | ||||||||||||||||||||||||||||||
Licensing | - | - | - | 131.1 | 131.1 | - | - | - | 133.0 | 133.0 | ||||||||||||||||||||||||||||||
Total net revenues | $ | 2,494.5 | $ | 1,225.0 | $ | 767.5 | $ | 320.3 | $ | 4,807.3 | $ | 2,471.7 | $ | 1,165.0 | $ | 676.9 | $ | 339.5 | $ | 4,653.1 | ||||||||||||||||||||
RALPH LAUREN CORPORATION | ||||||
Global Retail Store Network | ||||||
December 29, | December 30, | |||||
2018 | 2017 | |||||
North America | ||||||
Ralph Lauren Stores | 42 | 44 | ||||
Polo Factory Stores | 185 | 174 | ||||
Total Directly Operated Stores | 227 | 218 | ||||
Concessions | 2 | 2 | ||||
Europe | ||||||
Ralph Lauren Stores | 23 | 20 | ||||
Polo Factory Stores | 64 | 62 | ||||
Total Directly Operated Stores | 87 | 82 | ||||
Concessions | 25 | 25 | ||||
| ||||||
Asia | ||||||
Ralph Lauren Stores | 55 | 49 | ||||
Polo Factory Stores | 56 | 54 | ||||
Total Directly Operated Stores | 111 | 103 | ||||
Concessions | 619 | 599 | ||||
Other | ||||||
Club Monaco Stores | 76 | 78 | ||||
Club Monaco Concessions | 5 | 2 | ||||
| ||||||
Global Directly Operated Stores and Concessions | ||||||
Ralph Lauren Stores | 120 | 113 | ||||
Polo Factory Stores | 305 | 290 | ||||
Club Monaco Stores | 76 | 78 | ||||
Total Directly Operated Stores | 501 | 481 | ||||
Concessions | 651 | 628 | ||||
Global Licensed Stores and Concessions | ||||||
Ralph Lauren Licensed Stores | 101 | 87 | ||||
Club Monaco Licensed Stores | 59 | 62 | ||||
Total Licensed Stores | 160 | 149 | ||||
Licensed Concessions | 111 | 122 | ||||
RALPH LAUREN CORPORATION | |||||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | |||||||||||||||
(in millions, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | |||||||||||||||
December 29, 2018 | |||||||||||||||
As Reported | Total Adjustments(a)(b) | As Adjusted | |||||||||||||
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 | 91.4 | 1.6 | 93.0 | ||||||||||||
Operating margin | 22.0 | % | 22.4 | % | |||||||||||
Asia | 47.9 | - | 47.9 | ||||||||||||
Operating margin | 17.4 | % | 17.4 | % | |||||||||||
Other non-reportable segments | 42.6 | 2.3 | 44.9 | ||||||||||||
Operating margin | 33.5 | % | 35.4 | % | |||||||||||
Unallocated corporate expenses and restructuring and 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)(c) | As Adjusted | |||||||||||||
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 | 291.9 | 1.8 | 293.7 | ||||||||||||
Operating margin | 23.8 | % | 24.0 | % | |||||||||||
Asia | 123.3 | 3.7 | 127.0 | ||||||||||||
Operating margin | 16.1 | % | 16.5 | % | |||||||||||
Other non-reportable segments | 97.9 | 8.9 | 106.8 | ||||||||||||
Operating margin | 30.6 | % | 33.4 | % | |||||||||||
Unallocated corporate expenses and restructuring and other charges | (553.2 | ) | 79.0 | (474.2 | ) | ||||||||||
Total operating income | $ | 533.9 | $ | 94.8 | $ | 628.7 | |||||||||
RALPH LAUREN CORPORATION | |||||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | |||||||||||||||
(in millions, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | |||||||||||||||
December 30, 2017 | |||||||||||||||
As Reported | Total Adjustments(a)(d) | As Adjusted | |||||||||||||
Net revenues | $ | 1,641.8 | $ | - | $ | 1,641.8 | |||||||||
Gross profit | 996.2 | - | 996.2 | ||||||||||||
Gross profit margin | 60.7 | % | 60.7 | % | |||||||||||
Total other operating expenses, net | (807.0 | ) | 27.2 | (779.8 | ) | ||||||||||
Operating expense margin | 49.2 | % | 47.5 | % | |||||||||||
Operating income | 189.2 | 27.2 | 216.4 | ||||||||||||
Operating margin | 11.5 | % | 13.2 | % | |||||||||||
Income before income taxes | 186.3 | 27.2 | 213.5 | ||||||||||||
Income tax provision | (268.1 | ) | 222.0 | (46.1 | ) | ||||||||||
Effective tax rate | 143.9 | % | 21.6 | % | |||||||||||
Net income (loss) | $ | (81.8 | ) | $ | 249.2 | $ | 167.4 | ||||||||
Net income (loss) per diluted common share | $ | (1.00 | ) | $ | 2.03 | ||||||||||
Weighted average common shares outstanding - Diluted | 81.7 | 82.6 | |||||||||||||
SEGMENT INFORMATION - | |||||||||||||||
OPERATING INCOME: | |||||||||||||||
North America | $ | 196.6 | $ | 1.7 | $ | 198.3 | |||||||||
Operating margin | 22.2 | % | 22.4 | % | |||||||||||
Europe | 81.0 | - | 81.0 | ||||||||||||
Operating margin | 21.4 | % | 21.4 | % | |||||||||||
Asia | 44.3 | 0.2 | 44.5 | ||||||||||||
Operating margin | 17.6 | % | 17.7 | % | |||||||||||
Other non-reportable segments | 37.1 | 0.1 | 37.2 | ||||||||||||
Operating margin | 29.5 | % | 29.6 | % | |||||||||||
Unallocated corporate expenses and restructuring and other charges | (169.8 | ) | 25.2 | (144.6 | ) | ||||||||||
Total operating income | $ | 189.2 | $ | 27.2 | $ | 216.4 | |||||||||
Nine Months Ended | |||||||||||||||
December 30, 2017 | |||||||||||||||
As Reported | Total Adjustments(a)(e) | As Adjusted | |||||||||||||
Net revenues | $ | 4,653.1 | $ | - | $ | 4,653.1 | |||||||||
Gross profit | 2,843.2 | 1.3 | 2,844.5 | ||||||||||||
Gross profit margin | 61.1 | % | 61.1 | % | |||||||||||
Total other operating expenses, net | (2,370.4 | ) | 103.5 | (2,266.9 | ) | ||||||||||
Operating expense margin | 50.9 | % | 48.7 | % | |||||||||||
Operating income | 472.8 | 104.8 | 577.6 | ||||||||||||
Operating margin | 10.2 | % | 12.4 | % | |||||||||||
Income before income taxes | 464.3 | 104.8 | 569.1 | ||||||||||||
Income tax provision | (342.8 | ) | 196.3 | (146.5 | ) | ||||||||||
Effective tax rate | 73.8 | % | 25.7 | % | |||||||||||
Net income | $ | 121.5 | $ | 301.1 | $ | 422.6 | |||||||||
Net income per diluted common share | $ | 1.47 | $ | 5.12 | |||||||||||
Weighted average common shares outstanding - Diluted | 82.5 | 82.5 | |||||||||||||
SEGMENT INFORMATION - | |||||||||||||||
OPERATING INCOME: | |||||||||||||||
North America | $ | 549.3 | $ | 3.4 | $ | 552.7 | |||||||||
Operating margin | 22.2 | % | 22.4 | % | |||||||||||
Europe | 273.6 | 1.3 | 274.9 | ||||||||||||
Operating margin | 23.5 | % | 23.6 | % | |||||||||||
Asia | 101.0 | 1.1 | 102.1 | ||||||||||||
Operating margin | 14.9 | % | 15.1 | % | |||||||||||
Other non-reportable segments | 96.9 | 9.1 | 106.0 | ||||||||||||
Operating margin | 28.6 | % | 31.2 | % | |||||||||||
Unallocated corporate expenses and restructuring and other charges | (548.0 | ) | 89.9 | (458.1 | ) | ||||||||||
Total operating income | $ | 472.8 | $ | 104.8 | $ | 577.6 |
RALPH LAUREN CORPORATION | |||
Footnotes to Non-U.S. GAAP Financial Measures | |||
(a) | Adjustments for inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations. Adjustments for impairment-related charges are recorded within impairment of assets in the consolidated statements of operations. Adjustments for enactment-related charges recorded in connection with U.S. tax reform and other income tax-related adjustments are recorded within the income tax provision in the consolidated 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 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. The income tax provision reflects enactment-related charges of $32.3 million recorded in connection with U.S. tax reform. | ||
(c) | 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. The income tax provision reflects enactment-related charges of $27.6 million recorded in connection with U.S. tax reform. | ||
(d) | Adjustments for the three months ended December 30, 2017 include (i) charges of $22.0 million recorded in connection with the Way Forward Plan, consisting of restructuring charges, impairment of assets, and accelerated stock-based compensation expense; (ii) additional impairment of assets of $1.7 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. The income tax provision reflects enactment-related charges of $231.3 million recorded in connection with U.S. tax reform. | ||
(e) | Adjustments for the nine months ended December 30, 2017 include (i) charges of $79.0 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 $10.8 million related to underperforming stores as a result of on-going store portfolio evaluation; and (iii) net other charges of $15.0 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. The income tax provision reflects enactment-related charges of $231.3 million recorded in connection with U.S. tax reform. |
NON-U.S. GAAP FINANCIAL MEASURES
Since
This earnings release also includes certain other non-U.S. GAAP financial measures relating to the impact of charges and other items as described herein. The Company uses non-U.S. GAAP financial measures, among other things, to evaluate its operating performance and to better represent the manner in which it conducts and views its business. The Company believes that excluding items that are not comparable from period to period helps investors and others compare operating performance between two periods. While the Company considers non-U.S. GAAP measures useful in analyzing its results, they are not intended to replace, nor act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP, and may be different from non-U.S. GAAP measures reported by other companies.
Adjustments made during the fiscal periods presented include charges recorded in connection with the Company’s restructuring plans, as well as depreciation expense associated with the Company’s former Polo store at
Additionally, the Company’s full year Fiscal 2019 and fourth quarter Fiscal 2019 guidance excludes certain anticipated restructuring-related and other charges. The Company is not able to provide a full reconciliation of these non-U.S. GAAP financial measures to U.S. GAAP because certain material items that impact these measures, such as the timing and exact amount of charges related to our restructuring plans, have not yet occurred or are out of the Company’s control. Accordingly, a reconciliation of our non-U.S. GAAP based financial measure guidance to the most directly comparable U.S. GAAP measures is not available without unreasonable effort. However, the Company has identified the estimated impact of certain items excluded from its financial outlook. Specifically, the Company’s financial outlook excludes estimated remaining pretax charges of approximately
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