RALPH LAUREN CORPORATION |
(Exact Name of Registrant as Specified in Its Charter) |
DELAWARE |
(State or Other Jurisdiction of Incorporation) |
001-13057 | 13-2622036 |
(Commission File Number) | (IRS Employer Identification No.) |
650 MADISON AVENUE, NEW YORK, NEW YORK | 10022 |
(Address of Principal Executive Offices) | (Zip Code) |
(212) 318-7000
|
(Registrant’s Telephone Number, Including Area Code)
|
NOT APPLICABLE
|
(Former Name or Former Address, if Changed Since Last Report)
|
(d) | Exhibits. |
|
EXHIBIT NO.
|
DESCRIPTION
|
|
|
|
|
99.1 |
Press Release, dated August 8, 2017
|
RALPH LAUREN CORPORATION | ||||
Date: August 8, 2017
|
By:
|
/s/ Jane Hamilton Nielsen | ||
Name: | Jane Hamilton Nielsen | |||
Title: | Chief Financial Officer | |||
— | continuing to drive quality of sales up by moderating discount levels across all regions, generating 210 basis points of adjusted gross margin improvement in the first quarter; |
— | lowering our inventory levels by 31% to last year to improve inventory turns; |
— | increasing SKU productivity by reducing the number of SKUs by 20% for Fall 2017 and producing a more focused, higher margin assortment; |
— | shortening our lead times to have 35% of our business on a 6-month calendar and 90% on 9-months by the end of Fiscal 2018 to drive improved buying and reduce markdowns; |
— | reducing operating expenses by 13% on an adjusted basis to increase efficiency and achieve expense savings targets; |
— | optimizing our wholesale distribution by closing 20-25% of our underperforming U.S. department store points of distribution by the end of Fiscal 2018; |
— | selectively expanding our high-ROI concession network with 26 additional locations compared to last year at the end of the first quarter; and |
— | evolving our product and marketing, including the launch of five limited edition Polo shirts, introduced monthly from July through November, each inspired by one of our signature design motifs and supported by social media through collaborations with influencers on Instagram.” |
— | North America Revenue. North America revenue in the first quarter decreased 17% to $710 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 8%, including a 4% decline in brick and mortar stores and a 22% decrease in e-commerce that reflected a planned reduction in inventory, reduced SKU count and reduced promotional activity. |
— | Europe Revenue. Europe revenue in the first quarter decreased 14% to $323 million on a reported basis and 10% in constant currency. The decline was primarily driven by shifts in timing of shipments in wholesale, brand exits, and reduced markdowns to improve quality of sales. On a constant currency basis, comparable store sales in Europe were down 8%, including an 8% decline in brick and mortar stores and a 5% 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 first quarter decreased 1% on a reported basis to $209 million and increased 1% in constant currency. Comparable store sales increased 2% in constant currency driven by higher traffic. |
— | North America Operating Income. North America operating income in the first quarter was $151 million on a reported basis and $152 million on an adjusted basis excluding $1 million in restructuring-related and other charges. Adjusted North America operating margin was 21.4%, 110 basis point above last year, driven by gross margin improvement. |
— | Europe Operating Income. Europe operating income in the first quarter was $67 million on a reported basis and $68 million on an adjusted basis excluding $1 million in restructuring-related and other charges. Adjusted Europe operating margin was 21.1%, which was 120 basis points lower than prior year; however, on a constant currency basis, adjusted operating margin was up 90 basis points driven by gross margin improvement. |
— | Asia Operating Income. Asia operating income in the first quarter was $30 million on both a reported and adjusted basis. Adjusted Asia operating margin was 14.5%, up 740 basis points to prior year, driven by both gross margin improvement and operating expense leverage. |
July 1,
|
April 1,
|
July 2,
|
||||||||||
2017
|
2017
|
2016
|
||||||||||
ASSETS
|
||||||||||||
Current assets:
|
||||||||||||
Cash and cash equivalents
|
$
|
830.4
|
$
|
668.3
|
$
|
457.3
|
||||||
Short-term investments
|
740.5
|
684.7
|
618.6
|
|||||||||
Accounts receivable, net of allowances
|
279.2
|
450.2
|
337.6
|
|||||||||
Inventories
|
859.9
|
791.5
|
1,241.5
|
|||||||||
Income tax receivable
|
77.5
|
79.4
|
60.2
|
|||||||||
Prepaid expenses and other current assets
|
299.2
|
280.4
|
286.9
|
|||||||||
Total current assets
|
3,086.7
|
2,954.5
|
3,002.1
|
|||||||||
Property and equipment, net
|
1,273.3
|
1,316.0
|
1,564.5
|
|||||||||
Deferred tax assets
|
141.4
|
125.9
|
115.9
|
|||||||||
Goodwill
|
924.2
|
904.6
|
930.2
|
|||||||||
Intangible assets, net
|
213.7
|
219.8
|
240.2
|
|||||||||
Other non-current assets (a)
|
174.7
|
131.2
|
265.6
|
|||||||||
Total assets
|
$
|
5,814.0
|
$
|
5,652.0
|
$
|
6,118.5
|
||||||
LIABILITIES AND EQUITY
|
||||||||||||
Current liabilities:
|
||||||||||||
Short-term debt
|
$
|
-
|
$
|
-
|
$
|
90.0
|
||||||
Accounts payable
|
160.9
|
147.7
|
191.5
|
|||||||||
Income tax payable
|
36.6
|
29.5
|
22.4
|
|||||||||
Accrued expenses and other current liabilities
|
1,019.4
|
982.7
|
992.0
|
|||||||||
Total current liabilities
|
1,216.9
|
1,159.9
|
1,295.9
|
|||||||||
Long-term debt
|
590.4
|
588.2
|
602.0
|
|||||||||
Non-current liability for unrecognized tax benefits
|
64.7
|
62.7
|
77.5
|
|||||||||
Other non-current liabilities
|
581.9
|
541.6
|
576.8
|
|||||||||
Total liabilities
|
2,453.9
|
2,352.4
|
2,552.2
|
|||||||||
Equity:
|
||||||||||||
Common stock
|
1.3
|
1.2
|
1.2
|
|||||||||
Additional paid-in-capital
|
2,330.4
|
2,308.8
|
2,259.5
|
|||||||||
Retained earnings
|
5,770.8
|
5,751.9
|
5,951.6
|
|||||||||
Treasury stock, Class A, at cost
|
(4,578.3
|
)
|
(4,563.9
|
)
|
(4,453.6
|
)
|
||||||
Accumulated other comprehensive loss
|
(164.1
|
)
|
(198.4
|
)
|
(192.4
|
)
|
||||||
Total equity
|
3,360.1
|
3,299.6
|
3,566.3
|
|||||||||
Total liabilities and equity
|
$
|
5,814.0
|
$
|
5,652.0
|
$
|
6,118.5
|
||||||
Net Cash (incl. LT Investments)
|
1,060.6
|
786.2
|
532.7
|
|||||||||
Cash & Investments (ST & LT)
|
1,651.0
|
1,374.4
|
1,224.7
|
|||||||||
Net Cash (excl. LT Investments)
|
980.5
|
764.8
|
383.9
|
|||||||||
Cash & ST Investments
|
1,570.9
|
1,353.0
|
1,075.9
|
|||||||||
(a) Includes non-current investments of:
|
$
|
80.1
|
$
|
21.4
|
$
|
148.8
|
Three Months Ended
|
||||||||
July 1,
|
July 2,
|
|||||||
2017
|
2016
|
|||||||
North America
|
$
|
709.7
|
$
|
855.6
|
||||
Europe
|
323.5
|
377.6
|
||||||
Asia
|
209.1
|
211.1
|
||||||
Other non-reportable segments
|
104.8
|
107.9
|
||||||
Net revenues
|
1,347.1
|
1,552.2
|
||||||
Cost of goods sold (a)
|
(495.9
|
)
|
(657.6
|
)
|
||||
Gross profit
|
851.2
|
894.6
|
||||||
Selling, general, and administrative expenses (a)
|
(708.4
|
)
|
(814.7
|
)
|
||||
Amortization of intangible assets
|
(6.0
|
)
|
(6.0
|
)
|
||||
Impairment of assets
|
(9.7
|
)
|
(19.4
|
)
|
||||
Restructuring and other charges (a)
|
(36.8
|
)
|
(85.7
|
)
|
||||
Total other operating expenses, net
|
(760.9
|
)
|
(925.8
|
)
|
||||
Operating income (loss)
|
90.3
|
(31.2
|
)
|
|||||
Foreign currency gains
|
0.1
|
2.4
|
||||||
Interest expense
|
(5.0
|
)
|
(3.4
|
)
|
||||
Interest and other income, net
|
2.3
|
0.9
|
||||||
Equity in losses of equity-method investees
|
(0.9
|
)
|
(1.9
|
)
|
||||
Income (loss) before income taxes
|
86.8
|
(33.2
|
)
|
|||||
Income tax benefit (provision)
|
(27.3
|
)
|
10.9
|
|||||
Net income (loss)
|
$
|
59.5
|
$
|
(22.3
|
)
|
|||
Net income (loss) per share - Basic
|
$
|
0.73
|
$
|
(0.27
|
)
|
|||
Net income (loss) per share - Diluted
|
$
|
0.72
|
$
|
(0.27
|
)
|
|||
Weighted average shares outstanding - Basic
|
81.6
|
83.3
|
||||||
Weighted average shares outstanding - Diluted
|
82.5
|
83.3
|
||||||
Dividends declared per share
|
$
|
0.50
|
$
|
0.50
|
||||
(a) Includes total depreciation expense of:
|
$
|
(66.9
|
)
|
$
|
(72.4
|
)
|
Three Months Ended
|
||||||||
July 1,
|
July 2,
|
|||||||
2017
|
2016
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$
|
59.5
|
$
|
(22.3
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Depreciation and amortization expense
|
72.9
|
78.4
|
||||||
Deferred income tax expense (benefit)
|
(14.7
|
)
|
3.0
|
|||||
Equity in loss of equity-method investees
|
0.9
|
1.9
|
||||||
Non-cash stock-based compensation expense
|
21.6
|
17.7
|
||||||
Non-cash impairment of assets
|
9.7
|
19.4
|
||||||
Non-cash restructuring-related inventory charges
|
0.7
|
54.0
|
||||||
Other non-cash charges
|
1.1
|
9.7
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
174.0
|
174.4
|
||||||
Inventories
|
(55.4
|
)
|
(167.8
|
)
|
||||
Prepaid expenses and other current assets
|
(4.6
|
)
|
(23.2
|
)
|
||||
Accounts payable and accrued expenses
|
42.4
|
141.7
|
||||||
Income tax receivables and payables
|
8.7
|
(20.8
|
)
|
|||||
Deferred income
|
0.6
|
(2.3
|
)
|
|||||
Other balance sheet changes
|
16.8
|
(20.9
|
)
|
|||||
Net cash provided by operating activities
|
334.2
|
242.9
|
||||||
-
|
-
|
|||||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(41.9
|
)
|
(77.6
|
)
|
||||
Purchases of investments
|
(270.4
|
)
|
(144.5
|
)
|
||||
Proceeds from sales and maturities of investments
|
187.4
|
182.2
|
||||||
Acquisitions and ventures
|
(3.6
|
)
|
(1.3
|
)
|
||||
Net cash used in investing activities
|
(128.5
|
)
|
(41.2
|
)
|
||||
-
|
-
|
|||||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of short-term debt
|
-
|
943.9
|
||||||
Repayments of short-term debt
|
-
|
(970.0
|
)
|
|||||
Payments of capital lease obligations
|
(6.2
|
)
|
(7.2
|
)
|
||||
Payments of dividends
|
(40.5
|
)
|
(41.4
|
)
|
||||
Repurchases of common stock, including shares surrendered for tax withholdings
|
(14.4
|
)
|
(114.9
|
)
|
||||
Proceeds from exercise of stock options
|
0.1
|
3.2
|
||||||
Net cash used in financing activities
|
(61.0
|
)
|
(186.4
|
)
|
||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
19.9
|
(14.6
|
)
|
|||||
Net increase in cash, cash equivalents, and restricted cash
|
164.6
|
0.7
|
||||||
Cash, cash equivalents, and restricted cash at beginning of period
|
711.8
|
502.1
|
||||||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
876.4
|
$
|
502.8
|
Three Months Ended
|
||||||||
July 1,
|
July 2,
|
|||||||
2017
|
2016
|
|||||||
Net revenues:
|
||||||||
North America
|
$
|
709.7
|
$
|
855.6
|
||||
Europe
|
323.5
|
377.6
|
||||||
Asia
|
209.1
|
211.1
|
||||||
Other non-reportable segments
|
104.8
|
107.9
|
||||||
Total net revenues
|
$
|
1,347.1
|
$
|
1,552.2
|
||||
Operating income (loss):
|
||||||||
North America
|
$
|
150.5
|
$
|
165.8
|
||||
Europe
|
67.1
|
75.0
|
||||||
Asia
|
30.2
|
(37.8
|
)
|
|||||
Other non-reportable segments
|
33.0
|
27.8
|
||||||
280.8
|
230.8
|
|||||||
Unallocated corporate expenses
|
(153.7
|
)
|
(176.3
|
)
|
||||
Unallocated restructuring and other charges
|
(36.8
|
)
|
(85.7
|
)
|
||||
Total operating income (loss)
|
$
|
90.3
|
$
|
(31.2
|
)
|
Three Months Ended
July 1, 2017 % Change |
||||||||||||||||
As Reported
|
Constant Currency
|
|||||||||||||||
North America
|
||||||||||||||||
E-commerce
|
(22
|
%)
|
(22
|
%)
|
||||||||||||
Excluding E-commerce
|
(5
|
%)
|
(4
|
%)
|
||||||||||||
Total North America
|
(8
|
%)
|
(8
|
%)
|
||||||||||||
Europe
|
||||||||||||||||
E-commerce
|
(7
|
%)
|
(5
|
%)
|
||||||||||||
Excluding E-commerce
|
(12
|
%)
|
(8
|
%)
|
||||||||||||
Total Europe
|
(11
|
%)
|
(8
|
%)
|
||||||||||||
Asia(a)
|
1
|
%
|
2
|
%
|
||||||||||||
Total Ralph Lauren
|
(7
|
%)
|
(6
|
%)
|
(a)
|
Comparable store sales for our Asia segment were comprised primarily of sales made through our stores and concession shops.
|
Three Months Ended
|
% Change
|
|||||||||||||||
July 1, 2017
|
July 2, 2016
|
As Reported
|
Constant Currency
|
|||||||||||||
North America
|
$
|
709.7
|
$
|
855.6
|
(17.1
|
%)
|
(16.9
|
%)
|
||||||||
Europe
|
323.5
|
377.6
|
(14.3
|
%)
|
(10.2
|
%)
|
||||||||||
Asia
|
209.1
|
211.1
|
(1.0
|
%)
|
0.5
|
%
|
||||||||||
Other non-reportable segments
|
104.8
|
107.9
|
(2.7
|
%)
|
(1.9
|
%)
|
||||||||||
Net revenues
|
$
|
1,347.1
|
$
|
1,552.2
|
(13.2
|
%)
|
(11.9
|
%)
|
July 1,
|
July 2,
|
|||||||
2017
|
2016
|
|||||||
Global Directly Operated Stores and Concessions
|
||||||||
Ralph Lauren Stores
|
106
|
132
|
||||||
Polo Factory Stores
|
282
|
272
|
||||||
Club Monaco Stores
|
79
|
81
|
||||||
Total Directly Operated Stores
|
467
|
485
|
||||||
Concessions
|
624
|
598
|
||||||
Global Licensed Stores and Concessions
|
||||||||
Ralph Lauren Licensed Stores
|
105
|
96
|
||||||
Club Monaco Licensed Stores
|
59
|
60
|
||||||
Total Licensed Stores
|
164
|
156
|
||||||
Licensed Concessions
|
99
|
91
|
Three Months Ended
|
||||||||||||
July 1, 2017
|
||||||||||||
As
Reported |
Total
Adjustments (a) |
As
Adjusted |
||||||||||
Net revenues
|
$
|
1,347.1
|
$
|
-
|
$
|
1,347.1
|
||||||
Gross profit
|
851.2
|
0.7
|
851.9
|
|||||||||
Gross profit margin
|
63.2
|
%
|
63.2
|
%
|
||||||||
Total other operating expenses, net
|
(760.9
|
)
|
46.5
|
(714.4
|
)
|
|||||||
Operating expense margin
|
56.5
|
%
|
53.0
|
%
|
||||||||
Operating income
|
90.3
|
47.2
|
137.5
|
|||||||||
Operating margin
|
6.7
|
%
|
10.2
|
%
|
||||||||
Income before income taxes
|
86.8
|
47.2
|
134.0
|
|||||||||
Income tax provision
|
(27.3
|
)
|
(15.6
|
)
|
(42.9
|
)
|
||||||
Effective tax rate
|
31.4
|
%
|
32.0
|
%
|
||||||||
Net income
|
$
|
59.5
|
$
|
31.6
|
$
|
91.1
|
||||||
Net income per diluted share
|
$
|
0.72
|
$
|
1.11
|
||||||||
Weighted average shares outstanding - Basic
|
81.6
|
81.6
|
||||||||||
Weighted average shares outstanding - Diluted
|
82.5
|
82.5
|
||||||||||
SEGMENT INFORMATION -
OPERATING INCOME:
|
||||||||||||
North America
|
$
|
150.5
|
$
|
1.3
|
$
|
151.8
|
||||||
Operating margin
|
21.2
|
%
|
21.4
|
%
|
||||||||
Europe
|
67.1
|
1.2
|
68.3
|
|||||||||
Operating margin
|
20.7
|
%
|
21.1
|
%
|
||||||||
Asia
|
30.2
|
0.1
|
30.3
|
|||||||||
Operating margin
|
14.4
|
%
|
14.5
|
%
|
||||||||
Other non-reportable segments
|
33.0
|
0.1
|
33.1
|
|||||||||
Operating margin
|
31.5
|
%
|
31.5
|
%
|
||||||||
Unallocated corporate expenses and restructuring and other charges, net
|
(190.5
|
)
|
44.5
|
(146.0
|
)
|
|||||||
Total operating income
|
$
|
90.3
|
$
|
47.2
|
$
|
137.5
|
||||||
Three Months Ended
|
||||||||||||
July 2, 2016
|
||||||||||||
As
Reported |
Total
Adjustments (b) |
As
Adjusted |
||||||||||
Net revenues
|
$
|
1,552.2
|
$
|
-
|
$
|
1,552.2
|
||||||
Gross profit
|
894.6
|
54.0
|
948.6
|
|||||||||
Gross profit margin
|
57.6
|
%
|
61.1
|
%
|
||||||||
Total other operating expenses, net
|
(925.8
|
)
|
105.1
|
(820.7
|
)
|
|||||||
Operating expense margin
|
59.6
|
%
|
52.9
|
%
|
||||||||
Operating income (loss)
|
(31.2
|
)
|
159.1
|
127.9
|
||||||||
Operating margin
|
(2.0
|
%)
|
8.2
|
%
|
||||||||
Income (loss) before income taxes
|
(33.2
|
)
|
159.1
|
125.9
|
||||||||
Income tax benefit (provision)
|
10.9
|
(47.3
|
)
|
(36.4
|
)
|
|||||||
Effective tax rate
|
32.8
|
%
|
28.9
|
%
|
||||||||
Net income (loss)
|
$
|
(22.3
|
)
|
$
|
111.8
|
$
|
89.5
|
|||||
Net income (loss) per diluted share
|
$
|
(0.27
|
)
|
$
|
1.06
|
|||||||
Weighted average shares outstanding - Basic
|
83.3
|
83.3
|
||||||||||
Weighted average shares outstanding - Diluted
|
83.3
|
84.3
|
||||||||||
SEGMENT INFORMATION -
OPERATING INCOME/(LOSS):
|
||||||||||||
North America
|
$
|
165.8
|
$
|
7.7
|
$
|
173.5
|
||||||
Operating margin
|
19.4
|
%
|
20.3
|
%
|
||||||||
Europe
|
75.0
|
9.3
|
84.3
|
|||||||||
Operating margin
|
19.9
|
%
|
22.3
|
%
|
||||||||
Asia
|
(37.8
|
)
|
52.8
|
15.0
|
||||||||
Operating margin
|
(17.9
|
%)
|
7.1
|
%
|
||||||||
Other non-reportable segments
|
27.8
|
3.0
|
30.8
|
|||||||||
Operating margin
|
25.7
|
%
|
28.5
|
%
|
||||||||
Unallocated corporate expenses and restructuring charges, net
|
(262.0
|
)
|
86.3
|
(175.7
|
)
|
|||||||
Total operating income (loss)
|
$
|
(31.2
|
)
|
$
|
159.1
|
$
|
127.9
|
(a)
|
Adjustments include charges of $37.0 million incurred in connection with the Way Forward Plan, consisting of restructuring charges, impairment of assets, and inventory-related charges. Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations. Adjustments also include other charges of $10.2 million recorded within restructuring and other charges in the consolidated statements of operations, primarily related to the departure of Mr. Stefan Larsson and depreciation expense related to 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.
|
(b)
|
Adjustments include restructuring charges, impairment of assets, and inventory-related charges recorded in connection with our restructuring plans. Inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations.
|