Ralph Lauren Reports Better-Than-Expected Second Quarter Fiscal 2015 Results
-
Second Quarter Net Revenues Increased 4% to
$2.0 Billion , Led by Retail Segment Growth - Better-Than-Expected Operating Margin of 14.4% Reflects Disciplined Operational Management and Continued Investments in the Company’s Strategic Growth Initiatives
-
Earnings Per Diluted Share Was
$2.25 in the Second Quarter - The Company Adjusts Its Fiscal 2015 Outlook for Foreign Currency Impacts
“It’s been an incredibly active and exciting last few months for our
Company,” said
“Our better-than-expected second quarter results showcase the
operational discipline of our organization,” said
Second Quarter Fiscal 2015 Income Statement Review
Net Revenues. Net revenues for the second quarter of
Fiscal 2015 increased 4% to
-
Wholesale Sales. Wholesale segment sales were
$943 million in the second quarter of Fiscal 2015, 2% above the prior year period, reflecting growth in all geographic regions. -
Retail Sales. Retail sales rose 7% to
$1.0 billion in the second quarter, led by double-digit growth internationally and for global e-commerce operations. Consolidated comparable store sales increased 1% on both a reported and constant currency basis during the second quarter. -
Licensing. Licensing revenues of
$45 million in the second quarter were 2% above the prior year period, reflecting higher royalties from increased sales ofRalph Lauren products.
Gross Profit. Gross profit for the second quarter of
Fiscal 2015 increased 4% to
Operating Expenses. Operating expenses of
Operating Income. Operating income for the second quarter
of Fiscal 2015 was
-
Wholesale Operating Income. Wholesale operating income rose 2%
to
$247 million in the second quarter of Fiscal 2015. Wholesale operating margin of 26.2% was in line with the prior year period as improved profitability for underlying operations was offset by increased investments in advertising and marketing. -
Retail Operating Income. Retail operating income of
$137 million was 1% above the prior year period. Retail operating margin declined 80 basis points to 13.6%, as expenses associated with the Company’s global store and e-commerce development efforts, in addition to increased investments in advertising and marketing, more than offset improved profitability for underlying operations. -
Licensing Operating Income. Licensing operating income of
$42 million rose 2% from the prior year period, consistent with the increase in licensing revenues.
Net Income and Diluted EPS. Net income for the second
quarter of Fiscal 2015 was
Second Quarter Fiscal 2015 Balance Sheet and Cash Flow Review
The Company ended the second quarter with
The Company had
Global Retail Store Network
The Company ended the second quarter of Fiscal 2015 with 448 directly
operated stores, comprised of 143
Fiscal 2015 Outlook
The Company is maintaining its constant dollar outlook for Fiscal 2015. However, as a result of recent, unfavorable foreign currency movements, the Company now expects consolidated net revenues for Fiscal 2015 to increase by 5%-7% compared to its previous outlook of 6%-8% growth. The Fiscal 2015 operating margin is still estimated to be approximately 75-125 basis points below Fiscal 2014’s level, likely at the mid-to-low end of that range due to incrementally negative foreign currency movements. The full year Fiscal 2015 tax rate is estimated at 30%.
In the third quarter of Fiscal 2015, the Company expects consolidated net revenues to increase by 3%-5%, including a 200 basis point net negative impact from foreign currency translation. Operating margin for the third quarter of Fiscal 2015 is expected to be approximately 100-150 basis points below the comparable prior year period due to higher cost of goods and incremental investments in the Company’s strategic growth objectives. The third quarter tax rate is estimated at 30%.
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
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 statements
regarding, among other things, our current expectations about the
Company's future results and financial condition, revenues, store
openings, 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; our ability to successfully implement our anticipated
growth strategies and to capitalize on our repositioning initiatives in
certain merchandise categories; our ability to secure the technology
facilities and systems used by the Company and those of third party
service providers from, among other things, cybersecurity breaches, acts
of vandalism, computer viruses or similar events; our ability to
continue to maintain our brand image and reputation and protect our
trademarks; the impact of global economic conditions and domestic and
foreign currency fluctuations on the Company, the global economy and the
consumer marketplace and our ability to access sources of liquidity; the
impact of the volatile state of the global economy or consumer
preferences on purchases of premium lifestyle products that we sell and
our ability to forecast consumer demand; changes in the competitive
marketplace and in our commercial relationships; 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; the impact
to our business of events of unrest and instability that are currently
taking place in certain parts of the world; our ability to continue to
expand our business internationally; risks associated with changes in
social, political, economic and other conditions affecting foreign
operations or sourcing (including tariffs and trade controls, raw
materials prices and labor costs); changes in our effective tax rates or
credit profile and ratings within the financial community; changes in
our relationships with department store customers and licensing
partners; the potential impact on our operations and on our customers
resulting from natural or man-made disasters; 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
RALPH LAUREN CORPORATION | |||||||||||||||||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
September 27, | March 29, | September 28, | |||||||||||||||||||||||
2014 | 2014 | 2013 | |||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 483 | $ | 797 | $ | 839 | |||||||||||||||||||
Short-term investments | 708 | 488 | 572 | ||||||||||||||||||||||
Accounts receivable, net of allowances | 641 | 588 | 577 | ||||||||||||||||||||||
Inventories | 1,292 | 1,020 | 1,215 | ||||||||||||||||||||||
Income tax receivable | 62 | 62 | 34 | ||||||||||||||||||||||
Deferred tax assets | 150 | 150 | 119 | ||||||||||||||||||||||
Prepaid expenses and other current assets | 224 | 224 | 202 | ||||||||||||||||||||||
Total current assets | 3,560 | 3,329 | 3,558 | ||||||||||||||||||||||
Property and equipment, net | 1,411 | 1,322 | 1,280 | ||||||||||||||||||||||
Deferred tax assets | 45 | 39 | 22 | ||||||||||||||||||||||
Goodwill | 940 | 964 | 967 | ||||||||||||||||||||||
Intangible assets, net | 283 | 299 | 318 | ||||||||||||||||||||||
Other non-current assets | 159 | 137 | 121 | ||||||||||||||||||||||
Total assets | $ | 6,398 | $ | 6,090 | $ | 6,266 | |||||||||||||||||||
LIABILITIES AND EQUITY | |||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||
Short-term debt | $ | 210 | $ | - | $ | 283 | |||||||||||||||||||
Accounts payable | 255 | 203 | 219 | ||||||||||||||||||||||
Income tax payable | 56 | 77 | 22 | ||||||||||||||||||||||
Accrued expenses and other current liabilities | 762 | 690 | 694 | ||||||||||||||||||||||
Total current liabilities | 1,283 | 970 | 1,218 | ||||||||||||||||||||||
Long-term debt | 300 | 300 | 300 | ||||||||||||||||||||||
Non-current liability for unrecognized tax benefits | 133 | 132 | 155 | ||||||||||||||||||||||
Other non-current liabilities | 653 | 654 | 602 | ||||||||||||||||||||||
Total liabilities | 2,369 | 2,056 | 2,275 | ||||||||||||||||||||||
Equity: | |||||||||||||||||||||||||
Common stock | 1 | 1 | 1 | ||||||||||||||||||||||
Additional paid-in-capital | 2,056 | 1,979 | 1,884 | ||||||||||||||||||||||
Retained earnings | 5,530 | 5,257 | 4,961 | ||||||||||||||||||||||
Treasury stock, Class A, at cost | (3,598 | ) | (3,317 | ) | (2,969 | ) | |||||||||||||||||||
Accumulated other comprehensive income | 40 | 114 | 114 | ||||||||||||||||||||||
Total equity | 4,029 | 4,034 | 3,991 | ||||||||||||||||||||||
Total liabilities and equity | $ | 6,398 | $ | 6,090 | $ | 6,266 | |||||||||||||||||||
RALPH LAUREN CORPORATION | |||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||||||||||
(in millions, except per share data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended |
|||||||||||||||||
September 27, | September 28, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Wholesale net sales | $ | 943 | $ | 928 | |||||||||||||
Retail net sales | 1,006 | 944 | |||||||||||||||
Net sales | 1,949 | 1,872 | |||||||||||||||
Licensing revenue | 45 | 43 | |||||||||||||||
Net revenues | 1,994 | 1,915 | |||||||||||||||
Cost of goods sold(a) | (862 | ) | (831 | ) | |||||||||||||
Gross profit | 1,132 | 1,084 | |||||||||||||||
Selling, general, and administrative expenses(a) | (837 | ) | (777 | ) | |||||||||||||
Amortization of intangible assets | (7 | ) | (10 | ) | |||||||||||||
Restructuring and other charges | (2 | ) | (2 | ) | |||||||||||||
Total other operating expenses, net | (846 | ) | (789 | ) | |||||||||||||
Operating income | 286 | 295 | |||||||||||||||
Foreign currency gains (losses) | (3 | ) | 1 | ||||||||||||||
Interest expense | (5 | ) | (7 | ) | |||||||||||||
Interest and other income, net | 3 | 2 | |||||||||||||||
Equity in losses of equity-method investees | (3 | ) | (3 | ) | |||||||||||||
Income before provision for income taxes | 278 | 288 | |||||||||||||||
Provision for income taxes | (77 | ) | (83 | ) | |||||||||||||
Net income | $ | 201 | $ | 205 | |||||||||||||
Net income per share - Basic | $ | 2.27 | $ | 2.28 | |||||||||||||
Net income per share - Diluted | $ | 2.25 | $ | 2.23 | |||||||||||||
Weighted average shares outstanding - Basic | 88.4 | 90.4 | |||||||||||||||
Weighted average shares outstanding - Diluted | 89.2 | 92.2 | |||||||||||||||
Dividends declared per share | $ | 0.45 | $ | 0.40 | |||||||||||||
(a) Includes total depreciation expense of: | $ | (65 | ) | $ | (56 | ) | |||||||||||
RALPH LAUREN CORPORATION | |||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||||||||||
(in millions, except per share data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Six Months Ended |
|||||||||||||||||
September 27, | September 28, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Wholesale net sales | $ | 1,651 | $ | 1,663 | |||||||||||||
Retail net sales | 1,966 | 1,823 | |||||||||||||||
Net sales | 3,617 | 3,486 | |||||||||||||||
Licensing revenue | 85 | 82 | |||||||||||||||
Net revenues | 3,702 | 3,568 | |||||||||||||||
Cost of goods sold(a) | (1,527 | ) | (1,480 | ) | |||||||||||||
Gross profit | 2,175 | 2,088 | |||||||||||||||
Selling, general, and administrative expenses(a) | (1,626 | ) | (1,512 | ) | |||||||||||||
Amortization of intangible assets | (13 | ) | (19 | ) | |||||||||||||
Gain on acquisition of Chaps | - | 16 | |||||||||||||||
Restructuring and other charges | (6 | ) | (2 | ) | |||||||||||||
Total other operating expenses, net | (1,645 | ) | (1,517 | ) | |||||||||||||
Operating income | 530 | 571 | |||||||||||||||
Foreign currency losses | (6 | ) | (5 | ) | |||||||||||||
Interest expense | (9 | ) | (12 | ) | |||||||||||||
Interest and other income, net | 4 | 4 | |||||||||||||||
Equity in losses of equity-method investees | (6 | ) | (5 | ) | |||||||||||||
Income before provision for income taxes | 513 | 553 | |||||||||||||||
Provision for income taxes | (150 | ) | (167 | ) | |||||||||||||
Net income | $ | 363 | $ | 386 | |||||||||||||
Net income per share - Basic | $ | 4.09 | $ | 4.27 | |||||||||||||
Net income per share - Diluted | $ | 4.05 | $ | 4.17 | |||||||||||||
Weighted average shares outstanding - Basic | 88.7 | 90.6 | |||||||||||||||
Weighted average shares outstanding - Diluted | 89.7 | 92.6 | |||||||||||||||
Dividends declared per share | $ | 0.90 | $ | 0.80 | |||||||||||||
(a) Includes total depreciation expense of: | $ | (128 | ) | $ | (107 | ) | |||||||||||
RALPH LAUREN CORPORATION | |||||||||||||||||||||||||||||||||||
OTHER INFORMATION | |||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | |||||||||||||||||||||||||||||||||||
Net revenues and operating income for the periods ended September 27, 2014 and September 28, 2013 for each segment were as follows: | |||||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
September 27, | September 28, | September 27, | September 28, | ||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||||||||||
Wholesale | $ | 943 | $ | 928 | $ | 1,651 | $ | 1,663 | |||||||||||||||||||||||||||
Retail | 1,006 | 944 | 1,966 | 1,823 | |||||||||||||||||||||||||||||||
Licensing | 45 | 43 | 85 | 82 | |||||||||||||||||||||||||||||||
Total net revenues | $ | 1,994 | $ | 1,915 | $ | 3,702 | $ | 3,568 | |||||||||||||||||||||||||||
* | Operating income: | ||||||||||||||||||||||||||||||||||
Wholesale | $ | 247 | $ | 243 | $ | 427 | $ | 450 | |||||||||||||||||||||||||||
Retail | 137 | 135 | 305 | 300 | |||||||||||||||||||||||||||||||
Licensing | 42 | 40 | 78 | 75 | |||||||||||||||||||||||||||||||
426 | 418 | 810 | 825 | ||||||||||||||||||||||||||||||||
Less: | |||||||||||||||||||||||||||||||||||
Unallocated corporate expenses | (138 | ) | (121 | ) | (274 | ) | (268 | ) | |||||||||||||||||||||||||||
Gain on acquisition of Chaps | - | - | - | 16 | |||||||||||||||||||||||||||||||
Unallocated restructuring and other charges | (2 | ) | (2 | ) | (6 | ) | (2 | ) | |||||||||||||||||||||||||||
Total operating income | $ | 286 | $ | 295 | $ | 530 | $ | 571 | |||||||||||||||||||||||||||
* |
During the fourth quarter of Fiscal 2014, the Company changed the manner in which it allocates certain costs for management reporting due to strategic changes it is implementing to globalize certain functions that will position the Company for future growth. These changes included realigning certain costs between segments and retaining other costs at the corporate level for some of the Company's global functions. Management believes these changes allow for a better representation of segment profitability and are aligned with how segment performance is assessed. This expense realignment did not result in a change to the Company’s reportable segments. However, as a result of these changes, the Company determined that it is more appropriate to retain certain previously allocated corporate expenses within its corporate unallocated expenses. All prior period segment information has been recast to reflect the change in the Company’s segment measurement on a comparable basis. This recast had no impact on the Company’s consolidated financial statements in any period. |
|
RALPH LAUREN CORPORATION | |||||||||||||||||||||||||||
Constant Currency Financial Measures | |||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Same - Store Sales Data | |||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
September 27, 2014 | September 27, 2014 | ||||||||||||||||||||||||||
% Change | % Change | ||||||||||||||||||||||||||
As Reported | Constant Currency | As Reported | Constant Currency | ||||||||||||||||||||||||
Total Ralph Lauren | 1 | % | 1 | % | 2 | % | 1 | % | |||||||||||||||||||
Operating Segment Data | |||||||||||||||||||||||||||
Three Months Ended | % Change | ||||||||||||||||||||||||||
September 27, 2014 | September 28, 2013 | As Reported | Constant Currency | ||||||||||||||||||||||||
Wholesale net sales | $ | 943 | $ | 928 | 1.7 | % | 1.7 | % | |||||||||||||||||||
Retail net sales | 1,006 | 944 | 6.5 | % | 5.8 | % | |||||||||||||||||||||
Net sales | 1,949 | 1,872 | 4.2 | % | 3.8 | % | |||||||||||||||||||||
Licensing revenue | 45 | 43 | 1.9 | % | 1.9 | % | |||||||||||||||||||||
Net revenues | $ | 1,994 | $ | 1,915 | 4.1 | % | 3.7 | % | |||||||||||||||||||
Six Months Ended | % Change | ||||||||||||||||||||||||||
September 27, 2014 | September 28, 2013 | As Reported | Constant Currency | ||||||||||||||||||||||||
Wholesale net sales | $ | 1,651 | $ | 1,663 | (0.7 | %) | (0.9 | %) | |||||||||||||||||||
Retail net sales | 1,966 | 1,823 | 7.8 | % | 6.8 | % | |||||||||||||||||||||
Net sales | 3,617 | 3,486 | 3.8 | % | 3.1 | % | |||||||||||||||||||||
Licensing revenue | 85 | 82 | 2.8 | % | 2.8 | % | |||||||||||||||||||||
Net revenues | $ | 3,702 | $ | 3,568 | 3.8 | % | 3.1 | % | |||||||||||||||||||
Source:
Ralph Lauren Corporation
Investor Relations
James Hurley,
212-813-7862
or
Corporate Communications
Malcolm Carfrae,
212-583-2262