Ralph Lauren Reports Third Quarter Fiscal 2015 Results and Raises Quarterly Dividend
- Third Quarter Net Revenues Increased 1% on a Reported Basis and 3% in Constant Currency
- Operating Margin of 15.5% Reflects Disciplined Operational Management and Continued Investments in the Company’s Strategic Growth Initiatives
-
Earnings Per Diluted Share Was
$2.41 in the Third Quarter - The Company Announces New Global Brand Management Structure
- The Board of Directors Authorizes an 11% Increase in the Company’s Quarterly Cash Dividend
The Company also announced that its Board of Directors declared an 11%
increase in the regular quarterly cash dividend on the Company's Common
Stock. The new quarterly cash dividend is
“Our year-to-date results reflect continued focus on our long-term
strategic growth initiatives,” said
“The resilience of the third quarter’s operating profitability is a
testament to the strong, consistent operational discipline of our global
teams,” said
Third Quarter Fiscal 2015 Income Statement Review
Net Revenues. Net revenues for the third quarter of Fiscal
2015 rose 1% to
-
Wholesale Sales. Wholesale segment sales of
$837 million in the third quarter of Fiscal 2015 were in line with the prior year period. Growth in European wholesale shipments was offset by lower shipments in theAmericas and unfavorable foreign currency translation. Excluding negative foreign currency effects, wholesale segment sales increased 2%. -
Retail Sales. Retail sales increased 2% to
$1.1 billion in the third quarter, led by double-digit growth in global e-commerce and the contribution from new store openings. Excluding the negative impact from foreign currency translation, retail sales rose 5% over the prior year period. Consolidated comparable store sales declined 2% on a reported basis during the third quarter and were in line with the prior year in constant currency. -
Licensing. Licensing revenues of
$47 million in the third quarter were 6% above the prior year period, reflecting higher royalties from increased sales ofRalph Lauren , Polo and Lauren products worldwide.
Gross Profit. Gross profit for the third quarter of Fiscal
2015 declined 1% to
Operating Expenses. Operating expenses of
Operating Income. Operating income declined 6% to
-
Wholesale Operating Income. Wholesale operating income of
$207 million was 5% below the prior year period. Wholesale operating margin declined 120 basis points to 24.7% due to product mix impacts. -
Retail Operating Income. Retail operating income of
$194 million in the third quarter of Fiscal 2015 was 12% lower than the prior year period. Retail operating margin declined 260 basis points to 16.9% due to a more promotional U.S. marketplace and increased expenses associated with the Company’s global store and e-commerce development efforts. -
Licensing Operating Income. Licensing operating income of
$42 million increased 7% from the prior year period, consistent with the increase in licensing revenues.
Net Income and Diluted EPS. Net income for the third
quarter of Fiscal 2015 was
Third Quarter Fiscal 2015 Balance Sheet and Cash Flow Review
The Company ended the third quarter with
The Company had
Global Retail Store Network
The Company ended the third quarter of Fiscal 2015 with 470 directly
operated stores, comprised of 148
Fiscal 2015 Outlook
In the fourth quarter of Fiscal 2015, the Company expects consolidated net revenues to increase at a mid-single digit rate in constant currency. Based on current rates, the net negative impact from foreign currency translation is estimated at approximately 550 basis points. Operating margin for the fourth quarter of Fiscal 2015 is expected to be 250-300 basis points below the comparable prior year period, reflecting relatively equal pressure from the gross margin and operating expenses. The fourth quarter tax rate is estimated at 31%-32%.
Based on the third quarter results and incrementally unfavorable foreign currency movements, the Company is adjusting its outlook for Fiscal 2015. The Company now expects consolidated net revenues for Fiscal 2015 to increase by approximately 4% in constant currency. Based on current rates, the net negative impact from foreign currency translation is estimated at approximately 200 basis points. The revised revenue outlook compares to the Company’s previous expectation of 5%-7% growth. The Fiscal 2015 operating margin is now estimated to be approximately 170-190 basis points below Fiscal 2014’s level, which compares to a prior expectation of a 100-125 basis point decline. The full year Fiscal 2015 tax rate continues to be estimated at 30%. Based on current rates, foreign exchange is expected to have a negative impact on the Company’s sales and profits in Fiscal 2016.
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 contain certain "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include the statements
under “Fiscal 2015 Outlook” and 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) | ||||||||||||
December 27, | March 29, | December 28, | ||||||||||
2014 | 2014 | 2013 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 763 | $ | 797 | $ | 882 | ||||||
Short-term investments | 644 | 488 | 533 | |||||||||
Accounts receivable, net of allowances | 416 | 588 | 425 | |||||||||
Inventories | 1,211 | 1,020 | 1,117 | |||||||||
Income tax receivable | 60 | 62 | 32 | |||||||||
Deferred tax assets | 149 | 150 | 125 | |||||||||
Prepaid expenses and other current assets | 276 | 224 | 228 | |||||||||
Total current assets | 3,519 | 3,329 | 3,342 | |||||||||
Property and equipment, net | 1,454 | 1,322 | 1,299 | |||||||||
Deferred tax assets | 49 | 39 | 21 | |||||||||
Goodwill | 917 | 964 | 958 | |||||||||
Intangible assets, net | 273 | 299 | 305 | |||||||||
Other non-current assets | 132 | 137 | 135 | |||||||||
Total assets | $ | 6,344 | $ | 6,090 | $ | 6,060 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term debt | $ | 113 | $ | - | $ | - | ||||||
Accounts payable | 229 | 203 | 207 | |||||||||
Income tax payable | 132 | 77 | 49 | |||||||||
Accrued expenses and other current liabilities | 784 | 690 | 728 | |||||||||
Total current liabilities | 1,258 | 970 | 984 | |||||||||
Long-term debt | 300 | 300 | 300 | |||||||||
Non-current liability for unrecognized tax benefits | 112 | 132 | 122 | |||||||||
Other non-current liabilities | 599 | 654 | 620 | |||||||||
Total liabilities | 2,269 | 2,056 | 2,026 | |||||||||
Equity: | ||||||||||||
Common stock | 1 | 1 | 1 | |||||||||
Additional paid-in-capital | 2,089 | 1,979 | 1,952 | |||||||||
Retained earnings | 5,706 | 5,257 | 5,144 | |||||||||
Treasury stock, Class A, at cost | (3,699 | ) | (3,317 | ) | (3,167 | ) | ||||||
Accumulated other comprehensive income (loss) | (22 | ) | 114 | 104 | ||||||||
Total equity | 4,075 | 4,034 | 4,034 | |||||||||
Total liabilities and equity | $ | 6,344 | $ | 6,090 | $ | 6,060 | ||||||
RALPH LAUREN CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||
(in millions, except per share data) | ||||||||
(Unaudited) | ||||||||
December 27, | December 28, | |||||||
2014 | 2013 | |||||||
Wholesale net sales | $ | 837 | $ | 840 | ||||
Retail net sales | 1,149 | 1,130 | ||||||
Net sales | 1,986 | 1,970 | ||||||
Licensing revenue | 47 | 45 | ||||||
Net revenues | 2,033 | 2,015 | ||||||
Cost of goods sold(a) | (874 | ) | (843 | ) | ||||
Gross profit | 1,159 | 1,172 | ||||||
Selling, general, and administrative expenses(a) | (837 | ) | (815 | ) | ||||
Amortization of intangible assets | (6 | ) | (9 | ) | ||||
Restructuring and other charges | (1 | ) | (14 | ) | ||||
Total other operating expenses, net | (844 | ) | (838 | ) | ||||
Operating income | 315 | 334 | ||||||
Foreign currency losses | (8 | ) | (4 | ) | ||||
Interest expense | (3 | ) | (4 | ) | ||||
Interest and other income, net | - | - | ||||||
Equity in losses of equity-method investees | (3 | ) | (2 | ) | ||||
Income before provision for income taxes | 301 | 324 | ||||||
Provision for income taxes | (86 | ) | (87 | ) | ||||
Net income | $ | 215 | $ | 237 | ||||
Net income per share - Basic | $ | 2.44 | $ | 2.62 | ||||
Net income per share - Diluted | $ | 2.41 | $ | 2.57 | ||||
Weighted average shares outstanding - Basic | 88.1 | 90.1 | ||||||
Weighted average shares outstanding - Diluted | 89.0 | 91.8 | ||||||
Dividends declared per share | $ | 0.45 | $ | 0.45 | ||||
(a) Includes total depreciation expense of: | $ | (72 | ) | $ | (58 | ) | ||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||
(in millions, except per share data) | ||||||||
(Unaudited) | ||||||||
December 27, | December 28, | |||||||
2014 | 2013 | |||||||
Wholesale net sales | $ | 2,488 | $ | 2,503 | ||||
Retail net sales | 3,115 | 2,953 | ||||||
Net sales | 5,603 | 5,456 | ||||||
Licensing revenue | 132 | 127 | ||||||
Net revenues | 5,735 | 5,583 | ||||||
Cost of goods sold(a) | (2,401 | ) | (2,323 | ) | ||||
Gross profit | 3,334 | 3,260 | ||||||
Selling, general, and administrative expenses(a) | (2,463 | ) | (2,327 | ) | ||||
Amortization of intangible assets | (19 | ) | (28 | ) | ||||
Gain on acquisition of Chaps | - | 16 | ||||||
Restructuring and other charges | (7 | ) | (16 | ) | ||||
Total other operating expenses, net | (2,489 | ) | (2,355 | ) | ||||
Operating income | 845 | 905 | ||||||
Foreign currency losses | (14 | ) | (9 | ) | ||||
Interest expense | (12 | ) | (16 | ) | ||||
Interest and other income, net | 4 | 4 | ||||||
Equity in losses of equity-method investees | (9 | ) | (7 | ) | ||||
Income before provision for income taxes | 814 | 877 | ||||||
Provision for income taxes | (236 | ) | (254 | ) | ||||
Net income | $ | 578 | $ | 623 | ||||
Net income per share - Basic | $ | 6.53 | $ | 6.89 | ||||
Net income per share - Diluted | $ | 6.46 | $ | 6.74 | ||||
Weighted average shares outstanding - Basic | 88.5 | 90.4 | ||||||
Weighted average shares outstanding - Diluted | 89.5 | 92.4 | ||||||
Dividends declared per share | $ | 1.35 | $ | 1.25 | ||||
(a) Includes total depreciation expense of: | $ | (200 | ) | $ | (165 | ) | ||
RALPH LAUREN CORPORATION | ||||||||||||||||||
OTHER INFORMATION | ||||||||||||||||||
(in millions) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||||
Net revenues and operating income for the periods ended December 27, 2014 and December 28, 2013 for each segment were as follows: | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
December 27, | December 28, | December 27, | December 28, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Net revenues: | ||||||||||||||||||
Wholesale | $ | 837 | $ | 840 | $ | 2,488 | $ | 2,503 | ||||||||||
Retail | 1,149 | 1,130 | 3,115 | 2,953 | ||||||||||||||
Licensing | 47 | 45 | 132 | 127 | ||||||||||||||
Total net revenues | $ | 2,033 | $ | 2,015 | $ | 5,735 | $ | 5,583 | ||||||||||
* | Operating income: | |||||||||||||||||
Wholesale | $ | 207 | $ | 217 | $ | 634 | $ | 667 | ||||||||||
Retail | 194 | 221 | 499 | 521 | ||||||||||||||
Licensing | 42 | 40 | 120 | 115 | ||||||||||||||
443 | 478 | 1,253 | 1,303 | |||||||||||||||
Unallocated corporate expenses | (127 | ) | (130 | ) | (401 | ) | (398 | ) | ||||||||||
Gain on acquisition of Chaps | - | - | - | 16 | ||||||||||||||
Unallocated restructuring and other charges | (1 | ) | (14 | ) | (7 | ) | (16 | ) | ||||||||||
Total operating income | $ | 315 | $ | 334 | $ | 845 | $ | 905 | ||||||||||
* 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 implemented 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
December 27, 2014 % Change |
Nine Months Ended
December 27, 2014 % Change |
|||||||||||||
As Reported | Constant Currency | As Reported | Constant Currency | |||||||||||
Total Ralph Lauren | (2 | %) | 0 | % | 0 | % | 1 | % | ||||||
Operating Segment Data | ||||||||||||||
Three Months Ended | % Change | |||||||||||||
December 27, 2014 | December 28, 2013 | As Reported | Constant Currency | |||||||||||
Wholesale net sales | $ | 837 | $ | 840 | (0.4 | %) | 1.5 | % | ||||||
Retail net sales | 1,149 | 1,130 | 1.7 | % | 4.5 | % | ||||||||
Net sales | 1,986 | 1,970 | 0.8 | % | 3.2 | % | ||||||||
Licensing revenue | 47 | 45 | 6.1 | % | 6.1 | % | ||||||||
Net revenues | $ | 2,033 | $ | 2,015 | 0.9 | % | 3.3 | % | ||||||
Nine Months Ended | % Change | |||||||||||||
December 27, 2014 | December 28, 2013 | As Reported | Constant Currency | |||||||||||
Wholesale net sales | $ | 2,488 | $ | 2,503 | (0.6 | %) | (0.1 | %) | ||||||
Retail net sales | 3,115 | 2,953 | 5.5 | % | 5.9 | % | ||||||||
Net sales | 5,603 | 5,456 | 2.7 | % | 3.2 | % | ||||||||
Licensing revenue | 132 | 127 | 3.9 | % | 3.9 | % | ||||||||
Net revenues | $ | 5,735 | $ | 5,583 | 2.7 | % | 3.2 | % | ||||||
Source:
Ralph Lauren Corporation
Investor Relations
James Hurley,
212-813-7862
or
Corporate Communications
Malcolm Carfrae,
212-583-2262