Ralph Lauren Reports Better-Than-Expected Fourth Quarter and Full Year Fiscal 2015 Results
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Fourth Quarter Net Revenues of
$1.9 Billion Increased 7% in Constant Currency -
Earnings Per Diluted Share (EPS) Was
$1.41 in the Fourth Quarter, In Line With Prior Year Excluding Foreign Currency Impacts - Fourth Quarter Operating Margin Was Better-Than-Expected Due To Disciplined Expense Management
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The Company's Board of Directors Authorizes an Additional
$500 Million Stock Repurchase Program
Net income for the full year Fiscal 2015 period was
The Company's Board of Directors authorized an additional
“We made excellent progress on our strategic initiatives in Fiscal
2015,” said
“Our better-than-expected fourth quarter results were achieved in a
challenging global macroeconomic environment, showcasing the operational
discipline of our teams,” said
Fourth Quarter and Full Year Fiscal 2015 Income Statement Review
Net Revenues. Net revenues for the fourth quarter of
Fiscal 2015 increased approximately 7% on a constant currency basis,
driven by wholesale segment growth and double-digit e-commerce expansion
across all regions. Reported net revenues increased 1% to
Net revenues for the full year Fiscal 2015 period increased
approximately 4% on a constant currency basis. Reported net revenues
increased 2% to
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Wholesale Sales. In the fourth quarter of Fiscal 2015,
wholesale segment sales increased 8% on a constant currency basis,
driven by double-digit growth in
North America . Reported wholesale segment sales rose 2% to$1.0 billion .
For Fiscal 2015, wholesale revenues increased 2% on a constant currency basis, driven by growth in bothEurope and theAmericas . Reported wholesale revenues were in line with Fiscal 2014 at$3.5 billion .
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Retail Sales. Retail sales rose 6% on a constant currency basis
in the fourth quarter over the prior year period, supported by
double-digit expansion in global e-commerce and the contribution from
new store openings. Reported retail sales were in line with the fourth
quarter of Fiscal 2014 at
$841 million . Consolidated comparable store sales increased 1% on a constant currency basis during the fourth quarter and declined 4% on a reported basis.
Retail sales for Fiscal 2015 rose 6% on a constant currency basis from the prior year period, reflecting growth in all regions that was driven by double-digit e-commerce expansion globally and the contribution from new stores. Reported retail sales increased 4% to approximately$4.0 billion from$3.8 billion in Fiscal 2014. During Fiscal 2015, consolidated comparable store sales were up 1% in constant currency and declined 1% on a reported basis.
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Licensing. Licensing revenues of
$37 million in the fourth quarter were 5% below the prior year period, due to negative foreign currency effects and the anniversary of the launch of Polo Red fragrance.
Licensing revenues of$169 million in Fiscal 2015 were 2% above Fiscal 2014’s level, reflecting higher royalties from increased sales ofRalph Lauren , Polo and Lauren products worldwide.
Gross Profit. Gross profit for the fourth quarter of
Fiscal 2015 was
Gross profit for Fiscal 2015 increased 2% to
Operating Expenses. Operating expenses of
Operating expenses for Fiscal 2015 were
Operating Income. Operating income declined 15% to
Fiscal 2015’s operating income of
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Wholesale Operating Income. Wholesale operating income of
$309 million in the fourth quarter of Fiscal 2015 was 5% above the prior year period. Wholesale operating margin increased 60 basis points to 30.7% as improved profitability in underlying operations was partially offset by negative foreign currency effects.
Wholesale operating income declined 2% in Fiscal 2015 to$943 million from$963 million in Fiscal 2014. Wholesale operating margin for Fiscal 2015 was 27.0% compared to 27.6% in Fiscal 2014. The decline in wholesale operating margin was a result of negative foreign currency effects that were partially offset by improved profitability in core operations.
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Retail Operating Income. Retail operating income was
$28 million in the fourth quarter of Fiscal 2015 compared with$51 million in the prior year period. Retail operating margin declined 270 basis points to 3.4%, due to investments in new store development and lower profitability in core operations.
Retail operating income was$527 million in Fiscal 2015 compared to$572 million in the prior year period. Retail operating margin declined 180 basis points to 13.3%. The lower operating margin was due to investments in new store development and lower profitability in core operations.
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Licensing Operating Income. Licensing operating income of
$32 million in the fourth quarter of Fiscal 2015 was 6% below the prior year period. Licensing operating income of$152 million in Fiscal 2015 increased 2% above the prior year period.
Net Income and Earnings Per Diluted Share (EPS). Net
income for the fourth quarter of Fiscal 2015 was
The Company had an effective tax rate of 28% in the fourth quarter of Fiscal 2015 which compared to an effective tax rate of 30% in the fourth quarter of Fiscal 2014.
Net income for the full year Fiscal 2015 period was
Fourth Quarter and Full Year Fiscal 2015 Balance Sheet and Cash Flow Review
The Company ended the fourth quarter of Fiscal 2015 with
The Company had
Global Retail Store Network
The Company ended the fourth quarter of Fiscal 2015 with 466 directly
operated stores, comprised of 143
Fiscal 2016 Outlook
The Company currently expects consolidated net revenues for Fiscal 2016
to increase by mid-single digits in constant currency. Based on current
exchange rates, foreign currency will have an approximate 450 basis
point negative impact on Fiscal 2016 revenue growth. Operating margin
for Fiscal 2016 is currently expected to be 180-230 basis points below
the prior year’s level due to negative foreign currency effects. The
full year Fiscal 2016 tax rate is estimated at 30%. Capital expenditures
are planned at approximately
This guidance excludes restructuring and other one-time related charges
associated with our global brand reorganization. We expect these charges
to be approximately
In the first quarter of Fiscal 2016, the Company expects consolidated net revenues to be flat in constant currency, as retail segment growth is offset by a decline in wholesale revenue which is impacted by our customers’ receipt plans due to an earlier Easter this year. Based on current exchange rates, foreign currency will have an approximate 600 basis point negative impact on revenue growth in the first quarter of Fiscal 2016. Operating margin for the first quarter of Fiscal 2016 is expected to be approximately 600-650 basis points below the comparable prior year period, primarily due to negative foreign currency effects, the quarterly revenue growth profile and timing of expense savings initiatives. The first 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
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 2016 Outlook” and statements regarding, among other
things, our current expectations about the Company's future results and
financial condition, revenues, store openings and closings, employee
reductions, margins, expenses and earnings and are indicated by words or
phrases such as "anticipate," "estimate," "expect," "project," "we
believe" and similar words or phrases. These forward-looking statements
involve known and unknown risks, uncertainties and other factors which
may cause actual results, performance or achievements to be materially
different from the future results, performance or achievements expressed
in or implied by such forward-looking statements. Forward-looking
statements are based largely on the Company's expectations and judgments
and are subject to a number of risks and uncertainties, many of which
are unforeseeable and beyond our control. The factors that could cause
actual results to materially differ include, among others: the loss of
key personnel; our ability to achieve anticipated operating enhancements
and/or cost reductions from our restructuring plans, including our
planned transition to a global brand-based operating structure; our
ability to successfully implement our anticipated growth strategies and
to capitalize on our repositioning initiatives in certain merchandise
categories; our exposure to currency exchange rate fluctuations from
both a transactional and translational perspective, and risks associated
with increases in the costs of raw materials, transportation, and labor;
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;
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 impact to our business
resulting from potential costs and obligations related to the early
termination of our long term, non-cancellable leases; the potential
impact to the trading prices of our securities if our Class A Common
Stock share repurchase activity and/or cash dividend rate differs from
investors' expectations; 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) | |||||||||
(Audited) | |||||||||
March 28, | March 29, | ||||||||
2015 | 2014 | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 500 | $ | 797 | |||||
Short-term investments | 644 | 488 | |||||||
Accounts receivable, net of allowances | 655 | 588 | |||||||
Inventories | 1,042 | 1,020 | |||||||
Income tax receivable | 57 | 62 | |||||||
Deferred tax assets | 145 | 150 | |||||||
Prepaid expenses and other current assets | 281 | 224 | |||||||
Total current assets | 3,324 | 3,329 | |||||||
Property and equipment, net | 1,436 | 1,322 | |||||||
Deferred tax assets | 45 | 39 | |||||||
Goodwill | 903 | 964 | |||||||
Intangible assets, net | 267 | 299 | |||||||
Other non-current assets | 131 | 135 | |||||||
Total assets | $ | 6,106 | $ | 6,088 | |||||
LIABILITIES AND EQUITY | |||||||||
Current liabilities: | |||||||||
Short-term debt | $ | 234 | $ | - | |||||
Accounts payable | 210 | 203 | |||||||
Income tax payable | 27 | 77 | |||||||
Accrued expenses and other current liabilities | 715 | 690 | |||||||
Total current liabilities | 1,186 | 970 | |||||||
Long-term debt | 298 | 298 | |||||||
Non-current liability for unrecognized tax benefits | 116 | 132 | |||||||
Other non-current liabilities | 615 | 654 | |||||||
Total liabilities | 2,215 | 2,054 | |||||||
Equity: | |||||||||
Common stock | 1 | 1 | |||||||
Additional paid-in-capital | 2,117 | 1,979 | |||||||
Retained earnings | 5,787 | 5,257 | |||||||
Treasury stock, Class A, at cost | (3,849 | ) | (3,317 | ) | |||||
Accumulated other comprehensive (loss) income | (165 | ) | 114 | ||||||
Total equity | 3,891 | 4,034 | |||||||
Total liabilities and equity | $ | 6,106 | $ | 6,088 | |||||
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 |
|||||||||
March 28, | March 29, | ||||||||
2015 | 2014 | ||||||||
Wholesale net sales | $ | 1,007 | $ | 983 | |||||
Retail net sales | 841 | 845 | |||||||
Net sales | 1,848 | 1,828 | |||||||
Licensing revenue | 37 | 39 | |||||||
Net revenues | 1,885 | 1,867 | |||||||
Cost of goods sold(a) | (841 | ) | (817 | ) | |||||
Gross profit | 1,044 | 1,050 | |||||||
Selling, general, and administrative expenses(a) | (840 | ) | (815 | ) | |||||
Amortization of intangible assets | (6 | ) | (7 | ) | |||||
Impairment of assets | (5 | ) | (1 | ) | |||||
Restructuring and other charges | (3 | ) | (2 | ) | |||||
Total other operating expenses, net | (854 | ) | (825 | ) | |||||
Operating income | 190 | 225 | |||||||
Foreign currency gains (losses) | (12 | ) | 1 | ||||||
Interest expense | (5 | ) | (4 | ) | |||||
Interest and other income (loss), net | 2 | (1 | ) | ||||||
Equity in losses of equity-method investees | (2 | ) | (2 | ) | |||||
Income before provision for income taxes | 173 | 219 | |||||||
Provision for income taxes | (49 | ) | (66 | ) | |||||
Net income | $ | 124 | $ | 153 | |||||
Net income per share - Basic | $ | 1.43 | $ | 1.70 | |||||
Net income per share - Diluted | $ | 1.41 | $ | 1.68 | |||||
Weighted average shares outstanding - Basic | 87.3 | 89.8 | |||||||
Weighted average shares outstanding - Diluted | 88.2 | 90.9 | |||||||
Dividends declared per share | $ | 0.50 | $ | 0.45 | |||||
(a) Includes total depreciation expense of: | $ | (69 | ) | $ | (58 | ) | |||
RALPH LAUREN CORPORATION | |||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||
(in millions, except per share data) | |||||||||
(Audited) | |||||||||
Twelve Months Ended |
|||||||||
March 28, | March 29, | ||||||||
2015 | 2014 | ||||||||
Wholesale net sales | $ | 3,495 | $ | 3,486 | |||||
Retail net sales | 3,956 | 3,798 | |||||||
Net sales | 7,451 | 7,284 | |||||||
Licensing revenue | 169 | 166 | |||||||
Net revenues | 7,620 | 7,450 | |||||||
Cost of goods sold(a) | (3,242 | ) | (3,140 | ) | |||||
Gross profit | 4,378 | 4,310 | |||||||
Selling, general, and administrative expenses(a) | (3,301 | ) | (3,142 | ) | |||||
Amortization of intangible assets | (25 | ) | (35 | ) | |||||
Gain on acquisition of Chaps | - | 16 | |||||||
Impairment of assets | (7 | ) | (1 | ) | |||||
Restructuring and other charges | (10 | ) | (18 | ) | |||||
Total other operating expenses, net | (3,343 | ) | (3,180 | ) | |||||
Operating income | 1,035 | 1,130 | |||||||
Foreign currency losses | (26 | ) | (8 | ) | |||||
Interest expense | (17 | ) | (20 | ) | |||||
Interest and other income, net | 6 | 3 | |||||||
Equity in losses of equity-method investees | (11 | ) | (9 | ) | |||||
Income before provision for income taxes | 987 | 1,096 | |||||||
Provision for income taxes | (285 | ) | (320 | ) | |||||
Net income | $ | 702 | $ | 776 | |||||
Net income per share - Basic | $ | 7.96 | $ | 8.55 | |||||
Net income per share - Diluted | $ | 7.88 | $ | 8.43 | |||||
Weighted average shares outstanding - Basic | 88.2 | 90.7 | |||||||
Weighted average shares outstanding - Diluted | 89.1 | 92.0 | |||||||
Dividends declared per share | $ | 1.85 | $ | 1.70 | |||||
(a) Includes total depreciation expense of: | $ | (269 | ) | $ | (223 | ) | |||
RALPH LAUREN CORPORATION | |||||||||||||||||
OTHER INFORMATION | |||||||||||||||||
(in millions) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
SEGMENT INFORMATION | |||||||||||||||||
Net revenues and operating income for the periods ended March 28, 2015 and March 29, 2014 for each segment were as follows: | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
March 28, | March 29, | March 28, | March 29, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Net revenues: | |||||||||||||||||
Wholesale | $ | 1,007 | $ | 983 | $ | 3,495 | $ | 3,486 | |||||||||
Retail | 841 | 845 | 3,956 | 3,798 | |||||||||||||
Licensing | 37 | 39 | 169 | 166 | |||||||||||||
Total net revenues | $ | 1,885 | $ | 1,867 | $ | 7,620 | $ | 7,450 | |||||||||
Operating income: | |||||||||||||||||
Wholesale | $ | 309 | $ | 296 | $ | 943 | $ | 963 | |||||||||
Retail | 28 | 51 | 527 | 572 | |||||||||||||
Licensing | 32 | 35 | 152 | 150 | |||||||||||||
369 | 382 | 1,622 | 1,685 | ||||||||||||||
Less: | |||||||||||||||||
Unallocated corporate expenses | (176 | ) | (155 | ) | (577 | ) | (553 | ) | |||||||||
Gain on acquisition of Chaps | - | - | - | 16 | |||||||||||||
Unallocated restructuring and other charges | (3 | ) | (2 | ) | (10 | ) | (18 | ) | |||||||||
Total operating income | $ | 190 | $ | 225 | $ | 1,035 | $ | 1,130 | |||||||||
RALPH LAUREN CORPORATION | |||||||||||||||
Constant Currency Financial Measures | |||||||||||||||
(in millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
Same - Store Sales Data | |||||||||||||||
Three Months Ended
March 28, 2015 % Change |
Twelve Months Ended
March 29, 2014 % Change |
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As Reported | Constant Currency | As Reported | Constant Currency | ||||||||||||
Total Ralph Lauren | (4 | %) | 1 | % | (1 | %) | 1 | % | |||||||
Operating Segment Data | |||||||||||||||
Three Months Ended | % Change | ||||||||||||||
March 28, 2015 | March 29, 2014 | As Reported | Constant Currency | ||||||||||||
Wholesale net sales | $ | 1,007 | $ | 983 | 2.4 | % | 7.6 | % | |||||||
Retail net sales | 841 | 845 | (0.4 | %) | 5.7 | % | |||||||||
Net sales | 1,848 | 1,828 | 1.1 | % | 6.7 | % | |||||||||
Licensing revenue | 37 | 39 | (5.3 | %) | (2.2 | %) | |||||||||
Net revenues | $ | 1,885 | $ | 1,867 | 1.0 | % | 6.5 | % | |||||||
Twelve Months Ended | % Change | ||||||||||||||
March 28, 2015 | March 29, 2014 | As Reported | Constant Currency | ||||||||||||
Wholesale net sales | $ | 3,495 | $ | 3,486 | 0.3 | % | 2.1 | % | |||||||
Retail net sales | 3,956 | 3,798 | 4.2 | % | 5.9 | % | |||||||||
Net sales | 7,451 | 7,284 | 2.3 | % | 4.1 | % | |||||||||
Licensing revenue | 169 | 166 | 1.8 | % | 3.3 | % | |||||||||
Net revenues | $ | 7,620 | $ | 7,450 | 2.3 | % | 4.0 | % | |||||||
Net Income Per Share - Diluted | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
March 28, 2015 | March 28, 2015 | ||||||||||||||
As reported | $ | 1.41 | $ | 7.88 | |||||||||||
Foreign currency exchange impact | 0.28 | 0.31 | |||||||||||||
Constant currency | $ | 1.69 | $ | 8.19 |
Since
Source:
Ralph Lauren Corporation
Investor Relations
Evren Kopelman,
212-813-7862
Or
Corporate Communications
Malcolm Carfrae,
212-583-2262