Ralph Lauren Reports Better-Than-Expected First Quarter Fiscal 2016 Results
-
First Quarter Net Revenues of
$1.6 Billion Were In Line with the Prior Year in Constant Currency, Driven By Double-Digit Growth Internationally - Operating Margin Was Better-Than-Expected Due To Disciplined Expense Management
-
Diluted EPS Was
$1.09 in the First Quarter, Excluding Restructuring and Related Non-Cash Charges - The Company Maintains Its Fiscal 2016 Outlook
- Began Successful Transition To The New Global Brand Management Structure
“We are making the right strategic decisions and investments to support
the future growth of the Company,” said
“Our better-than-expected first quarter profitability reflects the
strong progress we have made on our key strategic initiatives,” said
First Quarter 2016 Income Statement Review
Net Revenues. Net revenues for the first quarter of Fiscal
2016 were in line with the prior year period on a constant currency
basis, driven by double-digit growth internationally, contribution from
new stores and global e-commerce expansion. Reported net revenues
declined 5% to
-
Wholesale Sales. In the first quarter of Fiscal 2016, wholesale
segment sales declined 6% on a constant currency basis. Wholesale
revenue in the first quarter was negatively impacted by our customers’
receipt plans due to an earlier Easter this year which was partially
offset by double-digit constant currency growth in
Europe . Combining 4Q15 and 1Q16, which is more reflective of the Spring/Summer season, global wholesale revenues were up approximately 2% in constant currency. Reported wholesale segment sales declined 9% to$642 million . -
Retail Sales. Retail sales increased 3% on a constant currency
basis in the first quarter over the prior year period, driven by
contribution from new stores and e-commerce expansion. Reported retail
sales declined 3% compared to the first quarter of Fiscal 2015 to
$935 million , negatively impacted by foreign currency movements. Consolidated comparable store sales decreased 2% on a constant currency basis during the first quarter and declined 8% on a reported basis. -
Licensing. Licensing revenues of
$41 million in the first quarter were 6% above the prior year period in constant currency and grew 3% on a reported basis, reflecting higher royalties from increased sales ofRalph Lauren , Polo and Lauren products worldwide.
Gross Profit. Gross profit for the first quarter of Fiscal
2016 was
Operating Expenses. Excluding restructuring and related
non-cash charges, operating expenses were
Operating Income. Excluding restructuring and related
non-cash charges, operating income was
-
Wholesale Operating Income. Excluding non-cash charges
associated with our global brand reorganization, wholesale operating
income was
$140 million in the first quarter of Fiscal 2016 compared with$180 million in the prior year period. Wholesale operating margin decreased 370 basis points to 21.8% due to a change in customer receipt plans related to the earlier Easter this year. -
Retail Operating Income. Excluding non-cash charges associated
with our global brand reorganization, retail operating income was
$118 million in the first quarter of Fiscal 2016 compared with$168 million in the prior year period. Retail operating margin declined 490 basis points to 12.6%, due to fixed expense deleverage and negative foreign currency effects. -
Licensing Operating Income. Licensing operating income of
$36 million in the first quarter of Fiscal 2016 was in line with the prior year period.
Net Income and Earnings Per Diluted Share (EPS). Excluding
restructuring and related non-cash charges, net income for the first
quarter of Fiscal 2016 was
The Company had an effective tax rate of approximately 30%, excluding restructuring and related non-cash charges, in the first quarter of Fiscal 2016, which compared to an effective tax rate of 31% in the first quarter of Fiscal 2015. On a reported basis, the effective tax rate was 29% in the first quarter.
Update On The Global Brand Reorganization
In the 90 days since the announcement of a new global brand management
organizational structure, the Company established six global brand
groups and filled the global brand president roles, as well as the key
regional and channel positions. The Company is on track to achieve
The Company expects to incur restructuring and related non-cash charges
of approximately
First Quarter Fiscal 2016 Balance Sheet and Cash Flow Review
The Company ended the first quarter of Fiscal 2016 with
The Company had
Global Retail Store Network
The Company ended the first quarter of Fiscal 2016 with 467 directly
operated stores, comprised of 140
Fiscal 2016 Outlook
The Company continues to expect 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 still 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%.
This guidance excludes restructuring and non-cash charges associated
with our global brand reorganization. We expect these charges to be
approximately
In the second quarter of Fiscal 2016, the Company expects consolidated net revenues to be up 3-5% in constant currency, and based on current exchange rates, foreign currency will have an approximate 550 basis point negative impact on revenue growth. Operating margin for the second quarter of Fiscal 2016 is expected to be approximately 275-325 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 second 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
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) | ||||||||||||||
(Unaudited) | ||||||||||||||
June 27, | March 28, | June 28, | ||||||||||||
2015 | 2015 | 2014 | ||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 490 | $ | 500 | $ | 711 | ||||||||
Short-term investments | 661 | 644 | 658 | |||||||||||
Accounts receivable, net of allowances | 390 | 655 | 357 | |||||||||||
Inventories | 1,270 | 1,042 | 1,180 | |||||||||||
Income tax receivable | 69 | 57 | 61 | |||||||||||
Deferred tax assets | 146 | 145 | 152 | |||||||||||
Prepaid expenses and other current assets | 278 | 281 | 202 | |||||||||||
Total current assets | 3,304 | 3,324 | 3,321 | |||||||||||
Property and equipment, net | 1,419 | 1,436 | 1,363 | |||||||||||
Deferred tax assets | 50 | 45 | 39 | |||||||||||
Goodwill | 901 | 903 | 963 | |||||||||||
Intangible assets, net | 260 | 267 | 293 | |||||||||||
Other non-current assets (a) | 134 | 131 | 149 | |||||||||||
Total assets | $ | 6,068 | $ | 6,106 | $ | 6,128 | ||||||||
LIABILITIES AND EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Short-term debt | $ | 155 | $ | 234 | $ | - | ||||||||
Accounts payable | 207 | 210 | 260 | |||||||||||
Income tax payable | 35 | 27 | 96 | |||||||||||
Accrued expenses and other current liabilities | 832 | 715 | 705 | |||||||||||
Total current liabilities | 1,229 | 1,186 | 1,061 | |||||||||||
Long-term debt | 297 | 298 | 298 | |||||||||||
Non-current liability for unrecognized tax benefits | 102 | 116 | 136 | |||||||||||
Other non-current liabilities | 633 | 615 | 661 | |||||||||||
Total liabilities | 2,261 | 2,215 | 2,156 | |||||||||||
Equity: | ||||||||||||||
Common stock | 1 | 1 | 1 | |||||||||||
Additional paid-in-capital | 2,170 | 2,117 | 2,017 | |||||||||||
Retained earnings | 5,808 | 5,787 | 5,369 | |||||||||||
Treasury stock, Class A, at cost | (4,018 | ) | (3,849 | ) | (3,528 | ) | ||||||||
Accumulated other comprehensive (loss) income | (154 | ) | (165 | ) | 113 | |||||||||
Total equity | 3,807 | 3,891 | 3,972 | |||||||||||
Total liabilities and equity | $ | 6,068 | $ | 6,106 | $ | 6,128 | ||||||||
(a) Includes non-current investments of: | $ | 8 | $ | 8 | $ | 2 | ||||||||
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 |
||||||||||
June 27, | June 28, | |||||||||
2015 | 2014 | |||||||||
Wholesale net sales | $ | 642 | $ | 708 | ||||||
Retail net sales | 935 | 960 | ||||||||
Net sales | 1,577 | 1,668 | ||||||||
Licensing revenue | 41 | 40 | ||||||||
Net revenues | 1,618 | 1,708 | ||||||||
Cost of goods sold(a) | (652 | ) | (665 | ) | ||||||
Gross profit | 966 | 1,043 | ||||||||
Selling, general, and administrative expenses(a) | (822 | ) | (788 | ) | ||||||
Amortization of intangible assets | (6 | ) | (6 | ) | ||||||
Impairment of assets | (8 | ) | (1 | ) | ||||||
Restructuring charges | (34 | ) | (4 | ) | ||||||
Total other operating expenses, net | (870 | ) | (799 | ) | ||||||
Operating income | 96 | 244 | ||||||||
Foreign currency losses | (1 | ) | (3 | ) | ||||||
Interest expense | (4 | ) | (4 | ) | ||||||
Interest and other income, net | 2 | 1 | ||||||||
Equity in losses of equity-method investees | (3 | ) | (3 | ) | ||||||
Income before provision for income taxes | 90 | 235 | ||||||||
Provision for income taxes | (26 | ) | (73 | ) | ||||||
Net income | $ | 64 | $ | 162 | ||||||
Net income per share - Basic | $ | 0.74 | $ | 1.82 | ||||||
Net income per share - Diluted | $ | 0.73 | $ | 1.80 | ||||||
Weighted average shares outstanding - Basic | 86.5 | 88.9 | ||||||||
Weighted average shares outstanding - Diluted | 87.5 | 90.2 | ||||||||
Dividends declared per share | $ | 0.50 | $ | 0.45 | ||||||
(a) Includes total depreciation expense of: | $ | (68 | ) | $ | (63 | ) | ||||
RALPH LAUREN CORPORATION | |||||||||
OTHER INFORMATION | |||||||||
(in millions) | |||||||||
(Unaudited) | |||||||||
SEGMENT INFORMATION | |||||||||
Net revenues and operating income for the periods ended June 27,
2015 and June 28, 2014 for each |
|||||||||
Three Months Ended | |||||||||
June 27, | June 28, | ||||||||
2015 | 2014 | ||||||||
Net revenues: | |||||||||
Wholesale | $ | 642 | $ | 708 | |||||
Retail | 935 | 960 | |||||||
Licensing | 41 | 40 | |||||||
Total net revenues | $ | 1,618 | $ | 1,708 | |||||
Operating income: | |||||||||
Wholesale | $ | 137 | $ | 180 | |||||
Retail | 110 | 168 | |||||||
Licensing | 36 | 36 | |||||||
283 | 384 | ||||||||
Less: | |||||||||
Unallocated corporate expenses | (153 | ) | (136 | ) | |||||
Unallocated restructuring charges | (34 | ) | (4 | ) | |||||
Total operating income | $ | 96 | $ | 244 | |||||
RALPH LAUREN CORPORATION | ||||||||||||||||
Constant Currency Financial Measures | ||||||||||||||||
(in millions) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Same - Store Sales Data | ||||||||||||||||
Three Months Ended
June 27, 2015 % Change |
||||||||||||||||
As Reported | Constant Currency |
|
|
|||||||||||||
Total Ralph Lauren | (8 | %) | (2 | %) | ||||||||||||
Operating Segment Data | ||||||||||||||||
Three Months Ended | % Change | |||||||||||||||
June 27, 2015 | June 28, 2014 | As Reported | Constant Currency | |||||||||||||
Wholesale net sales | $ | 642 | $ | 708 | (9.3 | %) | (5.7 | %) | ||||||||
Retail net sales | 935 | 960 | (2.7 | %) | 3.2 | % | ||||||||||
Net sales | 1,577 | 1,668 | (5.5 | %) | (0.5 | %) | ||||||||||
Licensing revenue | 41 | 40 | 2.7 | % | 6.0 | % | ||||||||||
Net revenues | $ | 1,618 | $ | 1,708 | (5.3 | %) | (0.4 | %) | ||||||||
RALPH LAUREN CORPORATION | |||||||||||||||||||||||||||
Reconciliation of Certain Non-GAAP Financial Measures | |||||||||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Three Months Ended June 27, 2015 | |||||||||||||||||||||||||||
Global Reorganization Plan | |||||||||||||||||||||||||||
As Reported |
Restructuring |
Asset |
NRV |
Excluding |
|||||||||||||||||||||||
Revenues | $ | 1,618 | $ | - | $ | - | $ | - | $ | 1,618 | |||||||||||||||||
Gross Profit | $ | 966 | $ | - | $ | - | $ | 3 | $ | 969 | |||||||||||||||||
Gross Profit margin | 59.7 | % | 59.8 | % | |||||||||||||||||||||||
Total other operating expenses | $ | (870 | ) | $ | 34 | $ | 8 | $ | - | $ | (828 | ) | |||||||||||||||
Operating expense margin | 53.7 | % | 51.1 | % | |||||||||||||||||||||||
Operating income | $ | 96 | $ | 34 | $ | 8 | $ | 3 | $ | 141 | |||||||||||||||||
Operating margin | 6.0 | % | 8.8 | % | |||||||||||||||||||||||
Income before provision for income taxes | $ | 90 | $ | 34 | $ | 8 | $ | 3 | $ | 135 | |||||||||||||||||
Provision for income taxes | $ | (26 | ) | $ | (11 | ) | $ | (2 | ) | $ | (1 | ) | $ | (40 | ) | ||||||||||||
Effective tax rate | 29.0 | % | 29.8 | % | |||||||||||||||||||||||
Net income | $ | 64 | $ | 23 | $ | 6 | $ | 2 | $ | 95 | |||||||||||||||||
Net income per diluted share | $ | 0.73 | $ | 0.26 | $ | 0.08 | $ | 0.02 | $ | 1.09 | |||||||||||||||||
SEGMENT INFORMATION - | |||||||||||||||||||||||||||
OPERATING INCOME/(LOSS): | |||||||||||||||||||||||||||
Wholesale | $ | 137 | $ | - | $ | 3 | $ | - | $ | 140 | |||||||||||||||||
Operating margin | 21.3 | % | 21.8 | % | |||||||||||||||||||||||
Retail | $ | 110 | $ | - | $ | 5 | $ | 3 | $ | 118 | |||||||||||||||||
Operating margin | 11.8 | % | 12.6 | % | |||||||||||||||||||||||
Licensing | $ | 36 | $ | - | $ | - | $ | - | $ | 36 | |||||||||||||||||
Operating margin | 88.6 | % | 88.6 | % | |||||||||||||||||||||||
Unallocated corporate expenses and restructuring charges, net | $ | (187 | ) | $ | 34 | $ | - | $ | - | $ | (153 | ) | |||||||||||||||
Total operating income | $ | 96 | $ | 34 | $ | 8 | $ | 3 | $ | 141 | |||||||||||||||||
SUPPLEMENTAL FINANCIAL INFORMATION
This earnings release includes certain non-GAAP financial measures relating to restructuring and non-cash charges recorded in connection with the Company’s global brand reorganization. Included in this earnings release is a reconciliation between the non-GAAP financial measures and the most directly comparable GAAP measures before and after these charges. The related tax effects were calculated using the respective statutory tax rates for each applicable jurisdiction. The Company uses non-GAAP financial measures, among other things, to evaluate its operating performance and in order to represent the manner in which the Company 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 the non-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 GAAP and may be different from non-GAAP measures reported by other companies.
Additionally, since
View source version on businesswire.com: http://www.businesswire.com/news/home/20150805005798/en/
Source:
Ralph Lauren Corporation
Investor Relations
Evren Kopelman,
212-813-7862
Or
Corporate Communications
Malcolm Carfrae,
212-583-2262