Ralph Lauren Reports First Quarter Fiscal 2018 Results
“I am thrilled to welcome
“While we are addressing challenges in our business, we have significant
opportunity ahead and we’re moving forward with urgency,” said
In the first quarter, the Company delivered on the following key elements:
- 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.”
First Quarter Fiscal 2018 Income Statement Review
Net Revenues. In the first quarter of Fiscal 2018, revenue
decreased by 13% to
The first quarter revenue decline is in line with the Company’s guidance of down low double-digits excluding 225 basis points of negative foreign currency impact. Foreign currency pressured the first quarter revenue growth by approximately 130 basis points. The foreign currency impact is less than guidance as foreign exchange rates moved favorably during the quarter.
As a reminder, during the fourth quarter of Fiscal 2017, the Company changed its reportable segments. Revenue performance for the Company’s new reportable segments in the first quarter compared to the prior year period was as follows:
-
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 inNorth 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 inEurope 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.
Gross Profit. Gross profit for the first quarter of Fiscal
2018 was
The gross margin increase was driven by initiatives to improve quality of sales through reduced promotional activity, favorable geographic and channel mix shifts, and improved product costs. Gross margin improvement was partially offset by unfavorable foreign currency effects of 50 basis points in the first quarter.
Operating Expenses. Operating expenses in the first
quarter of Fiscal 2018 were
Adjusted operating expense rate was 53.0%, 10 basis points above the prior year period, excluding restructuring-related and other charges from both periods. This increase was due to fixed expense deleverage.
Operating Income. Operating income in the first quarter of
Fiscal 2018 was
The higher operating margin year-over-year was attributable to gross margin expansion that was partially offset by approximately 50 basis points of unfavorable foreign currency impact and fixed expense deleverage.
The adjusted operating margin was above the Company’s guidance of 9.5-10.0% excluding foreign currency pressure of 75 basis points. The outperformance was driven by 25 basis points of benefit from less negative FX impact than expected and 55 basis points from the decision by Mr. Ralph Lauren and the Company’s Compensation Committee that he would forgo his bonus for Fiscal 2017 in support of the Company in its rebuilding year. This decision was unanticipated at the time the Company provided guidance.
-
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. AdjustedEurope 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. AdjustedAsia operating margin was 14.5%, up 740 basis points to prior year, driven by both gross margin improvement and operating expense leverage.
Net Income and EPS. On a reported basis, net income in the
first quarter of Fiscal 2018 was
In the first quarter of Fiscal 2018, the Company had an effective tax rate of approximately 31% on a reported basis, including the impact of ASU 2016-09, and approximately 32% on an adjusted basis, excluding restructuring-related and other charges, slightly below our guidance of 33%. This compared to a reported and an adjusted effective tax rate of 33% and 29%, respectively, in the prior year period.
Balance Sheet and Cash Flow Review
The Company ended the first quarter of Fiscal 2018 with
Inventory at the end of first quarter Fiscal 2018 was
The Company had
Full Year and Second Quarter Fiscal 2018 Outlook
The Company’s full year guidance on a constant currency basis is unchanged. The full year Fiscal 2018 and second quarter guidance excludes restructuring-related and other charges expected to be recorded primarily in connection with the Company’s Way Forward plan.
For Fiscal 2018, the Company continues to expect net revenue to decrease 8% to 9%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have minimal impact on revenue growth in Fiscal 2018; this is more favorable than the previous guidance of 150 basis points of negative impact given recent movements in foreign exchange rates.
The Company continues to expect operating margin for Fiscal 2018 to be 9.0%-10.5%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to pressure operating margin for Fiscal 2018 by approximately 40-50 basis points, less than the previous guidance of 50-75 basis points due to recent movements in foreign exchange rates.
In the second quarter of Fiscal 2018, the Company expects net revenue to be down 9-10%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have approximately 40 basis points of negative impact on revenue growth in the second quarter of Fiscal 2018.
Operating margin for the second quarter of Fiscal 2018 is expected to be up 40-60 basis points, excluding foreign currency impacts. Foreign currency is estimated to pressure operating margin by approximately 40 basis points in the second quarter.
During the first quarter of Fiscal 2018, the Company adopted Accounting Standard Update (ASU) 2016-09 for the accounting of employee share-based payments. This affects the Company’s effective tax rate and increases its variability, with one of the key variables being the price of the Company’s stock.
Excluding the impact of ASU 2016-09, the Fiscal 2018 tax rate is
estimated at 21-22%; based on a stock price of
The guidance for Fiscal 2018 tax rate is lower than previously forecasted. This is due to recent favorable movements in foreign exchange rates; we now expect to generate a larger portion of our earnings from jurisdictions where our earnings are taxed at a lower rate than the U.S. In addition, there were some favorable adjustments to tax reserves resulting in net benefit to full year forecasted effective tax rate.
The second quarter of Fiscal 2018 tax rate is estimated at approximately 24%, including the impact of ASU 2016-09.
We expect capital expenditures of approximately
Fiscal Year 2018 Outlook – Non-GAAP Disclosure:
The Company is not able to provide a full reconciliation of the non-GAAP financial measures to GAAP because certain material items that impact these measures, such as the timing and exact amount of charges related to our Way Forward plan, have not yet occurred or are out of the Company’s control. Accordingly, a reconciliation of our non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort. The Company has identified the estimated impact of the items excluded from its Fiscal 2018 guidance.
This Fiscal 2018 non-GAAP guidance excludes estimated pretax
restructuring-related and other charges expected to be recorded
primarily in connection with the Company’s Way Forward plan of
approximately
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
Future announcements regarding the timing of future earnings release dates and conference calls will be posted on the Company’s investor relations website at http://investor.ralphlauren.com and will not be issued through news wire services unless otherwise noted by the Company.
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 “Full Year and Second Quarter Fiscal 2018 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, including
Mr. Ralph Lauren, or other changes in our executive and senior
management team or to our operating structure, and our ability to
effectively transfer knowledge during periods of transition; the
potential impact to our business and future strategic direction
resulting from our transition to our new Chief Executive Officer; our
ability to successfully implement our long-term growth strategy and
achieve anticipated operating enhancements and cost reductions from our
restructuring plans; the impact to our business resulting from
investments and other costs incurred in connection with the execution of
our long-term growth strategy, including restructuring-related charges,
which may be dilutive to our earnings in the short term; our ability to
effectively manage inventory levels and the increasing pressure on our
margins in a highly promotional retail environment; the impact to our
business resulting from potential costs and obligations related to the
early closure of our stores or termination of our long-term,
non-cancellable leases; our efforts to successfully enhance, upgrade,
and/or transition our global information technology systems and
e-commerce platform; our ability to secure our facilities and systems
and those of our third-party service providers from, among other things,
cybersecurity breaches, acts of vandalism, computer viruses, or similar
Internet or email events; a variety of legal, regulatory, tax,
political, and economic risks, including risks related to the
importation and exportation of products, tariffs, and other trade
barriers which our operations are currently subject to, or may become
subject to as a result of potential changes in legislation, and other
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, trade and labor restrictions, and related laws that
may reduce the flexibility of our business; changes in our tax
obligations and effective tax rates due to a variety of factors,
including potential changes in tax laws and regulations, accounting
rules, or the mix and level of earnings by jurisdiction; our exposure to
currency exchange rate fluctuations from both a transactional and
translational perspective; the impact to our business resulting from
increases in the costs of raw materials, transportation, and labor; the
potential impact to our business resulting from the financial
difficulties of certain of our large wholesale customers, which may
result in consolidations, liquidations, restructurings, and other
ownership changes in the retail industry, as well as other changes in
the competitive marketplace, including the introduction of new products
or pricing changes by our competitors; the impact to our business
resulting from changes in consumers' ability or preferences to purchase
premium lifestyle products that we offer for sale and our ability to
forecast consumer demand, which could result in either a build-up or
shortage of inventory; our ability to maintain our credit profile and
ratings within the financial community; our ability to access sources of
liquidity to provide for our cash needs, including our debt obligations,
payment of dividends, capital expenditures, and potential repurchases of
our Class A common stock, as well as the ability of our customers,
suppliers, vendors, and lenders to access sources of liquidity to
provide for their own cash needs; the potential impact to the trading
prices of our securities if our Class A common stock share repurchase
activity and/or cash dividend payments differ from investors'
expectations; the impact of the volatile state of the global economy,
stock markets, and other global economic conditions on us, our
customers, suppliers, vendors, and lenders; the impact to our business
of events of unrest and instability that are currently taking place in
certain parts of the world, as well as from any terrorist action,
retaliation, and the threat of further action or retaliation; our
ability to open new retail stores, concession shops, and e-commerce
sites in an effort to expand our direct-to-consumer presence; our
ability to continue to expand or grow our business internationally and
the impact of related changes in our customer, channel, and geographic
sales mix as a result; our ability to continue to maintain our brand
image and reputation and protect our trademarks; our intention to
introduce new products or enter into or renew alliances and exclusive
relationships; changes in the business of, and our relationships with,
major department store customers and licensing partners; the potential
impact on our operations and on our suppliers and customers resulting
from natural or man-made disasters; the impact to our business resulting
from the
RALPH LAUREN CORPORATION | |||||||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||||||||
(in millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
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 | |||||||||
RALPH LAUREN CORPORATION | ||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||
(in millions, except per share data) | ||||||||||
(Unaudited) | ||||||||||
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 | ) | ||||
RALPH LAUREN CORPORATION | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||
(in millions) | ||||||||||
(Unaudited) | ||||||||||
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 | ||||||
RALPH LAUREN CORPORATION | ||||||||||
OTHER INFORMATION | ||||||||||
(in millions) | ||||||||||
(Unaudited) | ||||||||||
SEGMENT INFORMATION | ||||||||||
Net revenues and operating income (loss) for the three-month periods | ||||||||||
ended July 1, 2017 and July 2, 2016 for each segment were as follows: | ||||||||||
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 | ) | |||||
RALPH LAUREN CORPORATION | ||||||||
Constant Currency Financial Measures | ||||||||
(in millions) | ||||||||
(Unaudited) | ||||||||
Comparable Store Sales Data | ||||||||
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
Operating Segment Net Revenue Data | ||||||||||||||||
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 | %) | ||||||||
RALPH LAUREN CORPORATION | ||||||
Global Retail Store Network | ||||||
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 | ||||
RALPH LAUREN CORPORATION | |||||||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | |||||||||||||||||
(in millions, except per share data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
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. | ||
SUPPLEMENTAL FINANCIAL INFORMATION
Since
Additionally, this earnings release includes certain non-U.S. GAAP
financial measures relating to charges recorded in connection with the
Company’s restructuring plans. Adjustments for the first quarter of
Fiscal 2018 also include other charges primarily recorded in connection
with the departure of the Company’s former CEO, Mr.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170808005748/en/
Source:
Ralph Lauren Corporation
Investor Relations:
Evren Kopelman,
212-813-7862
or
Corporate Communications:
Lindsay Knoll,
212-650-4401
rl-press@ralphlauren.com