Ralph Lauren Reports Second Quarter Fiscal 2019 Results
“Our 50th anniversary celebration was an incredible moment for our
Company and our teams. It captured how our brand and the World of
“As we execute our
We delivered across the following strategic initiatives in the second quarter of Fiscal 2019:
-
Win Over a New Generation of Consumers
- Increased marketing investment by over 30% to last year, leveraging our 50th Anniversary Fashion Show, and drove record levels of engagement across digital and social media
-
Drove the highest share of voice across New York Fashion Week –
nearly 30% of Fashion Week impressions included
Ralph Lauren -
Continue our focused approach to leveraging celebrity and social
influencers that resonate with different segments of the
Ralph Lauren consumer base, including a specific focus on attracting younger consumers to the brand
-
Energize Core Products and Accelerate Under-Developed Categories
- Average unit retail across our direct-to-consumer network was up 5% through elevating the product assortment and continued quality of sales initiatives
- Partnered with Mr. Porter, a leading men’s online retailer, on a limited edition capsule collection, inspired by some of our iconic men’s designs
-
In October, announced our first collaboration with
London streetwear brand Palace, driving brand buzz and consumer engagement among millennials - Our women’s Polo wear-to-work initiative started to come to life this fall in our directly-operated retail and select wholesale doors
-
Drive Targeted Expansion in Our Regions and Channels
-
Strong growth in international markets, driven by 13% revenue
growth in
Asia , led by over 20% growth inGreater China and strength acrossJapan ,South Korea , andAustralia -
Delivered 6% constant currency
Asia comp growth and expanded our store network inAsia , driven by 10 new points of distribution inChina in the second quarter - Continued to expand our distribution with new retail stores and global pure players
-
Strong growth in international markets, driven by 13% revenue
growth in
-
Lead With Digital
- Global digital revenue grew 10% to last year
-
North America directly-operated digital flagship returned to growth with a 9% comp, driven by strong brand building, an enhanced consumer experience, and higher quality of sales, all enabled by our new platform -
Launched our Polo mobile app and directly-operated
China digital commerce site
-
Operate With Discipline to Fuel Growth
- Adjusted gross margin was up 100 basis points driven by quality of sales
- Adjusted operating expenses, excluding our marketing investment, were flat to last year
Second Quarter Fiscal 2019 Income Statement Review
Net Revenue. In the second quarter of Fiscal 2019, revenue
increased by 1.6% to
Revenue performance for the Company’s reportable segments in the second quarter compared to the prior year period was:
-
North America Revenue.
North America revenue in the second quarter increased 1% on a reported basis and 2% in constant currency.North America wholesale revenue was flat to last year. In retail, comparable store sales inNorth America were up 1% in constant currency, including a 1% decline in brick and mortar stores and a 9% increase at ralphlauren.com. -
Europe Revenue.
Europe revenue in the second quarter declined 1% to$459 million on a reported basis and was flat to last year in constant currency.Europe wholesale revenue declined 1% on a reported basis and was flat in constant currency, as a shift in timing of shipments that benefited the first quarter negatively impacted our second quarter results. In retail, comparable store sales inEurope were down 4% on a constant currency basis, driven by a 4% decline in brick and mortar stores, related to assortment and inventory challenges, and flat revenues in digital commerce. -
Asia Revenue.
Asia revenue in the second quarter increased 13% to$245 million on a reported basis and increased 14% in constant currency, driven by strength in both retail and wholesale channels. Comparable store sales inAsia increased 6% in constant currency, reflecting growth in both brick and mortar and digital commerce operations.
Gross Profit. Gross profit for the second quarter of
Fiscal 2019 was
The gross margin increase was driven by initiatives to improve quality of sales through reduced promotional activity and improved pricing as well as favorable product mix. Foreign currency benefited gross margin by 40 basis points in the second quarter.
Operating Expenses. Operating expenses in the second
quarter of Fiscal 2019 were
Adjusted operating expense rate was 46.9%, 50 basis points above the prior year period, excluding restructuring-related and other charges. This increase was due to the increased marketing investment, new store expansion, and channel mix shift, as a greater portion of our revenue was generated by our international retail businesses, which typically carry a higher operating expense rate.
Operating Income. Operating income for the second quarter
of Fiscal 2019 was
-
North America Operating Income.
North America operating income in the second quarter was$210 million on both a reported and adjusted basis.Adjusted North America operating margin was 23.7%, up 60 basis points to last year. -
Europe Operating Income.
Europe operating income in the second quarter was$127 million on both a reported and adjusted basis. AdjustedEurope operating margin was 27.6%, 50 basis points higher than the prior year period. In constant currency, the adjusted operating margin declined by 110 basis points due to wholesale timing shifts, comp pressure, increased investment in marketing and new store expansion. -
Asia Operating Income.
Asia operating income in the second quarter was$33 million on a reported basis and$36 million on adjusted basis. AdjustedAsia operating margin was 14.8%, up 220 basis points to the prior year and up 270 basis points in constant currency, as leverage from strong top-line performance more than offset increased marketing investments in the quarter.
Net Income and EPS. On a reported basis, net income in the
second quarter of Fiscal 2019 was
In the second quarter of Fiscal 2019, the Company had an effective tax rate of 20.7% on a reported and 22.6% on an adjusted basis, excluding restructuring and related other charges. This compared to a reported and an adjusted effective tax rate of 24.8% and 25.9%, respectively, in the prior year period. The year-over-year decline is primarily driven by the effects of stock-based compensation and U.S. tax reform impacts.
Balance Sheet and Cash Flow Review
The Company ended the second quarter of Fiscal 2019 with
Inventory at the end of the second quarter of Fiscal 2019 was
The Company repurchased approximately
Full Year Fiscal 2019 and Third Quarter Outlook
The full year Fiscal 2019 and third quarter guidance excludes restructuring-related and other charges, as described in the “Non-U.S. GAAP Financial Measures” section of this press release.
For Fiscal 2019, the Company now expects net revenue to be approximately flat to up slightly in constant currency. Foreign currency is expected to have about 75 basis points of negative impact on revenue growth in Fiscal 2019.
The Company continues to expect operating margin for Fiscal 2019 to be up 40 to 60 basis points in constant currency driven by gross margin expansion. Foreign currency is expected to have minimal impact on operating margin in Fiscal 2019.
In the third quarter of Fiscal 2019, the Company expects net revenue to be up low single digits in constant currency. Foreign currency is expected to pressure revenue growth by about 100 basis points in the third quarter of Fiscal 2019.
Operating margin for the third quarter of Fiscal 2019 is expected to be up about 20 basis points in constant currency. Foreign currency is expected to be a slight benefit to operating margin in the third quarter.
We expect the full year Fiscal 2019 tax rate to be approximately 21%. Third quarter of Fiscal 2019 tax rate is estimated at approximately 22% to 23%.
The Company continues to plan capital expenditures 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
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 Fiscal 2019 and Third Quarter 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,” “can” 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; 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
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 open new retail stores, concession shops, and
digital commerce sites in an effort to expand our direct-to-consumer
presence; the impact to our business resulting from changes in
consumers' ability, willingness, 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 continue to maintain our brand image and
reputation and protect our trademarks; 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; the
impact of economic, political, and other conditions on us, our
customers, suppliers, vendors, and lenders; 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; our efforts to
successfully enhance, upgrade, and/or transition our global information
technology systems and digital commerce platform; the potential impact
to our business resulting from the imposition of additional duties,
tariffs, taxes, and other charges or other barriers to trade, including
those resulting from current trade developments with
RALPH LAUREN CORPORATION | ||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||||
(in millions) | ||||||||||||
(Unaudited) | ||||||||||||
September 29, | March 31, | September 30, | ||||||||||
2018 | 2018 | 2017 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 553.1 | $ | 1,304.6 | $ | 1,111.6 | ||||||
Short-term investments | 1,319.5 | 699.4 | 507.1 | |||||||||
Accounts receivable, net of allowances | 432.3 | 421.4 | 470.3 | |||||||||
Inventories | 994.6 | 761.3 | 864.6 | |||||||||
Income tax receivable | 34.9 | 38.0 | 70.5 | |||||||||
Prepaid expenses and other current assets | 359.1 | 323.7 | 300.3 | |||||||||
Total current assets | 3,693.5 | 3,548.4 | 3,324.4 | |||||||||
Property and equipment, net | 1,130.5 | 1,186.3 | 1,240.5 | |||||||||
Deferred tax assets | 67.6 | 86.6 | 143.2 | |||||||||
Goodwill | 928.6 | 950.5 | 933.0 | |||||||||
Intangible assets, net | 175.0 | 188.0 | 207.7 | |||||||||
Other non-current assets(a) | 160.3 | 183.5 | 179.5 | |||||||||
Total assets | $ | 6,155.5 | $ | 6,143.3 | $ | 6,028.3 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term debt | $ | - | $ | 10.1 | $ | - | ||||||
Current portion of long-term debt | - | 298.1 | 298.6 | |||||||||
Accounts payable | 202.1 | 165.6 | 172.8 | |||||||||
Income tax payable | 42.8 | 30.0 | 56.7 | |||||||||
Accrued expenses and other current liabilities | 996.2 | 1,083.4 | 1,062.0 | |||||||||
Total current liabilities | 1,241.1 | 1,587.2 | 1,590.1 | |||||||||
Long-term debt | 683.9 | 288.0 | 291.8 | |||||||||
Income tax payable | 124.8 | 124.8 | - | |||||||||
Non-current liability for unrecognized tax benefits | 80.0 | 79.2 | 75.2 | |||||||||
Other non-current liabilities | 563.7 | 606.7 | 561.6 | |||||||||
Total liabilities | 2,693.5 | 2,685.9 | 2,518.7 | |||||||||
Equity: | ||||||||||||
Common stock | 1.3 | 1.3 | 1.3 | |||||||||
Additional paid-in-capital | 2,448.0 | 2,383.4 | 2,348.2 | |||||||||
Retained earnings | 5,925.4 | 5,752.2 | 5,874.0 | |||||||||
Treasury stock, Class A, at cost | (4,804.9 | ) | (4,581.0 | ) | (4,578.5 | ) | ||||||
Accumulated other comprehensive loss | (107.8 | ) | (98.5 | ) | (135.4 | ) | ||||||
Total equity | 3,462.0 | 3,457.4 | 3,509.6 | |||||||||
Total liabilities and equity | $ | 6,155.5 | $ | 6,143.3 | $ | 6,028.3 | ||||||
Net Cash (incl. LT Investments) | 1,258.6 | 1,494.0 | 1,110.9 | |||||||||
Cash & Investments (ST & LT) | 1,942.5 | 2,090.2 | 1,701.3 | |||||||||
Net Cash (excl. LT Investments) | 1,188.7 | 1,407.8 | 1,028.3 | |||||||||
Cash & ST Investments | 1,872.6 | 2,004.0 | 1,618.7 | |||||||||
(a) Includes non-current investments of: | $ | 69.9 | $ | 86.2 | $ | 82.6 | ||||||
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 |
||||||||
September 29, | September 30, | |||||||
2018 | 2017 | |||||||
North America | $ | 888.2 | $ | 875.6 | ||||
Europe | 459.2 | 463.0 | ||||||
Asia | 244.7 | 216.8 | ||||||
Other non-reportable segments | 98.8 | 108.8 | ||||||
Net revenues | 1,690.9 | 1,664.2 | ||||||
Cost of goods sold | (661.6 | ) | (668.4 | ) | ||||
Gross profit | 1,029.3 | 995.8 | ||||||
Selling, general, and administrative expenses | (793.6 | ) | (772.7 | ) | ||||
Impairment of assets | (9.8 | ) | (11.2 | ) | ||||
Restructuring and other charges | (15.9 | ) | (18.6 | ) | ||||
Total other operating expenses, net | (819.3 | ) | (802.5 | ) | ||||
Operating income | 210.0 | 193.3 | ||||||
Interest expense | (6.0 | ) | (4.6 | ) | ||||
Interest income | 10.4 | 2.3 | ||||||
Other income, net | 0.4 | 0.2 | ||||||
Income before income taxes | 214.8 | 191.2 | ||||||
Income tax provision | (44.5 | ) | (47.4 | ) | ||||
Net income | $ | 170.3 | $ | 143.8 | ||||
Net income per common share - Basic | $ | 2.09 | $ | 1.76 | ||||
Net income per common share - Diluted | $ | 2.07 | $ | 1.75 | ||||
Weighted average common shares outstanding - Basic | 81.3 | 81.7 | ||||||
Weighted average common shares outstanding - Diluted | 82.3 | 82.3 | ||||||
Dividends declared per share | $ | 0.625 | $ | 0.50 | ||||
RALPH LAUREN CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||
(in millions, except per share data) | ||||||||
(Unaudited) | ||||||||
Six Months Ended |
||||||||
September 29, | September 30, | |||||||
2018 | 2017 | |||||||
North America | $ | 1,585.8 | $ | 1,585.3 | ||||
Europe | 809.8 | 786.5 | ||||||
Asia | 492.7 | 425.9 | ||||||
Other non-reportable segments | 193.2 | 213.6 | ||||||
Net revenues | 3,081.5 | 3,011.3 | ||||||
Cost of goods sold | (1,156.5 | ) | (1,164.3 | ) | ||||
Gross profit | 1,925.0 | 1,847.0 | ||||||
Selling, general, and administrative expenses | (1,535.5 | ) | (1,487.1 | ) | ||||
Impairment of assets | (11.1 | ) | (20.9 | ) | ||||
Restructuring and other charges | (38.3 | ) | (55.4 | ) | ||||
Total other operating expenses, net | (1,584.9 | ) | (1,563.4 | ) | ||||
Operating income | 340.1 | 283.6 | ||||||
Interest expense | (10.4 | ) | (9.6 | ) | ||||
Interest income | 19.6 | 4.3 | ||||||
Other expense, net | (1.6 | ) | (0.3 | ) | ||||
Income before income taxes | 347.7 | 278.0 | ||||||
Income tax provision | (68.4 | ) | (74.7 | ) | ||||
Net income | $ | 279.3 | $ | 203.3 | ||||
Net income per common share - Basic | $ | 3.42 | $ | 2.49 | ||||
Net income per common share - Diluted | $ | 3.37 | $ | 2.47 | ||||
Weighted average common shares outstanding - Basic | 81.6 | 81.6 | ||||||
Weighted average common shares outstanding - Diluted | 82.8 | 82.4 | ||||||
Dividends declared per share | $ | 1.25 | $ | 1.00 | ||||
RALPH LAUREN CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||
(in millions) | ||||||||
(Unaudited) | ||||||||
Six Months Ended | ||||||||
September 29, | September 30, | |||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 279.3 | $ | 203.3 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization expense | 140.0 | 146.7 | ||||||
Deferred income tax expense (benefit) | 11.2 | (25.3 | ) | |||||
Non-cash stock-based compensation expense | 42.8 | 39.4 | ||||||
Non-cash impairment of assets | 11.1 | 20.9 | ||||||
Non-cash restructuring-related inventory charges | - | 1.3 | ||||||
Other non-cash charges | 6.2 | 4.4 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (18.7 | ) | (17.4 | ) | ||||
Inventories | (251.8 | ) | (53.4 | ) | ||||
Prepaid expenses and other current assets | (49.8 | ) | (1.9 | ) | ||||
Accounts payable and accrued liabilities | 3.4 | 72.2 | ||||||
Income tax receivables and payables | 29.5 | 51.4 | ||||||
Deferred income | (11.6 | ) | 3.0 | |||||
Other balance sheet changes | 21.4 | (7.6 | ) | |||||
Net cash provided by operating activities | 213.0 | 437.0 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (93.1 | ) | (74.7 | ) | ||||
Purchases of investments | (1,822.8 | ) | (426.3 | ) | ||||
Proceeds from sales and maturities of investments | 1,211.4 | 591.3 | ||||||
Acquisitions and ventures | (4.5 | ) | (3.6 | ) | ||||
Settlement of net investment hedges | (23.8 | ) | - | |||||
Net cash provided by (used in) investing activities | (732.8 | ) | 86.7 | |||||
Cash flows from financing activities: | ||||||||
Repayments of short-term debt | (9.9 | ) | - | |||||
Proceeds from the issuance of long-term debt | 398.1 | - | ||||||
Repayments of long-term debt | (300.0 | ) | - | |||||
Payments of capital lease obligations | (10.5 | ) | (14.2 | ) | ||||
Payments of dividends | (91.3 | ) | (81.1 | ) | ||||
Repurchases of common stock, including shares surrendered for tax withholdings | (223.9 | ) | (14.6 | ) | ||||
Proceeds from exercise of stock options | 21.8 | 0.1 | ||||||
Other financing activities | (2.8 | ) | - | |||||
Net cash used in financing activities | (218.5 | ) | (109.8 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (20.7 | ) | 33.2 | |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (759.0 | ) | 447.1 | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 1,355.5 | 711.8 | ||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 596.5 | $ | 1,158.9 | ||||
RALPH LAUREN CORPORATION | ||||||||||||||||
OTHER INFORMATION | ||||||||||||||||
(in millions) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||
Net revenues and operating income for the periods ended September 29, 2018 and September 30, 2017 for each segment were as follows: | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
September 29, | September 30, | September 29, | September 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net revenues: | ||||||||||||||||
North America | $ | 888.2 | $ | 875.6 | $ | 1,585.8 | $ | 1,585.3 | ||||||||
Europe | 459.2 | 463.0 | 809.8 | 786.5 | ||||||||||||
Asia | 244.7 | 216.8 | 492.7 | 425.9 | ||||||||||||
Other non-reportable segments | 98.8 | 108.8 | 193.2 | 213.6 | ||||||||||||
Total net revenues | $ | 1,690.9 | $ | 1,664.2 | $ | 3,081.5 | $ | 3,011.3 | ||||||||
Operating income: | ||||||||||||||||
North America | $ | 209.8 | $ | 202.2 | $ | 369.7 | $ | 352.7 | ||||||||
Europe | 126.6 | 125.5 | 200.5 | 192.6 | ||||||||||||
Asia | 32.7 | 26.5 | 75.4 | 56.7 | ||||||||||||
Other non-reportable segments | 24.5 | 26.8 | 55.3 | 59.8 | ||||||||||||
393.6 | 381.0 | 700.9 | 661.8 | |||||||||||||
Unallocated corporate expenses | (167.7 | ) | (169.1 | ) | (322.5 | ) | (322.8 | ) | ||||||||
Unallocated restructuring and other charges | (15.9 | ) | (18.6 | ) | (38.3 | ) | (55.4 | ) | ||||||||
Total operating income | $ | 210.0 | $ | 193.3 | $ | 340.1 | $ | 283.6 | ||||||||
RALPH LAUREN CORPORATION | ||||||||||
Constant Currency Financial Measures | ||||||||||
(in millions) | ||||||||||
(Unaudited) | ||||||||||
Comparable Store Sales Data | ||||||||||
Three Months Ended | Six Months Ended | |||||||||
September 29, 2018
% Change |
September 29, 2018
% Change |
|||||||||
Constant Currency | Constant Currency | |||||||||
North America | ||||||||||
Digital commerce | 9% | 4% | ||||||||
Excluding Digital commerce | (1%) | (2%) | ||||||||
Total North America | 1% | (1%) | ||||||||
Europe | ||||||||||
Digital commerce | 0% | 1% | ||||||||
Excluding Digital commerce | (4%) | (7%) | ||||||||
Total Europe | (4%) | (6%) | ||||||||
Asia | ||||||||||
Digital commerce | 66% | 57% | ||||||||
Excluding Digital commerce | 5% | 5% | ||||||||
Total Asia | 6% | 6% | ||||||||
Total Ralph Lauren | 0% | (1%) | ||||||||
Operating Segment Net Revenue Data | ||||||||||
Three Months Ended | % Change | |||||||||
September 29, 2018 | September 30, 2017 |
As Reported |
Constant Currency | |||||||
North America | $ | 888.2 | $ | 875.6 | 1.4% | 1.6% | ||||
Europe | 459.2 | 463.0 | (0.8%) | 0.1% | ||||||
Asia | 244.7 | 216.8 | 12.8% | 14.1% | ||||||
Other non-reportable segments | 98.8 | 108.8 | (9.1%) | (9.1%) | ||||||
Net revenues | $ | 1,690.9 | $ | 1,664.2 | 1.6% | 2.1% | ||||
Six Months Ended | % Change | |||||||||
September 29, 2018 | September 30, 2017 |
As Reported |
Constant Currency | |||||||
North America | $ | 1,585.8 | $ | 1,585.3 | 0.0% | 0.1% | ||||
Europe | 809.8 | 786.5 | 3.0% | 0.7% | ||||||
Asia | 492.7 | 425.9 | 15.7% | 15.1% | ||||||
Other non-reportable segments | 193.2 | 213.6 | (9.6%) | (9.6%) | ||||||
Net revenues | $ | 3,081.5 | $ | 3,011.3 | 2.3% | 1.7% | ||||
RALPH LAUREN CORPORATION | |||||||||||||||||||||||||||||||
Revenue by Sales Channel | |||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | ||||||||||||||||||||||||||||||
North |
Europe | Asia | Other | Total |
North |
Europe | Asia | Other | Total | ||||||||||||||||||||||
Sales Channel: | |||||||||||||||||||||||||||||||
Wholesale | $ | 452.8 | $ | 231.6 | $ | 22.2 | $ | 7.0 | $ | 713.6 | $ | 451.3 | $ | 233.5 | $ | 17.9 | $ | 7.3 | $ | 710.0 | |||||||||||
Retail | 435.4 | 227.6 | 222.5 | 47.4 | 932.9 | 424.3 | 229.5 | 198.9 | 54.6 | 907.3 | |||||||||||||||||||||
Licensing | - | - | - | 44.4 | 44.4 | - | - | - | 46.9 | 46.9 | |||||||||||||||||||||
Total net revenues | $ | 888.2 | $ | 459.2 | $ | 244.7 | $ | 98.8 | $ | 1,690.9 | $ | 875.6 | $ | 463.0 | $ | 216.8 | $ | 108.8 | $ | 1,664.2 | |||||||||||
Six Months Ended | |||||||||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | ||||||||||||||||||||||||||||||
North |
Europe | Asia | Other | Total |
North |
Europe | Asia | Other | Total | ||||||||||||||||||||||
Sales Channel: | |||||||||||||||||||||||||||||||
Wholesale | $ | 762.9 | $ | 369.6 | $ | 34.8 | $ | 12.5 | $ | 1,179.8 | $ | 764.6 | $ | 349.1 | $ | 25.8 | $ | 13.3 | $ | 1,152.8 | |||||||||||
Retail | 822.9 | 440.2 | 457.9 | 97.3 | 1,818.3 | 820.7 | 437.4 | 400.1 | 111.6 | 1,769.8 | |||||||||||||||||||||
Licensing | - | - | - | 83.4 | 83.4 | - | - | - | 88.7 | 88.7 | |||||||||||||||||||||
Total net revenues | $ | 1,585.8 | $ | 809.8 | $ | 492.7 | $ | 193.2 | $ | 3,081.5 | $ | 1,585.3 | $ | 786.5 | $ | 425.9 | $ | 213.6 | $ | 3,011.3 | |||||||||||
RALPH LAUREN CORPORATION | ||||
Global Retail Store Network | ||||
September 29, | September 30, | |||
2018 | 2017 | |||
North America |
||||
Ralph Lauren Stores | 42 | 44 | ||
Polo Factory Stores | 179 | 171 | ||
Total Directly Operated Stores | 221 | 215 | ||
Concessions | 2 | 2 | ||
Europe |
||||
Ralph Lauren Stores | 21 | 20 | ||
Polo Factory Stores | 62 | 63 | ||
Total Directly Operated Stores | 83 | 83 | ||
Concessions | 25 | 25 | ||
Asia |
||||
Ralph Lauren Stores | 53 | 45 | ||
Polo Factory Stores | 55 | 48 | ||
Total Directly Operated Stores | 108 | 93 | ||
Concessions | 606 | 593 | ||
Other |
||||
Club Monaco Stores | 75 | 78 | ||
Club Monaco Concessions | 5 | 2 | ||
Global Directly Operated Stores and Concessions |
||||
Ralph Lauren Stores | 116 | 109 | ||
Polo Factory Stores | 296 | 282 | ||
Club Monaco Stores | 75 | 78 | ||
Total Directly Operated Stores | 487 | 469 | ||
Concessions | 638 | 622 | ||
Global Licensed Stores and Concessions |
||||
Ralph Lauren Licensed Stores | 91 | 84 | ||
Club Monaco Licensed Stores | 59 | 62 | ||
Total Licensed Stores | 150 | 146 | ||
Licensed Concessions | 119 | 122 | ||
RALPH LAUREN CORPORATION | ||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | ||||||||||||
(in millions, except per share data) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | ||||||||||||
September 29, 2018 | ||||||||||||
As |
Total |
As |
||||||||||
Net revenues | $ | 1,690.9 | $ | - | $ | 1,690.9 | ||||||
Gross profit | 1,029.3 | - | 1,029.3 | |||||||||
Gross profit margin | 60.9 | % | 60.9 | % | ||||||||
Total other operating expenses, net | (819.3 | ) | 25.7 | (793.6 | ) | |||||||
Operating expense margin | 48.5 | % | 46.9 | % | ||||||||
Operating income | 210.0 | 25.7 | 235.7 | |||||||||
Operating margin | 12.4 | % | 13.9 | % | ||||||||
Income before income taxes | 214.8 | 25.7 | 240.5 | |||||||||
Income tax provision | (44.5 | ) | (9.8 | ) | (54.3 | ) | ||||||
Effective tax rate | 20.7 | % | 22.6 | % | ||||||||
Net income | $ | 170.3 | $ | 15.9 | $ | 186.2 | ||||||
Net income per diluted common share | $ | 2.07 | $ | 2.26 | ||||||||
Weighted average common shares outstanding - Diluted | 82.3 | 82.3 | ||||||||||
SEGMENT INFORMATION - | ||||||||||||
OPERATING INCOME: | ||||||||||||
North America | $ | 209.8 | $ | 0.3 | $ | 210.1 | ||||||
Operating margin | 23.6 | % | 23.7 | % | ||||||||
Europe | 126.6 | - | 126.6 | |||||||||
Operating margin | 27.6 | % | 27.6 | % | ||||||||
Asia | 32.7 | 3.5 | 36.2 | |||||||||
Operating margin | 13.4 | % | 14.8 | % | ||||||||
Other non-reportable segments | 24.5 | 5.8 | 30.3 | |||||||||
Operating margin | 24.8 | % | 30.6 | % | ||||||||
Unallocated corporate expenses and restructuring and other charges, net | (183.6 | ) | 16.1 | (167.5 | ) | |||||||
Total operating income | $ | 210.0 | $ | 25.7 | $ | 235.7 | ||||||
Six Months Ended | ||||||||||||
September 29, 2018 | ||||||||||||
As |
Total |
As |
||||||||||
Net revenues | $ | 3,081.5 | $ | - | $ | 3,081.5 | ||||||
Gross profit | 1,925.0 | - | 1,925.0 | |||||||||
Gross profit margin | 62.5 | % | 62.5 | % | ||||||||
Total other operating expenses, net | (1,584.9 | ) | 49.4 | (1,535.5 | ) | |||||||
Operating expense margin | 51.4 | % | 49.8 | % | ||||||||
Operating income | 340.1 | 49.4 | 389.5 | |||||||||
Operating margin | 11.0 | % | 12.6 | % | ||||||||
Income before income taxes | 347.7 | 49.4 | 397.1 | |||||||||
Income tax provision | (68.4 | ) | (14.6 | ) | (83.0 | ) | ||||||
Effective tax rate | 19.7 | % | 20.9 | % | ||||||||
Net income | $ | 279.3 | $ | 34.8 | $ | 314.1 | ||||||
Net income per diluted common share | $ | 3.37 | $ | 3.79 | ||||||||
Weighted average common shares outstanding - Diluted | 82.8 | 82.8 | ||||||||||
SEGMENT INFORMATION - | ||||||||||||
OPERATING INCOME: | ||||||||||||
North America | $ | 369.7 | $ | 0.3 | $ | 370.0 | ||||||
Operating margin | 23.3 | % | 23.3 | % | ||||||||
Europe | 200.5 | 0.2 | 200.7 | |||||||||
Operating margin | 24.8 | % | 24.8 | % | ||||||||
Asia | 75.4 | 3.7 | 79.1 | |||||||||
Operating margin | 15.3 | % | 16.1 | % | ||||||||
Other non-reportable segments | 55.3 | 6.6 | 61.9 | |||||||||
Operating margin | 28.6 | % | 32.0 | % | ||||||||
Unallocated corporate expenses and restructuring and other charges, net | (360.8 | ) | 38.6 | (322.2 | ) | |||||||
Total operating income | $ | 340.1 | $ | 49.4 | $ | 389.5 | ||||||
RALPH LAUREN CORPORATION | ||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | ||||||||||||
(in millions, except per share data) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | ||||||||||||
September 30, 2017 | ||||||||||||
As |
Total |
As |
||||||||||
Net revenues | $ | 1,664.2 | $ | - | $ | 1,664.2 | ||||||
Gross profit | 995.8 | 0.6 | 996.4 | |||||||||
Gross profit margin | 59.8 | % | 59.9 | % | ||||||||
Total other operating expenses, net | (802.5 | ) | 29.8 | (772.7 | ) | |||||||
Operating expense margin | 48.2 | % | 46.4 | % | ||||||||
Operating income | 193.3 | 30.4 | 223.7 | |||||||||
Operating margin | 11.6 | % | 13.4 | % | ||||||||
Income before income taxes | 191.2 | 30.4 | 221.6 | |||||||||
Income tax provision | (47.4 | ) | (10.1 | ) | (57.5 | ) | ||||||
Effective tax rate | 24.8 | % | 25.9 | % | ||||||||
Net income | $ | 143.8 | $ | 20.3 | $ | 164.1 | ||||||
Net income per diluted common share | $ | 1.75 | $ | 1.99 | ||||||||
Weighted average common shares outstanding - Diluted | 82.3 | 82.3 | ||||||||||
SEGMENT INFORMATION - | ||||||||||||
OPERATING INCOME: | ||||||||||||
North America | $ | 202.2 | $ | 0.4 | $ | 202.6 | ||||||
Operating margin | 23.1 | % | 23.1 | % | ||||||||
Europe | 125.5 | 0.1 | 125.6 | |||||||||
Operating margin | 27.1 | % | 27.1 | % | ||||||||
Asia | 26.5 | 0.8 | 27.3 | |||||||||
Operating margin | 12.2 | % | 12.6 | % | ||||||||
Other non-reportable segments | 26.8 | 8.9 | 35.7 | |||||||||
Operating margin | 24.6 | % | 32.9 | % | ||||||||
Unallocated corporate expenses and restructuring and other charges, net | (187.7 | ) | 20.2 | (167.5 | ) | |||||||
Total operating income | $ | 193.3 | $ | 30.4 | $ | 223.7 | ||||||
Six Months Ended | ||||||||||||
September 30, 2017 | ||||||||||||
As |
Total |
As |
||||||||||
Net revenues | $ | 3,011.3 | $ | - | $ | 3,011.3 | ||||||
Gross profit | 1,847.0 | 1.3 | 1,848.3 | |||||||||
Gross profit margin | 61.3 | % | 61.4 | % | ||||||||
Total other operating expenses, net | (1,563.4 | ) | 76.3 | (1,487.1 | ) | |||||||
Operating expense margin | 51.9 | % | 49.4 | % | ||||||||
Operating income | 283.6 | 77.6 | 361.2 | |||||||||
Operating margin | 9.4 | % | 12.0 | % | ||||||||
Income before income taxes | 278.0 | 77.6 | 355.6 | |||||||||
Income tax provision | (74.7 | ) | (25.7 | ) | (100.4 | ) | ||||||
Effective tax rate | 26.9 | % | 28.2 | % | ||||||||
Net income | $ | 203.3 | $ | 51.9 | $ | 255.2 | ||||||
Net income per diluted common share | $ | 2.47 | $ | 3.10 | ||||||||
Weighted average common shares outstanding - Diluted | 82.4 | 82.4 | ||||||||||
SEGMENT INFORMATION - | ||||||||||||
OPERATING INCOME: | ||||||||||||
North America | $ | 352.7 | $ | 1.7 | $ | 354.4 | ||||||
Operating margin | 22.2 | % | 22.4 | % | ||||||||
Europe | 192.6 | 1.3 | 193.9 | |||||||||
Operating margin | 24.5 | % | 24.7 | % | ||||||||
Asia | 56.7 | 0.9 | 57.6 | |||||||||
Operating margin | 13.3 | % | 13.5 | % | ||||||||
Other non-reportable segments | 59.8 | 9.0 | 68.8 | |||||||||
Operating margin | 28.0 | % | 32.2 | % | ||||||||
Unallocated corporate expenses and restructuring and other charges, net | (378.2 | ) | 64.7 | (313.5 | ) | |||||||
Total operating income | $ | 283.6 | $ | 77.6 | $ | 361.2 | ||||||
RALPH LAUREN CORPORATION | ||
Footnotes to Non-U.S. GAAP Financial Measures | ||
(a) | Adjustments for inventory-related charges are recorded within cost of goods sold in the consolidated statements of operations. Adjustments for impairment-related charges are recorded within impairment of assets in the consolidated statements of operations. Adjustments for enactment-related charges recorded in connection with U.S. tax reform and other income tax-related adjustments are recorded within the income tax provision in the consolidated statement of operations. Adjustments for all other charges are recorded within restructuring and other charges in the consolidated statements of operations. | |
(b) | Adjustments for the three months ended September 29, 2018 include (i) charges of $16.9 million recorded in connection with the Company's restructuring plans, consisting of restructuring charges and impairment of assets; (ii) additional impairment of assets of $5.3 million related to underperforming stores as a result of on-going store portfolio evaluation; and (iii) other charges of $3.5 million related to depreciation expense associated with the Company's former Polo store at 711 Fifth Avenue in New York City. The income tax provision reflects a favorable measurement period adjustment of $4.7 million recorded in connection with U.S. tax reform. | |
(c) | Adjustments for the six months ended September 29, 2018 include (i) charges of $32.9 million recorded in connection with the Company's restructuring plans, consisting of restructuring charges and impairment of assets; (ii) additional impairment of assets of $5.3 million related to underperforming stores as a result of on-going store portfolio evaluation; and (iii) other charges of $11.2 million primarily related to depreciation expense associated with the Company's former Polo store at 711 Fifth Avenue in New York City and its customs audit. The income tax provision reflects a favorable measurement period adjustment of $4.7 million recorded in connection with U.S. tax reform. | |
(d) | Adjustments for the three months ended September 30, 2017 include (i) charges of $20.0 million recorded in connection with the Way Forward plan, consisting of restructuring charges, impairment of assets, and inventory-related charges; (ii) additional impairment of assets of $9.1 million related to underperforming stores as a result of on-going store portfolio evaluation; and (iii) net other charges of $1.3 million related to depreciation expense associated with the Company's former Polo store at 711 Fifth Avenue in New York City and the reversal of reserves associated with the settlement of certain non-income tax issues. | |
(e) | Adjustments for the six months ended September 30, 2017 include (i) charges of $57.0 million recorded in connection with the Way Forward plan, consisting of restructuring charges, impairment of assets, and inventory-related charges; (ii) additional impairment of assets of $9.1 million related to underperforming stores as a result of on-going store portfolio evaluation; and (iii) net other charges of $11.5 million primarily related to depreciation expense associated with the Company's former Polo store at 711 Fifth Avenue in New York City, the departure of Mr. Stefan Larsson, and the reversal of reserves associated with the settlement of certain non-income tax issues. | |
NON-U.S. GAAP FINANCIAL MEASURES
Since
This earnings release also includes certain other non-U.S. GAAP financial measures relating to the impact of charges and other items as described herein. The Company uses non-U.S. GAAP financial measures, among other things, to evaluate its operating performance and to better represent the manner in which it 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 non-U.S. 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 U.S. GAAP, and may be different from non-U.S. GAAP measures reported by other companies.
Adjustments made during the fiscal periods presented include charges
recorded in connection with the Company’s restructuring plans, as well
as depreciation expense associated with the Company’s former Polo store
at
Additionally, the Company’s full year Fiscal 2019 and third quarter
Fiscal 2019 guidance excludes certain anticipated restructuring-related
and other one-time charges. The Company is not able to provide a full
reconciliation of these non-U.S. GAAP financial measures to U.S. GAAP
because certain material items that impact these measures, such as the
timing and exact amount of charges related to our restructuring plans,
have not yet occurred or are out of the Company’s control. Accordingly,
a reconciliation of our non-U.S. GAAP based financial measure guidance
to the most directly comparable U.S. GAAP measures is not available
without unreasonable effort. However, the Company has identified the
estimated impact of certain items excluded from its long-term financial
outlook. Specifically, the Company’s long-term financial outlook
excludes estimated pretax charges of approximately
View source version on businesswire.com: https://www.businesswire.com/news/home/20181106005242/en/
Source:
Ralph Lauren Corporation
Investor Relations:
Evren Kopelman,
212-813-7862
or
Corporate Communications:
rl-press@ralphlauren.com