Polo Ralph Lauren Reports 58% Increase in Third Quarter Earnings Per Share
NEW YORK--(BUSINESS WIRE)--Feb. 8, 2001--Polo Ralph Lauren Corporation(NYSE:RL):
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Record Holiday Sales Drive Strong Polo Ralph Lauren Store Comps
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Polo's European Business Exceeds Operating Profit Plans
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Net Revenues Increase 20%
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Operating Margins Improve 330 Basis Points
Polo Ralph Lauren Corporation (NYSE:RL) today reported earnings per diluted share of $0.52 cents on net income of $50.6 million for the quarterly period ended December 30, 2000 compared to earnings per diluted share of $0.33 cents on net income of $32.3 million for the third quarter of the prior year.
The results were driven by a 20% increase in net revenues, a 160 basis point improvement in gross margin and a 170 basis point decrease in expenses as a percentage of net revenues.
"Our outstanding results reflect hard work and continued execution of our strategy of developing Polo into a globally-recognized luxury goods provider while maintaining strong control of our operating costs," said Ralph Lauren, Chairman and Chief Executive Officer. "Ongoing customer demand for our men's and women's collections remains strong in all of our major markets and I am very excited about the opportunities generated by our global strategy."
"I believe we have a terrific plan and a highly-talented management team in the right positions to support both our current and future growth initiatives," Mr. Lauren said, referring to the separate announcement today that Lance Isham, Vice Chairman, will assume responsibility for the European expansion, and Polo President and Chief Operating Officer Roger Farah will assume responsibility for all Polo Ralph Lauren operations including the wholesale, retail and licensing divisions, financial and information services, global logistics and human resources. (See today's separate release.)
Mr. Isham commented, "In Europe, our brands exceeded expectations, achieving strong double-digit growth. We expect this strong growth to continue in Europe as the economic outlook there remains healthy and as the Euro strengthens. We are on track with our Continental brand rollout and we expect to increase our door penetration by 35% this fiscal year."
Commenting on the 20% increase in net revenues, Mr. Farah said, "The retail performance of our men's Purple Label, women's collection, Black Label and gift collections was very strong this holiday season. In our company-owned Polo Ralph Lauren stores and in specialty department stores, these luxury brands achieved strong double-digit growth. For our department store customers, Polo, Polo Sport and Lauren brands continue to be the leading items in their categories."
"The disciplined execution of our retail strategy of increasing the luxury mix in our stores is exceeding plan. For the third consecutive quarter, our Polo Ralph Lauren full price stores produced high-single digit comps. We were well-positioned for the holidays with strong depth in key apparel, accessory and gift items, and our customers responded very well," Mr. Farah said.
"We saw improved results in Club Monaco and believe we now have the right management to direct the growth and positioning of the Club Monaco brand. We are continuing to experience strong sales in our new stores in urban centers such as New York and Los Angeles, which are the right type of locations for the Club Monaco brand. While we have made good progress to date, there are many improvements we are undertaking to strengthen Club Monaco's results for the coming year including integrating Club Monaco with Polo's global supply chain management and streamlining the Club Monaco brand to one strong urban collection," Mr. Farah said.
"I am pleased with the financial and operational improvements we are delivering. The senior management team has committed to improving operating efficiencies and to disciplined spending. I believe this quarter's results are the first to show the impact of this commitment."
"We are confident that as we enter the fourth quarter we can continue to execute our growth strategy and reach our sales and operating goals. I believe that as we continue to execute, we will continue to identify additional opportunities to increase our profitability," Mr. Farah stated.
Net Revenues
Net revenues were $613.7 million in the third quarter, a gain of 20% compared to $510.3 million in the prior year's third quarter. These gains were driven by sales from the acquisition of the Polo Ralph Lauren brands in Europe, mid-teen sales growth in the Polo Ralph Lauren full price stores and continuing demand for the Company's licensed brands, including particularly Lauren and Polo Jeans Co., at department stores.
Gross Profit
Gross profit for the quarter rose 160 basis points to 48.5% of net revenues compared to 46.9% of net revenues in the prior year's quarter. The increase was a result of higher margins associated with the European business, a larger proportion of luxury apparel and better gross margins in our company-owned retail stores.
Total Expenses
Total expenses decreased 170 basis points to 33.9% of net revenues compared to total expenses of 35.6% of net revenues in the third quarter of fiscal year 2000. The expense reduction was driven by better cost management throughout all businesses.
Income from Operations
Third quarter income from operations was $89.3 million, or 14.6% of net revenues, compared to $57.9 million, or 11.3% of net revenues in the prior year's period. The gain represents a 330 basis point improvement in operating margin.
Inventory
At December 30, 2000, inventory was $401.9 compared to $380.4 million at January 1, 2000, pro forma to reflect the European licensee acquisition. While supporting a 20% increase in revenue, inventory turns continued to show improvement due to better planning at wholesale and better merchandising in the retail group.
Store Count
During the third quarter, Polo Ralph Lauren opened eight Club Monaco stores and four Polo outlet stores and closed two Club Monaco stores. At quarter end, the Company had 252 stores, including 29 Polo brand stores, six Polo Concept stores, 12 Polo Jeans Co. stores, 76 Club Monaco stores, 95 full line Outlet stores, 26 Polo Jeans Co. Outlet stores and eight European outlet stores.
Earnings Outlook
The Company expects earnings of $0.42 to $0.44 cents in the fourth quarter of fiscal 2001 driven by revenue growth of 15%. Looking to fiscal 2002, the Company expects earnings per share in the range of $1.93 to $1.98, driven by 5-7% revenue growth, improved gross margins and decreased operating expenses.
CONFERENCE CALL THIS MORNING TO DISCUSS THIRD QUARTER RESULTS
As previously announced, the Company will host a conference call today, February 8, 2001 at 9:00 A.M. Eastern Standard Time to discuss the third quarter results. To participate in the call, please call 1-800-558-9407. For international participants, please call 1-212-346-0134. Alternatively, individuals are invited to listen to a live online broadcast of the conference call by accessing the investor relations page through http://investor.polo.com on the Internet.
A replay of the call will be available through 5 P.M. Friday, February 9th by dialing 1-800-633-8284, or 1-858-812-6440 and entering reservation number 17613979.
Polo Ralph Lauren Corporation (NYSE:RL) is a leader in the design, marketing and distribution of premium lifestyle products in four categories: apparel, home, accessories and fragrances. For more than 30 years, Polo's reputation and distinctive image have been consistently developed across an expanding number of products, brands and international markets. The Company's brand names, which include, "Polo by Ralph Lauren", "Polo Sport Ralph Lauren", "Ralph Lauren Collection", "Ralph Lauren Purple Label", "RALPH by Ralph Lauren", "Lauren by Ralph Lauren", "Polo Jeans Co. Ralph Lauren", and "Chaps Ralph Lauren", among others, constitute one of the world's most widely recognized families of consumer brands. In May 1999, Polo Ralph Lauren acquired Club Monaco, a vertical lifestyle retailer based in Toronto. In February 2000, Ralph Lauren Media, LLC was formed as a joint venture between Polo Ralph Lauren, NBC and three of NBC's affiliated companies - ValueVision International, Inc. (Nasdaq: VVTV), NBC Internet, Inc. (Nasdaq: NBCI) and CNBC.com, LLC - to bring the Polo Ralph Lauren American lifestyle experience to consumers via multiple media platforms, including the Internet, broadcast, cable and print.
Certain statements including, without limitation, the statements made by Ralph Lauren, Lance Isham and Roger Farah and the statements relating to the earnings outlook for the fourth quarter of fiscal 2001 and full year 2002 contained herein constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations and involve certain risks and uncertainties. Actual results might differ materially from those projected in the forward-looking statements. Among the factors that could cause actual results to materially differ are the following: risks associated with implementing the Company's plans to enhance its worldwide luxury retail business, inventory management program and operating efficiency initiatives; risks associated with changes in the competitive marketplace, including the introduction of new products or pricing changes by the Company's competitors; changes in global economic conditions; risks associated with the Company's dependence on sales to a limited number of large department store customers, including risks related to extending credit to customers; risks associated with the Company's dependence on its licensing partners for a substantial portion of its net income and risks associated with a lack of operational and financial control over licensed businesses; risks associated with consolidations, restructurings and other ownership changes in the retail industry; risks associated with competition in the segments of the fashion and consumer product industries in which the Company operates, including the Company's ability to shape, stimulate and respond to changing consumer tastes and demands by producing attractive products, brands and marketing, and its ability to remain competitive in the areas of quality and price; risks associated with uncertainty relating to the Company's ability to implement its growth strategies; risks associated with the Company's entry into new markets either through internal development activities or through acquisitions; risks associated with the possible adverse impact of the Company's unaffiliated manufacturers' inability to manufacture in a timely manner, to meet quality standards or to use acceptable labor practices and other factors detailed in the filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Attached are the Consolidated Statements of Income for the quarter and nine months ended December 30, 2000 and the Consolidated Balance Sheets as of December 30, 2000 and January 1, 2000.
Polo Ralph Lauren Corporation
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended
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December 30, 2000 January 1, 2000
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Wholesale Net Sales $ 268,272 $ 196,288
Retail Net Sales 286,156 256,727
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Net Sales 554,428 453,015
Licensing Revenue 58,090 55,741
Other Income 1,222 1,543
-------------------- -------------------
Net Revenues 613,740 510,299
Cost of Goods Sold 316,220 270,719
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Gross Profit 297,520 239,580
Depreciation And Amortization 18,939 20,786
Other SG&A Expenses 189,233 160,910
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Total SG & A Expenses 208,172 181,696
Income from Operations 89,348 57,884
Interest Expense 5,704 3,422
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Income Before Taxes 83,644 54,462
Provision for Income Taxes 33,041 22,194
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Net Income $ 50,603 $ 32,268
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Net Income Per Share
- Basic and Diluted $0.52 $0.33
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Weighted Average Shares
Outstanding--Basic 96,530,102 98,807,754
==================== ===================
Weighted Average Shares &
Share Equivalents
Outstanding--Diluted 97,347,194 98,938,341
==================== ===================
Supplemental information:
EBITDA $108,287 $78,670
Polo Ralph Lauren Corporation
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Nine Months Ended
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December 30, 2000 January 1, 2000
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Wholesale Net Sales $ 754,284 $ 637,461
Retail Net Sales 750,681 670,535
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Net Sales 1,504,965 1,307,996
Licensing Revenue 178,383 174,945
Other Income 3,906 5,664
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Net Revenues 1,687,254 1,488,605
Cost of Goods Sold 849,198 762,635
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Gross Profit 838,056 725,970
Depreciation And Amortization 60,084 53,074
Other SG&A Expenses 555,028 468,031
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Total SG&A Expenses 615,112 521,105
Income from Operations 222,944 204,865
Interest Expense 18,992 9,597
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Income Before Taxes,
Accounting Change and
Restructuring and Special Charges 203,952 195,268
Provision for Income Taxes 80,562 79,574
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Income Before Accounting Change
and Restructuring and
Special Charges 123,390 115,694
Cumulative Effect of Change
in Accounting Principle,
Net of Taxes - 3,967
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Net Income Before Restructuring
and Special Charges 123,390 111,727
Restructuring and Special
Charges, net of taxes 111,625 -
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Net Income $11,765 $111,727
======================= ===================
Income Per Share
Before Accounting Change
and Restructuring and
Special Charges -
Basic and Diluted $1.27 $1.17
Cumulative Effect of Change
in Accounting Principle, Net -
Basic and Diluted - 0.04
----------------------- -------------------
Net Income Per Share Before
Restructuring and Special
Charges - Basic and Diluted $1.27 $1.13
======================= ===================
Net Income Per Share
- Basic and Diluted $0.12 $1.13
======================= ===================
Weighted Average Shares
Outstanding--Basic 96,778,511 99,155,088
======================= ===================
Weighted Average Shares &
Share Equivalents
Outstanding--Diluted 97,245,629 99,299,695
======================= ===================
Supplemental information:
EBITDA $283,028 $257,939
Polo Ralph Lauren Corporation
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
December 30, January 1,
2000 2000
-------------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 87,014 $ 345,330
Marketable securities 70,314 -
Accounts receivable, net of allowances 211,669 128,908
Inventories 401,863 343,210
Deferred tax assets 37,775 51,939
Prepaid expenses and other 67,346 29,411
-------------- ------------
Total current assets 875,981 898,798
Property and equipment, net 310,735 334,901
Deferred tax assets 47,692 12,737
Goodwill, net 253,261 76,937
Other assets, net 82,675 96,278
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$1,570,344 $1,419,651
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes and acceptances payable - banks $ 84,709 $ 25,000
Accounts payable 145,804 82,741
Accrued expenses and other 147,973 128,194
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Total current liabilities 378,486 235,935
Long-term debt 328,928 356,705
Other noncurrent liabilities 98,493 73,198
Stockholders' equity
Common Stock 1,005 1,004
Additional paid-in-capital 452,482 450,030
Retained earnings 382,550 339,015
Treasury Stock, Class A, at cost
(3,771,806 and 2,952,677 shares) (71,179) (36,829)
Accumulated other comprehensive income 2,853 2,425
Unearned compensation (3,274) (1,832)
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Total stockholders' equity 764,437 753,813
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$ 1,570,344 $1,419,651
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| CONTACT: | Polo Ralph Lauren Corporation, New York |
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| Investor Contact: Nancy S. Murray, 212/813-7862 | |
| Media Contact: Jim Abernathy, 212/371-5999 | |
