Ralph Lauren Reports Second Quarter Fiscal 2018 Results
“I am pleased with the progress we are making as we continue to
strengthen the foundations of our business and elevate the expression of
our iconic brand,” said
“We are focused on creating value for all of our stakeholders by
continuing to drive productivity and re-igniting quality growth,” said
We delivered across the following key initiatives in the second quarter:
-
Elevating Our Brand Through Improved Quality of Sales and
Distribution
- Average unit retail across our direct-to-consumer network was up 5% to last year
- Discount rates were down across all regions in retail
- Adjusted gross margin was up 300 basis points compared to last year
- Continued to close unproductive distribution in retail and wholesale and significantly reduced off-price shipments and began to upgrade our store environments
-
Evolving Product and Marketing to Increase Reach and Appeal
with New Consumers
- Evolved our product assortment by renewing our core styles and focusing on our icons, which drove improvements in Polo Fall seasonal product sell-out trend
- Increased marketing reach and effectiveness with significant growth in digital and social media impressions with the Stadium launch and September Fashion Show
- Released limited edition products that create more reasons for consumers to engage with us and inject energy and excitement into our brand
-
Expanding Our Digital and International Presence
-
In
Asia , expanded our high-ROI concession network and delivered 3% constant currency comp growth - Continued to drive sales growth in our wholesale digital business globally
-
Launched on T-mall,
JD.com and WeChat inChina
-
In
-
Working In New Ways to Drive Productivity and Agility
- Reduced operating expenses by 5% on an adjusted basis to increase efficiencies
- Lowered inventory levels by 26% to last year and improved inventory turns
- Continued the progress to achieve lead time goals and increased SKU productivity
Second Quarter Fiscal 2018 Income Statement Review
Net Revenues. In the second quarter of Fiscal 2018,
revenue decreased by 9% to
The second quarter revenue decline is in line with the Company’s guidance of a 9%-10% revenue decline, excluding approximately 40 basis points of negative foreign currency impact. Foreign currency benefited revenue growth by approximately 40 basis points in the second quarter, which is better than guidance, as foreign exchange rates moved favorably during the quarter.
Revenue performance for the Company’s reportable segments in the second quarter compared to the prior year period was as follows:
-
North America Revenue.
North America revenue in the second quarter decreased 16% to$877 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 9%, including a 6% decline in brick and mortar stores and an 18% decrease in e-commerce, primarily due to a planned reduction in promotional activity and lower traffic. -
Europe Revenue.
Europe revenue in the second quarter increased 4% to$463 million on a reported basis and was flat in constant currency. On a constant currency basis, comparable store sales inEurope were down 6%, driven by a 5% decline in brick and mortar stores and an 11% 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 second quarter was flat compared with the prior year period on a reported basis at$217 million and increased 4% in constant currency, driven by strength in both retail and wholesale channels. Comparable store sales increased 3% in constant currency driven by improved traffic and conversion.
Gross Profit. Gross profit for the second 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. Foreign currency benefited gross margin by 10 basis points in the second quarter.
Operating Expenses. Operating expenses in the second
quarter of Fiscal 2018 were
Adjusted operating expense rate was 46.4%, 190 basis points above the prior year period, excluding restructuring-related and other charges from both periods. This increase was due to fixed expense deleverage and an unfavorable channel mix shift, as a greater portion of our revenue was generated by our international retail businesses, which typically carry higher operating expense.
Operating Income. Operating income in the second quarter
of Fiscal 2018 was
The adjusted operating margin was above the Company’s guidance of 40-60 basis points of expansion excluding foreign currency pressure of 40 basis points. The outperformance was driven by our quality of sales initiatives that over-delivered our expectations.
-
North America Operating Income.
North America operating income in the second quarter was$203 million on both a reported and an adjusted basis.Adjusted North America operating margin was 23.2%, 150 basis point above last year, driven by gross margin improvement attributable to quality of sales initiatives. -
Europe Operating Income.
Europe operating income in the second quarter was$126 million on both a reported and an adjusted basis. AdjustedEurope operating margin was 27.1%, which was 350 basis points higher than the prior year period and 370 basis points higher in constant currency, driven primarily by gross margin improvement attributable to quality of sales initiatives. -
Asia Operating Income.
Asia operating income in the second quarter was$26 million on a reported basis and$27 million on an adjusted basis. AdjustedAsia operating margin was 12.6%, up 750 basis points to prior year and 580 basis points higher in constant currency, driven by both gross margin improvement and operating expense leverage.
Net Income and EPS. On a reported basis, net income in the
second quarter of Fiscal 2018 was
In the second quarter of Fiscal 2018, the Company had an effective tax rate of approximately 25% on a reported basis and approximately 26% on an adjusted basis, excluding restructuring-related and other charges, above guidance of 24%, due to discrete one-time items. This compared to a reported and an adjusted effective tax rate of 38% and 29%, respectively, in the prior year period.
Balance Sheet and Cash Flow Review
The Company ended the second quarter of Fiscal 2018 with
Inventory at the end of second quarter Fiscal 2018 was
The Company had
Full Year and Third Quarter Fiscal 2018 Outlook
As a reminder, the full year Fiscal 2018 and third 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. Foreign currency is now expected to have approximately 80 basis points of benefit to revenue growth in Fiscal 2018 versus previous guidance of minimal impact, given recent movements in foreign exchange rates.
Based on the first half performance, the Company now expects operating margin for Fiscal 2018 to be 9.5%-10.5%, excluding the impact of foreign currency, and versus previous guidance of 9.0%-10.5%. Foreign currency is now expected to have minimal impact on operating margin for Fiscal 2018, versus previous guidance of 40-50 basis points of pressure, due to recent movements in foreign exchange rates.
In the third quarter of Fiscal 2018, the Company expects net revenue to be down 6%-8%, excluding the impact of foreign currency. Foreign currency is expected to have approximately 160-170 basis points of benefit to revenue growth in the third quarter of Fiscal 2018.
Operating margin for the third quarter of Fiscal 2018 is expected to be down 50-70 basis points, excluding the impact of foreign currency. Foreign currency is estimated to benefit operating margin by approximately 10-20 basis points in the third quarter.
The full year Fiscal 2018 tax rate is estimated at approximately 25%, and the third quarter of Fiscal 2018 tax rate is estimated at approximately 23%, 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 Third 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) | ||||||||||||||||
September 30, | April 1, | October 1, | ||||||||||||||
2017 | 2017 | 2016 | ||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 1,111.6 | $ | 668.3 | $ | 434.2 | ||||||||||
Short-term investments | 507.1 | 684.7 | 531.4 | |||||||||||||
Accounts receivable, net of allowances | 470.3 | 450.2 | 490.2 | |||||||||||||
Inventories | 864.6 | 791.5 | 1,172.5 | |||||||||||||
Income tax receivable | 70.5 | 79.4 | 59.1 | |||||||||||||
Prepaid expenses and other current assets | 300.3 | 280.4 | 288.4 | |||||||||||||
Total current assets | 3,324.4 | 2,954.5 | 2,975.8 | |||||||||||||
Property and equipment, net | 1,240.5 | 1,316.0 | 1,564.0 | |||||||||||||
Deferred tax assets | 143.2 | 125.9 | 118.3 | |||||||||||||
Goodwill | 933.0 | 904.6 | 935.7 | |||||||||||||
Intangible assets, net | 207.7 | 219.8 | 234.6 | |||||||||||||
Other non-current assets(a) | 179.5 | 131.2 | 238.9 | |||||||||||||
Total assets | $ | 6,028.3 | $ | 5,652.0 | $ | 6,067.3 | ||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term debt | $ | - | $ | - | $ | 95.0 | ||||||||||
Current portion of long-term debt | 298.6 | - | - | |||||||||||||
Accounts payable | 172.8 | 147.7 | 158.6 | |||||||||||||
Income tax payable | 56.7 | 29.5 | 19.6 | |||||||||||||
Accrued expenses and other current liabilities | 1,062.0 | 982.7 | 943.6 | |||||||||||||
Total current liabilities | 1,590.1 | 1,159.9 | 1,216.8 | |||||||||||||
Long-term debt | 291.8 | 588.2 | 597.4 | |||||||||||||
Non-current liability for unrecognized tax benefits | 75.2 | 62.7 | 74.3 | |||||||||||||
Other non-current liabilities | 561.6 | 541.6 | 580.9 | |||||||||||||
Total liabilities | 2,518.7 | 2,352.4 | 2,469.4 | |||||||||||||
Equity: | ||||||||||||||||
Common stock | 1.3 | 1.2 | 1.2 | |||||||||||||
Additional paid-in-capital | 2,348.2 | 2,308.8 | 2,284.4 | |||||||||||||
Retained earnings | 5,874.0 | 5,751.9 | 5,956.2 | |||||||||||||
Treasury stock, Class A, at cost | (4,578.5 | ) | (4,563.9 | ) | (4,463.6 | ) | ||||||||||
Accumulated other comprehensive loss | (135.4 | ) | (198.4 | ) | (180.3 | ) | ||||||||||
Total equity | 3,509.6 | 3,299.6 | 3,597.9 | |||||||||||||
Total liabilities and equity | $ | 6,028.3 | $ | 5,652.0 | $ | 6,067.3 | ||||||||||
Net Cash (incl. LT Investments) | 1,110.9 | 786.2 | 395.6 | |||||||||||||
Cash & Investments (ST & LT) | 1,701.3 | 1,374.4 | 1,087.9 | |||||||||||||
Net Cash (excl. LT Investments) | 1,028.4 | 764.8 | 273.3 | |||||||||||||
Cash & ST Investments | 1,618.8 | 1,353.0 | 965.6 | |||||||||||||
(a) Includes non-current investments of: | $ | 82.6 | $ | 21.4 | $ | 122.3 | ||||||||||
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 30, | October 1, | |||||||||
2017 | 2016 | |||||||||
North America | $ | 876.7 | $ | 1,044.8 | ||||||
Europe | 463.0 | 445.8 | ||||||||
Asia | 216.8 | 216.5 | ||||||||
Other non-reportable segments | 107.7 | 113.5 | ||||||||
Net revenues | 1,664.2 | 1,820.6 | ||||||||
Cost of goods sold(a) | (668.4 | ) | (866.4 | ) | ||||||
Gross profit | 995.8 | 954.2 | ||||||||
Selling, general, and administrative expenses(a) | (766.7 | ) | (803.3 | ) | ||||||
Amortization of intangible assets | (6.0 | ) | (6.1 | ) | ||||||
Impairment of assets | (11.2 | ) | (27.0 | ) | ||||||
Restructuring and other charges(a) | (18.6 | ) | (41.5 | ) | ||||||
Total other operating expenses, net | (802.5 | ) | (877.9 | ) | ||||||
Operating income | 193.3 | 76.3 | ||||||||
Foreign currency gains | 1.7 | 1.1 | ||||||||
Interest expense | (4.6 | ) | (4.1 | ) | ||||||
Interest and other income, net | 2.0 | 2.3 | ||||||||
Equity in losses of equity-method investees | (1.2 | ) | (1.9 | ) | ||||||
Income before income taxes | 191.2 | 73.7 | ||||||||
Income tax provision | (47.4 | ) | (28.0 | ) | ||||||
Net income | $ | 143.8 | $ | 45.7 | ||||||
Net income per share - Basic | $ | 1.76 | $ | 0.55 | ||||||
Net income per share - Diluted | $ | 1.75 | $ | 0.55 | ||||||
Weighted average shares outstanding - Basic | 81.7 | 82.7 | ||||||||
Weighted average shares outstanding - Diluted | 82.3 | 83.2 | ||||||||
Dividends declared per share | $ | 0.50 | $ | 0.50 | ||||||
(a) Includes total depreciation expense of: | $ | (67.8 | ) | $ | (69.5 | ) | ||||
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 30, | October 1, | |||||||||
2017 | 2016 | |||||||||
North America | $ | 1,586.4 | $ | 1,900.4 | ||||||
Europe | 786.5 | 823.4 | ||||||||
Asia | 425.9 | 427.6 | ||||||||
Other non-reportable segments | 212.5 | 221.4 | ||||||||
Net revenues | 3,011.3 | 3,372.8 | ||||||||
Cost of goods sold(a) | (1,164.3 | ) | (1,524.0 | ) | ||||||
Gross profit | 1,847.0 | 1,848.8 | ||||||||
Selling, general, and administrative expenses(a) | (1,475.1 | ) | (1,618.0 | ) | ||||||
Amortization of intangible assets | (12.0 | ) | (12.1 | ) | ||||||
Impairment of assets | (20.9 | ) | (46.4 | ) | ||||||
Restructuring and other charges(a) | (55.4 | ) | (127.2 | ) | ||||||
Total other operating expenses, net | (1,563.4 | ) | (1,803.7 | ) | ||||||
Operating income | 283.6 | 45.1 | ||||||||
Foreign currency gains | 1.8 | 3.5 | ||||||||
Interest expense | (9.6 | ) | (7.5 | ) | ||||||
Interest and other income, net | 4.3 | 3.2 | ||||||||
Equity in losses of equity-method investees | (2.1 | ) | (3.8 | ) | ||||||
Income before income taxes | 278.0 | 40.5 | ||||||||
Income tax provision | (74.7 | ) | (17.1 | ) | ||||||
Net income | $ | 203.3 | $ | 23.4 | ||||||
Net income per share - Basic | $ | 2.49 | $ | 0.28 | ||||||
Net income per share - Diluted | $ | 2.47 | $ | 0.28 | ||||||
Weighted average shares outstanding - Basic | 81.6 | 83.0 | ||||||||
Weighted average shares outstanding - Diluted | 82.4 | 83.7 | ||||||||
Dividends declared per share | $ | 1.00 | $ | 1.00 | ||||||
(a) Includes total depreciation expense of: | $ | (134.7 | ) | $ | (141.9 | ) | ||||
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 30, | October 1, | |||||||||
2017 | 2016 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 203.3 | $ | 23.4 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization expense | 146.7 | 154.0 | ||||||||
Deferred income tax benefit | (25.3 | ) | (8.7 | ) | ||||||
Equity in loss of equity-method investees | 2.1 | 3.8 | ||||||||
Non-cash stock-based compensation expense | 39.4 | 31.9 | ||||||||
Non-cash impairment of assets | 20.9 | 46.4 | ||||||||
Non-cash restructuring-related inventory charges | 1.3 | 135.0 | ||||||||
Other non-cash charges | 2.3 | 9.9 | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | (17.4 | ) | 21.9 | |||||||
Inventories | (53.4 | ) | (172.6 | ) | ||||||
Prepaid expenses and other current assets | (1.9 | ) | (26.6 | ) | ||||||
Accounts payable and accrued expenses | 72.2 | 59.8 | ||||||||
Income tax receivables and payables | 51.4 | (22.0 | ) | |||||||
Deferred income | 3.0 | (12.2 | ) | |||||||
Other balance sheet changes | (7.6 | ) | (11.4 | ) | ||||||
Net cash provided by operating activities | 437.0 | 232.6 | ||||||||
Cash flows from investing activities: | ||||||||||
Capital expenditures | (74.7 | ) | (165.4 | ) | ||||||
Purchases of investments | (426.3 | ) | (392.4 | ) | ||||||
Proceeds from sales and maturities of investments | 591.3 | 546.6 | ||||||||
Acquisitions and ventures | (3.6 | ) | (2.5 | ) | ||||||
Net cash provided by (used in) investing activities | 86.7 | (13.7 | ) | |||||||
Cash flows from financing activities: | ||||||||||
Proceeds from issuance of short-term debt | - | 2,945.3 | ||||||||
Repayments of short-term debt | - | (2,966.4 | ) | |||||||
Payments of capital lease obligations | (14.2 | ) | (13.3 | ) | ||||||
Payments of dividends | (81.1 | ) | (82.6 | ) | ||||||
Repurchases of common stock, including shares surrendered for tax withholdings | (14.6 | ) | (114.9 | ) | ||||||
Proceeds from exercise of stock options | 0.1 | 4.0 | ||||||||
Net cash used in financing activities | (109.8 | ) | (227.9 | ) | ||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 33.2 | (12.9 | ) | |||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 447.1 | (21.9 | ) | |||||||
Cash, cash equivalents, and restricted cash at beginning of period | 711.8 | 502.1 | ||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 1,158.9 | $ | 480.2 | ||||||
RALPH LAUREN CORPORATION | ||||||||||||||||||||
OTHER INFORMATION | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||||||
Net revenues and operating income (loss) for the periods ended September 30, 2017 and October 1, 2016 for each segment were as follows: | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
September 30, | October 1, | September 30, | October 1, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Net revenues: | ||||||||||||||||||||
North America | $ | 876.7 | $ | 1,044.8 | $ | 1,586.4 | $ | 1,900.4 | ||||||||||||
Europe | 463.0 | 445.8 | 786.5 | 823.4 | ||||||||||||||||
Asia | 216.8 | 216.5 | 425.9 | 427.6 | ||||||||||||||||
Other non-reportable segments | 107.7 | 113.5 | 212.5 | 221.4 | ||||||||||||||||
Total net revenues | $ | 1,664.2 | $ | 1,820.6 | $ | 3,011.3 | $ | 3,372.8 | ||||||||||||
Operating income (loss): | ||||||||||||||||||||
North America | $ | 202.7 | $ | 202.4 | $ | 353.2 | $ | 368.2 | ||||||||||||
Europe | 125.5 | 100.4 | 192.6 | 175.4 | ||||||||||||||||
Asia | 26.5 | (65.8 | ) | 56.7 | (103.6 | ) | ||||||||||||||
Other non-reportable segments | 26.3 | 30.0 | 59.3 | 57.8 | ||||||||||||||||
381.0 | 267.0 | 661.8 | 497.8 | |||||||||||||||||
Unallocated corporate expenses | (169.1 | ) | (149.2 | ) | (322.8 | ) | (325.5 | ) | ||||||||||||
Unallocated restructuring and other charges | (18.6 | ) | (41.5 | ) | (55.4 | ) | (127.2 | ) | ||||||||||||
Total operating income | $ | 193.3 | $ | 76.3 | $ | 283.6 | $ | 45.1 | ||||||||||||
RALPH LAUREN CORPORATION | ||||||||||||||||||
Constant Currency Financial Measures | ||||||||||||||||||
(in millions) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Comparable Store Sales Data | ||||||||||||||||||
Three Months Ended
September 30, 2017 % Change |
Six Months Ended
September 30, 2017 % Change |
|||||||||||||||||
As Reported | Constant Currency | As Reported | Constant Currency | |||||||||||||||
North America | ||||||||||||||||||
E-commerce | (18 | %) | (18 | %) | (20 | %) | (20 | %) | ||||||||||
Excluding E-commerce | (6 | %) | (6 | %) | (5 | %) | (5 | %) | ||||||||||
Total North America | (8 | %) | (9 | %) | (8 | %) | (8 | %) | ||||||||||
Europe | ||||||||||||||||||
E-commerce | (8 | %) | (11 | %) | (7 | %) | (9 | %) | ||||||||||
Excluding E-commerce | (2 | %) | (5 | %) | (7 | %) | (7 | %) | ||||||||||
Total Europe | (3 | %) | (6 | %) | (7 | %) | (7 | %) | ||||||||||
Asia(a) | (1 | %) | 3 | % | 0 | % | 3 | % | ||||||||||
Total Ralph Lauren | (5 | %) | (6 | %) | (6 | %) | (6 | %) | ||||||||||
(a) Comparable store sales for our Asia segment were comprised primarily of sales made through our stores and concession shops. | ||||||||||||||||||
Operating Segment Net Revenue Data | ||||||||||||||||||
Three Months Ended | % Change | |||||||||||||||||
September 30, 2017 | October 1, 2016 | As Reported | Constant Currency | |||||||||||||||
North America | $ | 876.7 | $ | 1,044.8 | (16.1 | %) | (16.2 | %) | ||||||||||
Europe | 463.0 | 445.8 | 3.9 | % | 0.3 | % | ||||||||||||
Asia | 216.8 | 216.5 | 0.2 | % | 4.3 | % | ||||||||||||
Other non-reportable segments | 107.7 | 113.5 | (5.2 | %) | (4.6 | %) | ||||||||||||
Net revenues | $ | 1,664.2 | $ | 1,820.6 | (8.6 | %) | (9.0 | %) | ||||||||||
Six Months Ended | % Change | |||||||||||||||||
September 30, 2017 | October 1, 2016 | As Reported | Constant Currency | |||||||||||||||
North America | $ | 1,586.4 | $ | 1,900.4 | (16.5 | %) | (16.5 | %) | ||||||||||
Europe | 786.5 | 823.4 | (4.5 | %) | (4.5 | %) | ||||||||||||
Asia | 425.9 | 427.6 | (0.4 | %) | 2.4 | % | ||||||||||||
Other non-reportable segments | 212.5 | 221.4 | (4.0 | %) | (3.3 | %) | ||||||||||||
Net revenues | $ | 3,011.3 | $ | 3,372.8 | (10.7 | %) | (10.3 | %) | ||||||||||
RALPH LAUREN CORPORATION | ||||||
Global Retail Store Network | ||||||
September 30, | October 1, | |||||
2017 | 2016 | |||||
North America |
||||||
Ralph Lauren Stores | 44 | 50 | ||||
Polo Factory Stores | 171 | 168 | ||||
Total Directly Operated Stores | 215 | 218 | ||||
Concessions | 2 | 1 | ||||
Europe |
||||||
Ralph Lauren Stores | 20 | 26 | ||||
Polo Factory Stores | 63 | 59 | ||||
Total Directly Operated Stores | 83 | 85 | ||||
Concessions | 25 | 36 | ||||
Asia |
||||||
Ralph Lauren Stores | 45 | 52 | ||||
Polo Factory Stores | 48 | 48 | ||||
Total Directly Operated Stores | 93 | 100 | ||||
Concessions | 593 | 582 | ||||
Other |
||||||
Club Monaco Stores | 78 | 82 | ||||
Club Monaco Concessions | 2 | 2 | ||||
Global Directly Operated Stores and Concessions |
||||||
Ralph Lauren Stores | 109 | 128 | ||||
Polo Factory Stores | 282 | 275 | ||||
Club Monaco Stores | 78 | 82 | ||||
Total Directly Operated Stores | 469 | 485 | ||||
Concessions | 622 | 621 | ||||
Global Licensed Stores and Concessions |
||||||
Ralph Lauren Licensed Stores | 84 | 102 | ||||
Club Monaco Licensed Stores | 62 | 59 | ||||
Total Licensed Stores | 146 | 161 | ||||
Licensed Concessions | 122 | 97 | ||||
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
Reported |
Total
Adjustments(a)(b) |
As
Adjusted |
|||||||||||||||
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 share | $ | 1.75 | $ | 1.99 | |||||||||||||
Weighted average shares outstanding - Basic | 81.7 | 81.7 | |||||||||||||||
Weighted average shares outstanding - Diluted | 82.3 | 82.3 | |||||||||||||||
SEGMENT INFORMATION - | |||||||||||||||||
OPERATING INCOME: | |||||||||||||||||
North America | $ | 202.7 | $ | 0.4 | $ | 203.1 | |||||||||||
Operating margin | 23.1 | % | 23.2 | % | |||||||||||||
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 | 26.3 | 8.9 | 35.2 | ||||||||||||||
Operating margin | 24.4 | % | 32.8 | % | |||||||||||||
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
Reported |
Total
Adjustments(a)(c) |
As
Adjusted |
|||||||||||||||
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 share | $ | 2.47 | $ | 3.10 | |||||||||||||
Weighted average shares outstanding - Basic | 81.6 | 81.6 | |||||||||||||||
Weighted average shares outstanding - Diluted | 82.4 | 82.4 | |||||||||||||||
SEGMENT INFORMATION - | |||||||||||||||||
OPERATING INCOME: | |||||||||||||||||
North America | $ | 353.2 | $ | 1.7 | $ | 354.9 | |||||||||||
Operating margin | 22.3 | % | 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 | 59.3 | 9.0 | 68.3 | ||||||||||||||
Operating margin | 27.9 | % | 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 | |||||||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | |||||||||||||||||
(in millions, except per share data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
October 1, 2016 | |||||||||||||||||
As
Reported |
Total
Adjustments(a)(d) |
As
Adjusted |
|||||||||||||||
Net revenues | $ | 1,820.6 | $ | - | $ | 1,820.6 | |||||||||||
Gross profit | 954.2 | 81.0 | 1,035.2 | ||||||||||||||
Gross profit margin | 52.4 | % | 56.9 | % | |||||||||||||
Total other operating expenses, net | (877.9 | ) | 68.5 | (809.4 | ) | ||||||||||||
Operating expense margin | 48.2 | % | 44.5 | % | |||||||||||||
Operating income | 76.3 | 149.5 | 225.8 | ||||||||||||||
Operating margin | 4.2 | % | 12.4 | % | |||||||||||||
Income before income taxes | 73.7 | 149.5 | 223.2 | ||||||||||||||
Income tax provision | (28.0 | ) | (36.9 | ) | (64.9 | ) | |||||||||||
Effective tax rate | 38.0 | % | 29.0 | % | |||||||||||||
Net income | $ | 45.7 | $ | 112.6 | $ | 158.3 | |||||||||||
Net income per diluted share | $ | 0.55 | $ | 1.90 | |||||||||||||
Weighted average shares outstanding - Basic | 82.7 | 82.7 | |||||||||||||||
Weighted average shares outstanding - Diluted | 83.2 | 83.2 | |||||||||||||||
SEGMENT INFORMATION - | |||||||||||||||||
OPERATING INCOME/(LOSS): | |||||||||||||||||
North America | $ | 202.4 | $ | 24.8 | $ | 227.2 | |||||||||||
Operating margin | 19.4 | % | 21.7 | % | |||||||||||||
Europe | 100.4 | 4.8 | 105.2 | ||||||||||||||
Operating margin | 22.5 | % | 23.6 | % | |||||||||||||
Asia | (65.8 | ) | 76.8 | 11.0 | |||||||||||||
Operating margin | (30.4 | %) | 5.1 | % | |||||||||||||
Other non-reportable segments | 30.0 | 1.6 | 31.6 | ||||||||||||||
Operating margin | 26.4 | % | 27.9 | % | |||||||||||||
Unallocated corporate expenses and restructuring and other charges, net | (190.7 | ) | 41.5 | (149.2 | ) | ||||||||||||
Total operating income | $ | 76.3 | $ | 149.5 | $ | 225.8 | |||||||||||
Six Months Ended | |||||||||||||||||
October 1, 2016 | |||||||||||||||||
As
Reported |
Total
Adjustments(a)(d) |
As
Adjusted |
|||||||||||||||
Net revenues | $ | 3,372.8 | $ | - | $ | 3,372.8 | |||||||||||
Gross profit | 1,848.8 | 135.0 | 1,983.8 | ||||||||||||||
Gross profit margin | 54.8 | % | 58.8 | % | |||||||||||||
Total other operating expenses, net | (1,803.7 | ) | 173.6 | (1,630.1 | ) | ||||||||||||
Operating expense margin | 53.5 | % | 48.3 | % | |||||||||||||
Operating income | 45.1 | 308.6 | 353.7 | ||||||||||||||
Operating margin | 1.3 | % | 10.5 | % | |||||||||||||
Income before income taxes | 40.5 | 308.6 | 349.1 | ||||||||||||||
Income tax provision | (17.1 | ) | (84.2 | ) | (101.3 | ) | |||||||||||
Effective tax rate | 42.2 | % | 29.0 | % | |||||||||||||
Net income | $ | 23.4 | $ | 224.4 | $ | 247.8 | |||||||||||
Net income per diluted share | $ | 0.28 | $ | 2.96 | |||||||||||||
Weighted average shares outstanding - Basic | 83.0 | 83.0 | |||||||||||||||
Weighted average shares outstanding - Diluted | 83.7 | 83.7 | |||||||||||||||
SEGMENT INFORMATION - | |||||||||||||||||
OPERATING INCOME/(LOSS): | |||||||||||||||||
North America | $ | 368.2 | $ | 32.5 | $ | 400.7 | |||||||||||
Operating margin | 19.4 | % | 21.1 | % | |||||||||||||
Europe | 175.4 | 14.1 | 189.5 | ||||||||||||||
Operating margin | 21.3 | % | 23.0 | % | |||||||||||||
Asia | (103.6 | ) | 129.6 | 26.0 | |||||||||||||
Operating margin | (24.2 | %) | 6.1 | % | |||||||||||||
Other non-reportable segments | 57.8 | 4.6 | 62.4 | ||||||||||||||
Operating margin | 26.1 | % | 28.2 | % | |||||||||||||
Unallocated corporate expenses and restructuring charges, net | (452.7 | ) | 127.8 | (324.9 | ) | ||||||||||||
Total operating income | $ | 45.1 | $ | 308.6 | $ | 353.7 | |||||||||||
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 all other charges are recorded in restructuring and other charges in the consolidated statements of operations. | |
(b) | 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. | |
(c) | 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. | |
(d) | Adjustments for the three-month and six-month periods ended October 1, 2016 include charges of $149.5 million and $308.6 million, respectively, recorded in connection with the Company’s restructuring plans, consisting of restructuring charges, impairment of assets, and inventory-related charges. | |
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, as well as depreciation expense
associated with the Company’s former Polo store at
View source version on businesswire.com: http://www.businesswire.com/news/home/20171102005752/en/
Source:
Ralph Lauren Corporation
Investor Relations:
Evren Kopelman,
212-813-7862
or
Corporate Communications:
Lindsay Knoll,
212-650-4401
rl-press@ralphlauren.com