Ralph Lauren Reports Better-Than-Expected Fourth Quarter and Full Year Fiscal 2014 Sales and Profits
-
Fourth Quarter Net Revenues Increased 14% to
$1.9 Billion , Supported by Double-Digit Growth in theAmericas ,Europe andAsia - Consolidated Operating Income Rose 24% in the Fourth Quarter and Operating Margin Expanded 90 Basis Points to 12%, Reflecting Strong Sales Growth and Operating Expense Leverage
-
Earnings Per Diluted Share Rose 23% to
$1.68 in the Fourth Quarter -
The Company Achieved Record Full Year Operating Results; Net Revenues
Increased 7% to
$7.4 Billion and Diluted EPS Rose 5% to$8.43 in Fiscal 2014
"Fiscal 2014 was another year of record sales and profits for us," said
“Our strong sales growth in the fourth quarter and full year Fiscal 2014
periods is a clear demonstration of the tremendous appeal of the Ralph
Lauren brand and the diversity of our operating model across channels,
regions and merchandise categories," said
Fourth Quarter and Full Year Fiscal 2014 Income Statement Review
Net Revenues. Net revenues for the fourth quarter of
Fiscal 2014 rose 14% to
Net revenues for the full year Fiscal 2014 period increased 7% to
-
Wholesale Sales. Wholesale segment sales increased 24% to
$983 million in the fourth quarter, fueled by broad-based growth in theAmericas , including strong demand for accessories; the contribution from the newly transitioned Chaps men’s sportswear operations; and double-digit growth inEurope .
For Fiscal 2014, wholesale revenues were$3.5 billion , 11% above Fiscal 2013. The increase in wholesale revenues was primarily a result of strong momentum in theAmericas and the contribution from newly transitioned operations.
-
Retail Sales. Retail sales rose 5% to
$845 million from$805 million in the fourth quarter of Fiscal 2013, driven by growth in international operations and global store expansion, including newly transitioned operations inAustralia /New Zealand . Excluding the impacts of discontinued businesses and net negative foreign currency effects, retail sales rose 7% from the prior year period. Consolidated comparable store sales declined 2% on a reported basis and were down 1% in constant currency during the fourth quarter, reflecting the cold and late start to Spring inNorth America and the shift in the timing of Easter compared to the prior year.
Retail sales for Fiscal 2014 were up 5% to$3.8 billion from$3.6 billion in Fiscal 2013, driven by the contribution from global store expansion, double-digit growth in e-commerce and incremental sales from the newly transitionedAustralia /New Zealand operations. Excluding the impacts of discontinued businesses and net negative foreign currency effects, retail sales rose 8% from the prior year period. During Fiscal 2014, consolidated comparable store sales were flat on a reported basis and were up 1% in constant currency.
-
Licensing. Licensing revenues of
$39 million in the fourth quarter were 10% below the prior year period, as higher licensing revenues forRalph Lauren products were more than offset by lower Chaps andAustralia /New Zealand licensing revenues due to recent license take-backs.
Licensing revenues of$166 million in Fiscal 2014 were 9% below Fiscal 2013’s level, as higher licensing revenues forRalph Lauren products were more than offset by lower Chaps andAustralia /New Zealand licensing revenues due to recent license take-backs.
Gross Profit. Gross profit for the fourth quarter of
Fiscal 2014 increased 8% to
Gross profit for Fiscal 2014 increased 4% to
Operating Expenses. Operating expenses of
Operating expenses for Fiscal 2014 were
Operating Income. Operating income for the fourth quarter
of Fiscal 2014 was
Fiscal 2014’s operating income of
During the fourth quarter of Fiscal 2014, the Company changed the manner in which it allocates certain costs due to strategic changes it implemented to globalize certain functions that will position the Company for future growth. These changes included realigning certain costs between segments and retaining other costs at the corporate level for some of the Company’s global functions. The Company believes these changes provide a better representation of segment operations and are aligned with how segment performance is assessed. All prior period segment information has been recast to reflect proper measurement on a comparable basis. This recast had no impact on the Company’s consolidated financial statements in any period.
-
Wholesale Operating Income. Wholesale operating income
increased 25% to
$296 million in the fourth quarter of Fiscal 2014 and wholesale operating margin expanded 40 basis points to 30.1%. The improvement in wholesale operating margin reflects stronger profitability for core operations which more than offset the mix impact from the integration of the Chaps men’s sportswear operations and net negative foreign currency effects.
Wholesale operating income rose 7% in Fiscal 2014 to$963 million from$903 million in Fiscal 2013. Wholesale operating margin for Fiscal 2014 was 27.6% compared to 28.7% in Fiscal 2013. The decline in wholesale operating margin was a result of the mix impact from the integration of the Chaps men’s sportswear operations and net negative foreign currency effects that were partially offset by improved profitability for core operations.
-
Retail Operating Income. Retail operating income was
$51 million in the fourth quarter of Fiscal 2014, and retail operating margin was 6.1%, 400 basis points below the prior year period. The lower retail operating income margin reflects increased costs associated with the Company’s global store and e-commerce development efforts; increased promotional activity inthe United States ; and net negative foreign currency effects.
Retail operating income was$572 million in Fiscal 2014 and retail operating margin declined 190 basis points to 15.1%. The lower operating margin was a result of costs associated with the Company’s global store and e-commerce development efforts; increased promotional activity inthe United States during the fourth quarter; and net negative foreign currency effects.
-
Licensing Operating Income. Licensing operating income of
$35 million in the fourth quarter of Fiscal 2014 was in line with the prior year period. Licensing operating income of$150 million in Fiscal 2014 was also essentially in line with the prior year period.
Net Income and Diluted EPS. Net income for the fourth
quarter of Fiscal 2014 was
Net income for the full year Fiscal 2014 period increased 3% to
Fourth Quarter and Full Year Fiscal 2014 Balance Sheet and Cash Flow Review
The Company ended the fourth quarter with
The Company had
Global Retail Store Network
The Company ended the fourth quarter of Fiscal 2014 with 433 directly
operated stores, comprised of 138
Fiscal 2015 Outlook
The Company currently expects consolidated net revenues for Fiscal 2015
to increase by 6%-8%. Operating margin for Fiscal 2015 is currently
expected to be 75-125 basis points below the prior year’s level due to
continued investment in the Company’s global retail development and
infrastructure, in addition to increased advertising and marketing
expense. The full year Fiscal 2015 tax rate is estimated at 30%. Capital
expenditures are planned at approximately
In the first quarter of Fiscal 2015, the Company expects consolidated net revenues to increase by 3%-5%, led by retail segment growth. Operating margin for the first quarter of Fiscal 2015 is expected to be approximately 300-350 basis points below the comparable prior year period, primarily due to the timing of investments to support the Company’s strategic growth objectives. The first quarter tax rate is estimated at 30%.
Conference Call
As previously announced, the Company will host a conference call and
live online webcast today,
An online archive of the broadcast will be available by accessing the
Company's investor relations website at http://investor.ralphlauren.com.
A telephone replay of the call will be available from
ABOUT
This press release and oral statements made from time to time by
representatives of the Company contain or may contain certain
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements
include statements regarding, among other things, our current
expectations about the Company's future results and financial condition,
revenues, store openings, margins, expenses and earnings and are
indicated by words or phrases such as "anticipate," "estimate,"
"expect," "project," "we believe" and similar words or phrases. These
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from the future
results, performance or achievements expressed in or implied by such
forward-looking statements. Forward-looking statements are based largely
on the Company's expectations and judgments and are subject to a number
of risks and uncertainties, many of which are unforeseeable and beyond
our control. The factors that could cause actual results to materially
differ include, among others: the loss of key personnel; our ability to
successfully implement our anticipated growth strategies to continue to
expand or grow our business and capitalize on our repositioning
initiatives in certain merchandise categories; our ability to secure the
technology facilities and systems used by the Company and those of third
party service providers from, among other things, cybersecurity
breaches, acts of vandalism, computer viruses or similar events; our
ability to continue to maintain our brand image and reputation and
protect our trademarks; the impact of global economic conditions and
domestic and foreign currency fluctuations on the Company, the global
economy and the consumer marketplace and our ability to access sources
of liquidity; the impact of the volatile state of the global economy or
consumer preferences on purchases of premium lifestyle products that we
sell and our ability to forecast consumer demand; changes in the
competitive marketplace and in our commercial relationships; risks
associated with our international operations, such as compliance with
the Foreign Corrupt Practices Act or violations of other anti-bribery
and corruption laws prohibiting improper payments and the burdens of
complying with a variety of foreign laws and regulations, including tax
laws; our ability to continue to expand our business internationally;
risks associated with changes in social, political, economic and other
conditions affecting foreign operations or sourcing (including tariffs
and trade controls, raw materials prices and labor costs); changes in
our effective tax rates or credit profile and ratings within the
financial community; changes in our relationships with department store
customers and licensing partners; the potential impact on our operations
and on our customers resulting from natural or man-made disasters; and
other risk factors identified in the Company's Annual Report on Form
10-K, Form 10-Q and Form 8-K reports filed with the
RALPH LAUREN CORPORATION | ||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||||
(in millions) | ||||||||||||
(Audited) | ||||||||||||
March 29, | March 30, | |||||||||||
2014 | 2013 | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 797 | $ | 974 | ||||||||
Short-term investments | 488 | 325 | ||||||||||
Accounts receivable, net of allowances | 588 | 458 | ||||||||||
Inventories | 1,020 | 896 | ||||||||||
Income tax receivable | 62 | 29 | ||||||||||
Deferred tax assets | 150 | 120 | ||||||||||
Prepaid expenses and other current assets | 224 | 161 | ||||||||||
Total current assets | 3,329 | 2,963 | ||||||||||
Non-current investments | 2 | 81 | ||||||||||
Property and equipment, net | 1,322 | 932 | ||||||||||
Deferred tax assets | 39 | 22 | ||||||||||
Goodwill | 964 | 968 | ||||||||||
Intangible assets, net | 299 | 328 | ||||||||||
Other non-current assets | 135 | 124 | ||||||||||
Total assets | $ | 6,090 | $ | 5,418 | ||||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term debt | $ | - | $ | 267 | ||||||||
Accounts payable | 203 | 147 | ||||||||||
Income tax payable | 77 | 43 | ||||||||||
Accrued expenses and other current liabilities | 690 | 664 | ||||||||||
Total current liabilities | 970 | 1,121 | ||||||||||
Long-term debt | 300 | - | ||||||||||
Non-current liability for unrecognized tax benefits | 132 | 150 | ||||||||||
Other non-current liabilities | 654 | 362 | ||||||||||
Total liabilities | 2,056 | 1,633 | ||||||||||
Equity: | ||||||||||||
Common stock | 1 | 1 | ||||||||||
Additional paid-in-capital | 1,979 | 1,752 | ||||||||||
Retained earnings | 5,257 | 4,647 | ||||||||||
Treasury stock, Class A, at cost | (3,317 | ) | (2,709 | ) | ||||||||
Accumulated other comprehensive income | 114 | 94 | ||||||||||
Total equity | 4,034 | 3,785 | ||||||||||
Total liabilities and equity | $ | 6,090 | $ | 5,418 | ||||||||
RALPH LAUREN CORPORATION | ||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||||
(in millions, except per share data) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended |
||||||||||||
March 29, | March 30, | |||||||||||
2014 | 2013 | |||||||||||
Wholesale net sales | $ | 983 | $ | 796 | ||||||||
Retail net sales | 845 | 805 | ||||||||||
Net sales | 1,828 | 1,601 | ||||||||||
Licensing revenue | 39 | 43 | ||||||||||
Net revenues | 1,867 | 1,644 | ||||||||||
Cost of goods sold(a) | (817 | ) | (669 | ) | ||||||||
Gross profit | 1,050 | 975 | ||||||||||
Selling, general, and administrative expenses(a) | (815 | ) | (770 | ) | ||||||||
Amortization of intangible assets | (7 | ) | (7 | ) | ||||||||
Impairment of assets | (1 | ) | (7 | ) | ||||||||
Restructuring and other charges | (2 | ) | (9 | ) | ||||||||
Total other operating expenses, net | (825 | ) | (793 | ) | ||||||||
Operating income | 225 | 182 | ||||||||||
Foreign currency gains (losses) | 1 | (5 | ) | |||||||||
Interest expense | (4 | ) | (6 | ) | ||||||||
Interest and other income (loss), net | (1 | ) | 2 | |||||||||
Equity in losses of equity-method investees | (2 | ) | (5 | ) | ||||||||
Income before provision for income taxes | 219 | 168 | ||||||||||
Provision for income taxes | (66 | ) | (41 | ) | ||||||||
Net income | $ | 153 | $ | 127 | ||||||||
Net income per share - Basic | $ | 1.71 | $ | 1.40 | ||||||||
Net income per share - Diluted | $ | 1.68 | $ | 1.37 | ||||||||
Weighted average shares outstanding - Basic | 89.2 | 90.8 | ||||||||||
Weighted average shares outstanding - Diluted | 90.9 | 93.1 | ||||||||||
Dividends declared per share | $ | 0.45 | $ | 0.40 | ||||||||
(a) Includes total depreciation expense of: | $ | (58 | ) | $ | (52 | ) | ||||||
RALPH LAUREN CORPORATION | ||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | ||||||||||||
(in millions, except per share data) | ||||||||||||
(Audited) | ||||||||||||
Twelve Months Ended |
||||||||||||
March 29, | March 30, | |||||||||||
2014 | 2013 | |||||||||||
Wholesale net sales | $ | 3,486 | $ | 3,138 | ||||||||
Retail net sales | 3,798 | 3,625 | ||||||||||
Net sales | 7,284 | 6,763 | ||||||||||
Licensing revenue | 166 | 182 | ||||||||||
Net revenues | 7,450 | 6,945 | ||||||||||
Cost of goods sold(a) | (3,140 | ) | (2,789 | ) | ||||||||
Gross profit | 4,310 | 4,156 | ||||||||||
Selling, general, and administrative expenses(a) | (3,142 | ) | (2,971 | ) | ||||||||
Amortization of intangible assets | (35 | ) | (27 | ) | ||||||||
Gain on acquisition of Chaps | 16 | - | ||||||||||
Impairment of assets | (1 | ) | (19 | ) | ||||||||
Restructuring and other charges | (18 | ) | (12 | ) | ||||||||
Total other operating expenses, net | (3,180 | ) | (3,029 | ) | ||||||||
Operating income | 1,130 | 1,127 | ||||||||||
Foreign currency losses | (8 | ) | (12 | ) | ||||||||
Interest expense | (20 | ) | (22 | ) | ||||||||
Interest and other income, net | 3 | 6 | ||||||||||
Equity in losses of equity-method investees | (9 | ) | (10 | ) | ||||||||
Income before provision for income taxes | 1,096 | 1,089 | ||||||||||
Provision for income taxes | (320 | ) | (339 | ) | ||||||||
Net income | $ | 776 | $ | 750 | ||||||||
Net income per share - Basic | $ | 8.60 | $ | 8.21 | ||||||||
Net income per share - Diluted | $ | 8.43 | $ | 8.00 | ||||||||
Weighted average shares outstanding - Basic | 90.1 | 91.3 | ||||||||||
Weighted average shares outstanding - Diluted | 92.0 | 93.7 | ||||||||||
Dividends declared per share | $ | 1.70 | $ | 1.60 | ||||||||
(a) Includes total depreciation expense of: | $ | (223 | ) | $ | (206 | ) | ||||||
RALPH LAUREN CORPORATION | ||||||||||||||||||
OTHER INFORMATION | ||||||||||||||||||
(in millions) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||||
Net revenues and operating income for the periods ended March 29, 2014 and March 30, 2013 for each segment were as follows: | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
March 29, | March 30, | March 29, | March 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Net revenues: | ||||||||||||||||||
Wholesale | $ | 983 | $ | 796 | $ | 3,486 | $ | 3,138 | ||||||||||
Retail | 845 | 805 | 3,798 | 3,625 | ||||||||||||||
Licensing | 39 | 43 | 166 | 182 | ||||||||||||||
Total net revenues | $ | 1,867 | $ | 1,644 | $ | 7,450 | $ | 6,945 | ||||||||||
* | Operating income: | |||||||||||||||||
Wholesale | $ | 296 | $ | 236 | $ | 963 | $ | 903 | ||||||||||
Retail | 51 | 81 | 572 | 615 | ||||||||||||||
Licensing | 35 | 35 | 150 | 152 | ||||||||||||||
382 | 352 | 1,685 | 1,670 | |||||||||||||||
Less: | ||||||||||||||||||
Unallocated corporate expenses | (155 | ) | (161 | ) | (553 | ) | (531 | ) | ||||||||||
Gain on acquisition of Chaps | - | - | 16 | - | ||||||||||||||
Unallocated restructuring and other charges, net | (2 | ) | (9 | ) | (18 | ) | (12 | ) | ||||||||||
Total operating income | $ | 225 | $ | 182 | $ | 1,130 | $ | 1,127 | ||||||||||
* | During the fourth quarter of Fiscal 2014, the Company changed the manner in which it allocates certain costs for management reporting due to strategic changes it implemented to globalize certain functions that will position the Company for future growth. These changes included realigning certain costs between segments and retaining other costs at the corporate level for certain of the Company's global functions. Management believes these changes allow for a better representation of segment operations and are aligned with how segment performance is assessed. As a result of these changes, the Company determined that it is more appropriate to retain certain previously allocated corporate expenses within its unallocated corporate expenses. This expense realignment did not result in a change to the Company's reportable segments. All prior period segment information has been recast to reflect the change in the Company's segment measurement on a comparable basis. This recast had no impact on the Company's segment net revenues or on its consolidated financial statements in any fiscal period. | |
RALPH LAUREN CORPORATION | ||||||||||||
OTHER INFORMATION | ||||||||||||
(in millions) | ||||||||||||
(Audited) | ||||||||||||
The following table summarizes the Company's quarterly reportable segment operating income, which has been recast to reflect the fourth quarter Fiscal 2014 change in segment measurement, for the first three quarters of Fiscal 2014. |
||||||||||||
Three Months Ended | ||||||||||||
June 29, | September 28, | December 28, | ||||||||||
2013 | 2013 | 2013 | ||||||||||
Operating income: | ||||||||||||
Wholesale | $ | 207 | $ | 243 | $ | 217 | ||||||
Retail | 165 | 135 | 221 | |||||||||
Licensing | 35 | 40 | 40 | |||||||||
407 | 418 | 478 | ||||||||||
Less: | ||||||||||||
Unallocated corporate expenses | (147 | ) | (121 | ) | (130 | ) | ||||||
Gain on acquisition of Chaps | 16 | - | - | |||||||||
Unallocated restructuring and other charges, net | - | (2 | ) | (14 | ) | |||||||
Total operating income | $ | 276 | $ | 295 | $ | 334 | ||||||
RALPH LAUREN CORPORATION | ||||||||||||||||||||
Constant Currency Financial Measures | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Same - Store Sales Data | ||||||||||||||||||||
Three Months Ended
March 29, 2014 % Change |
Twelve Months Ended
March 29, 2014 % Change |
|||||||||||||||||||
As Reported | Constant Currency | As Reported | Constant Currency | |||||||||||||||||
Total Ralph Lauren | (2 | %) | (1 | %) | 0 | % | 1 | % | ||||||||||||
Operating Segment Data | ||||||||||||||||||||
Three Months Ended | % Change | |||||||||||||||||||
March 29, 2014 | March 30, 2013 | As Reported | Constant Currency | |||||||||||||||||
Wholesale net sales | $ | 983 | $ | 796 | 23.5 | % | 22.8 | % | ||||||||||||
Retail net sales | 845 | 805 | 5.1 | % | 6.0 | % | ||||||||||||||
Net sales | 1,828 | 1,601 | 14.3 | % | 14.4 | % | ||||||||||||||
Licensing revenue | 39 | 43 | (9.9 | %) | (9.9 | %) | ||||||||||||||
Net revenues | $ | 1,867 | $ | 1,644 | 13.6 | % | 13.7 | % | ||||||||||||
Twelve Months Ended | % Change | |||||||||||||||||||
March 29, 2014 | March 30, 2013 | As Reported | Constant Currency | |||||||||||||||||
Wholesale net sales | $ | 3,486 | $ | 3,138 | 11.1 | % | 10.9 | % | ||||||||||||
Retail net sales | 3,798 | 3,625 | 4.8 | % | 6.3 | % | ||||||||||||||
Net sales | 7,284 | 6,763 | 7.7 | % | 8.4 | % | ||||||||||||||
Licensing revenue | 166 | 182 | (9.0 | %) | (9.0 | %) | ||||||||||||||
Net revenues | $ | 7,450 | $ | 6,945 | 7.3 | % | 7.9 | % | ||||||||||||
Presented below is a reconciliation of the Company’s non-GAAP measure of reported to adjusted revenues:
RALPH LAUREN CORPORATION | |||||||
Reconciliation of Certain Non-GAAP Financial Measures | |||||||
(in millions, except per share data) | |||||||
(unaudited) | |||||||
Three Months
Ended |
Twelve Months
Ended |
||||||
March 29, 2014 | March 29, 2014 | ||||||
Net revenue growth, as reported | 14% | 7% | |||||
Impacts of foreign currency and discontinued businesses | 0% | 2% | |||||
Adjusted net revenue growth | 14% | 9% | |||||
Net retail revenue growth, as reported | 5% | 5% | |||||
Impacts of foreign currency and discontinued businesses | 2% | 3% | |||||
Adjusted net retail revenue growth | 7% | 8% |
Source:
Ralph Lauren Corporation
Investor Relations:
James Hurley,
212-813-7862
or
Corporate Communications:
Winnie Lerner,
212-583-2262