Ralph Lauren Reports Third Quarter Fiscal 2018 Results
Continued Execution Across Key Initiatives Delivers Better Than Expected Results; The Company Raises the Low End of Operating Margin Guidance for Fiscal 2018
“As we prepare to celebrate our 50th anniversary and look
ahead to the future, we continue to focus on evolving the expression of
our iconic brand and its rich heritage to connect with today’s consumers
in all the ways they experience our brand,” said
“Focused execution on our key initiatives, especially during the
important holiday period, delivered better-than-expected results for the
third quarter as we drove lower discounting and better quality of sales
overall,” said
We delivered across the following key initiatives in the third quarter:
-
Elevating Our Brand Through Improved Quality of Sales, Distribution
and Product
- Average unit retail across our direct-to-consumer network was up 4% to last year
- Discount rates were down across all regions in retail
- Adjusted gross margin was up 250 basis points compared to last year
- Continued to close unproductive distribution and reduce off-price penetration within wholesale, and began to upgrade our store environments
-
Evolving Product, Marketing and Shopping Experience 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/Holiday seasonal product sell-out trend
- Increased marketing effectiveness with significant growth in digital and social media reach with the Create-Your-Own Customization launch and Polo Teddy Bear Holiday campaign
-
Expanding Our Digital and International Presence
-
In
Asia , expanded our store network and delivered 3% constant currency comp growth - Continued to drive sales growth in our wholesale digital business globally and grow market share in our key categories
- Successfully transitioned our directly operated U.S. ecommerce site to a new technology platform to improve functionality and the consumer experience
-
In
-
Working In New Ways to Drive Productivity and Agility
- Reduced adjusted operating expenses in constant currency despite a 27% increase in marketing investment year-over-year, as we increased efficiencies
- Lowered inventory levels by 16% to last year and improved inventory turns
- Continued the progress to achieve lead time goals and increase SKU productivity
Third Quarter Fiscal 2018 Income Statement Review
Net Revenues. In the third quarter of Fiscal 2018, revenue
decreased by 4% to
The third quarter revenue decline was at the top end of the Company’s guidance of a 6%-8% constant currency revenue decline. Foreign currency benefited revenue growth by approximately 190 basis points in the third quarter, above the guidance of 160-170 basis points of benefit, as foreign exchange rates moved favorably during the quarter.
Revenue performance for the Company’s reportable segments in the third quarter compared to the prior year period was as follows:
-
North America Revenue.
North America revenue in the third quarter decreased 11% to$886 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 lower consumer demand. On a constant currency basis, comparable store sales inNorth America were down 10%, including a 3% decline in brick and mortar stores and a 27% decrease in e-commerce, primarily due to a planned reduction in promotional activity and lower traffic. -
Europe Revenue.
Europe revenue in the third quarter increased 8% to$378 million on a reported basis and was flat in constant currency. On a constant currency basis, comparable store sales inEurope were down 8%, driven by a 9% decline in brick and mortar stores and a 1% decline in e-commerce, as the Company continued to intensify its focus on driving quality of sales with a pullback in promotions. -
Asia Revenue.
Asia revenue in the third quarter increased 7% on both a reported and constant currency basis to$251 million , driven by strength in both retail and wholesale channels. Comparable store sales increased 3% in constant currency driven by improved conversion, average unit retail and the number of transactions.
Gross Profit. Gross profit for the third 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 30 basis points in the third quarter.
Operating Expenses. Operating expenses in the third
quarter of Fiscal 2018 were
Adjusted operating expense rate was 47.5%, 210 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 a higher operating expense rate.
Operating Income. Operating income in the third quarter of
Fiscal 2018 was
The adjusted operating margin was above the Company’s guidance of down 50-70 basis points in constant currency. The outperformance was driven by our quality of sales initiatives and Fall/Holiday product performance that exceeded our expectations. Foreign currency benefit of 50 basis points on operating margin in the third quarter was above the guidance of 10-20 basis points of benefit, as foreign exchange rates moved favorably during the quarter.
-
North America Operating Income.
North America operating income in the third quarter was$197 million on a reported basis and$198 million on an adjusted basis.Adjusted North America operating margin was 22.4%, 160 basis points above last year, driven by gross margin improvement attributable to quality of sales initiatives. -
Europe Operating Income.
Europe operating income in the third quarter was$81 million on both a reported and adjusted basis. AdjustedEurope operating margin was 21.4%, which was 270 basis points higher than the prior year period and 220 basis points higher in constant currency, driven by both gross margin improvement attributable to quality of sales initiatives and lower expense rate. -
Asia Operating Income.
Asia operating income in the third quarter was$44 million on a reported basis and$45 million on an adjusted basis. AdjustedAsia operating margin was 17.7%, up 140 basis points to prior year and 10 basis points higher in constant currency, driven by gross margin improvement.
Net Income and EPS. On a reported basis, net loss in the
third quarter of Fiscal 2018 was
In the third quarter of Fiscal 2018, the Company had an effective tax rate of 143.9% on a reported basis and 21.6% on an adjusted basis, excluding any impact from tax reform as well as restructuring and related charges, which was slightly below the Company’s guidance of 23%, due to discrete one-time items. This compared to a reported and an adjusted effective tax rate of 34% and 28%, respectively, in the prior year period.
Tax reform increased our estimated tax expense for the third quarter of
Fiscal 2018 by approximately
Balance Sheet and Cash Flow Review
The Company ended the third quarter of Fiscal 2018 with
Inventory at the end of third quarter Fiscal 2018 was
The Company had
Full Year and Fourth Quarter Fiscal 2018 Outlook
As a reminder, the full year Fiscal 2018 and fourth quarter guidance excludes restructuring-related and other charges expected to be recorded primarily in connection with the Company’s Way Forward plan as well as the one-time tax charge recorded during the third quarter related to tax reform.
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 100 basis points of benefit to revenue growth in Fiscal 2018 versus previous guidance of approximately 80 basis points of positive impact, given recent movements in foreign exchange rates.
Based on the year-to-date performance, the Company now expects operating margin for Fiscal 2018 to be 10.0%-10.5%, excluding the impact of foreign currency, and versus previous guidance of 9.5%-10.5%. Foreign currency is now expected to have 30 basis points of benefit to operating margin for Fiscal 2018 versus previous guidance for minimal impact, given recent movements in foreign exchange rates.
In the fourth quarter of Fiscal 2018, the Company expects net revenue to be down 8%-10%, excluding the impact of foreign currency. Foreign currency is expected to have approximately 330 basis points of benefit to revenue growth in the fourth quarter of Fiscal 2018.
Operating margin for the fourth quarter of Fiscal 2018 is expected to be down 240-260 basis points, excluding the impact of foreign currency. Foreign currency is estimated to benefit operating margin by approximately 90 basis points in the fourth quarter.
The full year Fiscal 2018 tax rate is estimated at approximately 23%, below our previous guidance of 25%, and fourth quarter of Fiscal 2018 tax rate is estimated at approximately 3%, due to the lower U.S. federal statutory income tax rate as a result of tax reform and discrete items. Both of these rates include 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 the
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 Fourth 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; the impact to our business resulting from the
recently enacted U.S. tax legislation commonly referred to as the Tax
Cuts and Jobs Act, including related changes to our tax obligations and
effective tax rate in future periods, as well as the one-time
enactment-related charges that were recorded during the third quarter of
Fiscal 2018 on a provisional basis based on a reasonable estimate and
are subject to change, all of which could differ materially from our
current expectations and/or investors' expectations; changes in our tax
obligations and effective tax rate due to a variety of other factors,
including potential additional changes in U.S. or foreign tax laws and
regulations, accounting rules, or the mix and level of earnings by
jurisdiction in future periods that are not currently known or
anticipated; 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; 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, tax 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) | |||||||||||||
December 30, | April 1, | December 31, | |||||||||||
2017 | 2017 | 2016 | |||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 1,175.7 | $ | 668.3 | $ | 928.3 | |||||||
Short-term investments | 862.3 | 684.7 | 453.2 | ||||||||||
Accounts receivable, net of allowances | 295.2 | 450.2 | 284.7 | ||||||||||
Inventories | 825.4 | 791.5 | 984.1 | ||||||||||
Income tax receivable | 69.8 | 79.4 | 63.4 | ||||||||||
Prepaid expenses and other current assets | 304.8 | 280.4 | 320.1 | ||||||||||
Total current assets | 3,533.2 | 2,954.5 | 3,033.8 | ||||||||||
Property and equipment, net | 1,215.9 | 1,316.0 | 1,514.2 | ||||||||||
Deferred tax assets | 133.1 | 125.9 | 90.6 | ||||||||||
Goodwill | 935.0 | 904.6 | 899.7 | ||||||||||
Intangible assets, net | 201.5 | 219.8 | 224.7 | ||||||||||
Other non-current assets(a) | 180.3 | 131.2 | 203.3 | ||||||||||
Total assets | $ | 6,199.0 | $ | 5,652.0 | $ | 5,966.3 | |||||||
LIABILITIES AND EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Current portion of long-term debt | $ | 298.3 | $ | - | $ | - | |||||||
Accounts payable | 184.3 | 147.7 | 157.8 | ||||||||||
Income tax payable | 138.5 | 29.5 | 37.8 | ||||||||||
Accrued expenses and other current liabilities | 1,089.1 | 982.7 | 955.4 | ||||||||||
Total current liabilities | 1,710.2 | 1,159.9 | 1,151.0 | ||||||||||
Long-term debt | 290.3 | 588.2 | 588.8 | ||||||||||
Income tax payable | 150.8 | - | - | ||||||||||
Non-current liability for unrecognized tax benefits | 76.4 | 62.7 | 77.2 | ||||||||||
Other non-current liabilities | 563.8 | 541.6 | 538.7 | ||||||||||
Total liabilities | 2,791.5 | 2,352.4 | 2,355.7 | ||||||||||
Equity: | |||||||||||||
Common stock | 1.3 | 1.2 | 1.2 | ||||||||||
Additional paid-in-capital | 2,365.1 | 2,308.8 | 2,299.6 | ||||||||||
Retained earnings | 5,751.5 | 5,751.9 | 5,996.5 | ||||||||||
Treasury stock, Class A, at cost | (4,579.8 | ) | (4,563.9 | ) | (4,463.7 | ) | |||||||
Accumulated other comprehensive loss | (130.6 | ) | (198.4 | ) | (223.0 | ) | |||||||
Total equity | 3,407.5 | 3,299.6 | 3,610.6 | ||||||||||
Total liabilities and equity | $ | 6,199.0 | $ | 5,652.0 | $ | 5,966.3 | |||||||
Net Cash (incl. LT Investments) | 1,532.7 | 786.2 | 875.0 | ||||||||||
Cash & Investments (ST & LT) | 2,121.3 | 1,374.4 | 1,463.8 | ||||||||||
Net Cash (excl. LT Investments) | 1,449.4 | 764.8 | 792.7 | ||||||||||
Cash & ST Investments | 2,038.0 | 1,353.0 | 1,381.5 | ||||||||||
(a) Includes non-current investments of: | $ | 83.3 | $ | 21.4 | $ | 82.3 | |||||||
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 |
|||||||||
December 30, | December 31, | ||||||||
2017 | 2016 | ||||||||
North America | $ | 886.4 | $ | 1,000.8 | |||||
Europe | 378.5 | 349.2 | |||||||
Asia | 251.0 | 235.2 | |||||||
Other non-reportable segments | 125.9 | 129.4 | |||||||
Net revenues | 1,641.8 | 1,714.6 | |||||||
Cost of goods sold(a) | (645.6 | ) | (731.4 | ) | |||||
Gross profit | 996.2 | 983.2 | |||||||
Selling, general, and administrative expenses(a) | (773.8 | ) | (771.9 | ) | |||||
Amortization of intangible assets | (6.0 | ) | (6.0 | ) | |||||
Impairment of assets | (3.9 | ) | (10.3 | ) | |||||
Restructuring and other charges(a) | (23.3 | ) | (66.7 | ) | |||||
Total other operating expenses, net | (807.0 | ) | (854.9 | ) | |||||
Operating income | 189.2 | 128.3 | |||||||
Foreign currency gains (losses) | 0.6 | (2.7 | ) | ||||||
Interest expense | (4.8 | ) | (3.6 | ) | |||||
Interest and other income, net | 2.8 | 2.5 | |||||||
Equity in losses of equity-method investees | (1.5 | ) | (1.4 | ) | |||||
Income before income taxes | 186.3 | 123.1 | |||||||
Income tax provision | (268.1 | ) | (41.8 | ) | |||||
Net income (loss) | $ | (81.8 | ) | $ | 81.3 | ||||
Net income (loss) per share - Basic | $ | (1.00 | ) | $ | 0.98 | ||||
Net income (loss) per share - Diluted | $ | (1.00 | ) | $ | 0.98 | ||||
Weighted average shares outstanding - Basic | 81.7 | 82.6 | |||||||
Weighted average shares outstanding - Diluted | 81.7 | 83.3 | |||||||
Dividends declared per share | $ | 0.50 | $ | 0.50 | |||||
(a) Includes total depreciation expense of: | $ | (66.7 | ) | $ | (71.9 | ) | |||
RALPH LAUREN CORPORATION | |||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||
(in millions, except per share data) | |||||||||
(Unaudited) | |||||||||
Nine Months Ended |
|||||||||
December 30, | December 31, | ||||||||
2017 | 2016 | ||||||||
North America | $ | 2,471.7 | $ | 2,901.2 | |||||
Europe | 1,165.0 | 1,172.6 | |||||||
Asia | 676.9 | 662.8 | |||||||
Other non-reportable segments | 339.5 | 350.8 | |||||||
Net revenues | 4,653.1 | 5,087.4 | |||||||
Cost of goods sold(a) | (1,809.9 | ) | (2,255.4 | ) | |||||
Gross profit | 2,843.2 | 2,832.0 | |||||||
Selling, general, and administrative expenses(a) | (2,248.9 | ) | (2,389.9 | ) | |||||
Amortization of intangible assets | (18.0 | ) | (18.1 | ) | |||||
Impairment of assets | (24.8 | ) | (56.7 | ) | |||||
Restructuring and other charges(a) | (78.7 | ) | (193.9 | ) | |||||
Total other operating expenses, net | (2,370.4 | ) | (2,658.6 | ) | |||||
Operating income | 472.8 | 173.4 | |||||||
Foreign currency gains | 2.4 | 0.8 | |||||||
Interest expense | (14.4 | ) | (11.1 | ) | |||||
Interest and other income, net | 7.1 | 5.7 | |||||||
Equity in losses of equity-method investees | (3.6 | ) | (5.2 | ) | |||||
Income before income taxes | 464.3 | 163.6 | |||||||
Income tax provision | (342.8 | ) | (58.9 | ) | |||||
Net income | $ | 121.5 | $ | 104.7 | |||||
Net income per share - Basic | $ | 1.49 | $ | 1.26 | |||||
Net income per share - Diluted | $ | 1.47 | $ | 1.25 | |||||
Weighted average shares outstanding - Basic | 81.7 | 82.9 | |||||||
Weighted average shares outstanding - Diluted | 82.5 | 83.6 | |||||||
Dividends declared per share | $ | 1.50 | $ | 1.50 | |||||
(a) Includes total depreciation expense of: | $ | (201.4 | ) | $ | (213.8 | ) | |||
RALPH LAUREN CORPORATION | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
Prepared in accordance with U.S. Generally Accepted Accounting Principles | |||||||||
(in millions) | |||||||||
(Unaudited) | |||||||||
Nine Months Ended | |||||||||
December 30, | December 31, | ||||||||
2017 | 2016 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 121.5 | $ | 104.7 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Depreciation and amortization expense | 219.4 | 231.9 | |||||||
Deferred income tax expense (benefit) | (8.0 | ) | 9.8 | ||||||
Equity in loss of equity-method investees | 3.6 | 5.2 | |||||||
Non-cash stock-based compensation expense | 56.3 | 46.4 | |||||||
Non-cash impairment of assets | 24.8 | 56.7 | |||||||
Non-cash restructuring-related inventory charges | 1.3 | 149.4 | |||||||
Other non-cash charges | 6.7 | 18.1 | |||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 158.9 | 214.9 | |||||||
Inventories | (11.6 | ) | (36.5 | ) | |||||
Prepaid expenses and other current assets | (4.2 | ) | (72.8 | ) | |||||
Accounts payable and accrued expenses | 105.0 | 98.4 | |||||||
Income tax receivables and payables | 279.7 | (2.6 | ) | ||||||
Deferred income | 3.8 | (15.5 | ) | ||||||
Other balance sheet changes | (6.1 | ) | 42.6 | ||||||
Net cash provided by operating activities | 951.1 | 850.7 | |||||||
- | - | ||||||||
Cash flows from investing activities: | |||||||||
Capital expenditures | (123.0 | ) | (225.5 | ) | |||||
Purchases of investments | (985.5 | ) | (460.5 | ) | |||||
Proceeds from sales and maturities of investments | 795.3 | 704.8 | |||||||
Acquisitions and ventures | (4.6 | ) | (2.5 | ) | |||||
Net cash provided by (used in) investing activities | (317.8 | ) | 16.3 | ||||||
- | - | ||||||||
Cash flows from financing activities: | |||||||||
Proceeds from issuance of short-term debt | - | 3,735.2 | |||||||
Repayments of short-term debt | - | (3,851.3 | ) | ||||||
Payments of capital lease obligations | (21.2 | ) | (19.4 | ) | |||||
Payments of dividends | (121.7 | ) | (123.7 | ) | |||||
Repurchases of common stock, including shares surrendered for tax withholdings | (15.9 | ) | (115.0 | ) | |||||
Proceeds from exercise of stock options | 0.1 | 4.7 | |||||||
Net cash used in financing activities | (158.7 | ) | (369.5 | ) | |||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 36.8 | (29.0 | ) | ||||||
Net increase in cash, cash equivalents, and restricted cash | 511.4 | 468.5 | |||||||
Cash, cash equivalents, and restricted cash at beginning of period | 711.8 | 502.1 | |||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 1,223.2 | $ | 970.6 | |||||
RALPH LAUREN CORPORATION | |||||||||||||||||
OTHER INFORMATION | |||||||||||||||||
(in millions) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
SEGMENT INFORMATION | |||||||||||||||||
Net revenues and operating income (loss) for the periods ended December 30, 2017 and December 31, 2016 for each segment were as follows: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
December 30, | December 31, | December 30, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net revenues: | |||||||||||||||||
North America | $ | 886.4 | $ | 1,000.8 | $ | 2,471.7 | $ | 2,901.2 | |||||||||
Europe | 378.5 | 349.2 | 1,165.0 | 1,172.6 | |||||||||||||
Asia | 251.0 | 235.2 | 676.9 | 662.8 | |||||||||||||
Other non-reportable segments | 125.9 | 129.4 | 339.5 | 350.8 | |||||||||||||
Total net revenues | $ | 1,641.8 | $ | 1,714.6 | $ | 4,653.1 | $ | 5,087.4 | |||||||||
Operating income (loss): | |||||||||||||||||
North America | $ | 196.6 | $ | 206.4 | $ | 549.3 | $ | 574.6 | |||||||||
Europe | 81.0 | 63.8 | 273.6 | 239.2 | |||||||||||||
Asia | 44.3 | 23.3 | 101.0 | (80.3 | ) | ||||||||||||
Other non-reportable segments | 37.1 | 33.2 | 96.9 | 91.0 | |||||||||||||
359.0 | 326.7 | 1,020.8 | 824.5 | ||||||||||||||
Unallocated corporate expenses | (146.5 | ) | (131.7 | ) | (469.3 | ) | (457.2 | ) | |||||||||
Unallocated restructuring and other charges | (23.3 | ) | (66.7 | ) | (78.7 | ) | (193.9 | ) | |||||||||
Total operating income | $ | 189.2 | $ | 128.3 | $ | 472.8 | $ | 173.4 | |||||||||
RALPH LAUREN CORPORATION | ||||||||||||||
Constant Currency Financial Measures | ||||||||||||||
(in millions) | ||||||||||||||
(Unaudited) | ||||||||||||||
Comparable Store Sales Data | ||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||
As Reported | Constant Currency | As Reported | Constant Currency | |||||||||||
North America | ||||||||||||||
E-commerce | (27 | %) | (27 | %) | (23 | %) | (23 | %) | ||||||
Excluding E-commerce | (3 | %) | (3 | %) | (5 | %) | (5 | %) | ||||||
Total North America | (10 | %) | (10 | %) | (9 | %) | (9 | %) | ||||||
Europe | ||||||||||||||
E-commerce | 8 | % | (1 | %) | (2 | %) | (6 | %) | ||||||
Excluding E-commerce | (2 | %) | (9 | %) | (5 | %) | (8 | %) | ||||||
Total Europe | (1 | %) | (8 | %) | (5 | %) | (7 | %) | ||||||
Asia(a) | 3 | % | 3 | % | 1 | % | 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 | |||||||||||||
December 30, 2017 | December 31, 2016 | As Reported | Constant Currency | |||||||||||
North America | $ | 886.4 | $ | 1,000.8 | (11.4 | %) | (11.6 | %) | ||||||
Europe | 378.5 | 349.2 | 8.4 | % | 0.3 | % | ||||||||
Asia | 251.0 | 235.2 | 6.7 | % | 6.6 | % | ||||||||
Other non-reportable segments | 125.9 | 129.4 | (2.7 | %) | (4.0 | %) | ||||||||
Net revenues | $ | 1,641.8 | $ | 1,714.6 | (4.2 | %) | (6.1 | %) | ||||||
Nine Months Ended | % Change | |||||||||||||
December 30, 2017 | December 31, 2016 | As Reported | Constant Currency | |||||||||||
North America | $ | 2,471.7 | $ | 2,901.2 | (14.8 | %) | (14.9 | %) | ||||||
Europe | 1,165.0 | 1,172.6 | (0.7 | %) | (3.1 | %) | ||||||||
Asia | 676.9 | 662.8 | 2.1 | % | 3.9 | % | ||||||||
Other non-reportable segments | 339.5 | 350.8 | (3.2 | %) | (3.2 | %) | ||||||||
Net revenues | $ | 4,653.1 | $ | 5,087.4 | (8.5 | %) | (8.9 | %) | ||||||
RALPH LAUREN CORPORATION | |||||
Global Retail Store Network | |||||
December 30, | December 31, | ||||
2017 | 2016 | ||||
North America |
|||||
Ralph Lauren Stores | 44 | 50 | |||
Polo Factory Stores | 174 | 172 | |||
Total Directly Operated Stores | 218 | 222 | |||
Concessions | 2 | 1 | |||
Europe |
|||||
Ralph Lauren Stores | 20 | 25 | |||
Polo Factory Stores | 62 | 62 | |||
Total Directly Operated Stores | 82 | 87 | |||
Concessions | 25 | 34 | |||
Asia |
|||||
Ralph Lauren Stores | 49 | 46 | |||
Polo Factory Stores | 54 | 47 | |||
Total Directly Operated Stores | 103 | 93 | |||
Concessions | 599 | 598 | |||
Other |
|||||
Club Monaco Stores | 78 | 83 | |||
Club Monaco Concessions | 2 | 2 | |||
Global Directly Operated Stores and Concessions |
|||||
Ralph Lauren Stores | 113 | 121 | |||
Polo Factory Stores | 290 | 281 | |||
Club Monaco Stores | 78 | 83 | |||
Total Directly Operated Stores | 481 | 485 | |||
Concessions | 628 | 635 | |||
Global Licensed Stores and Concessions |
|||||
Ralph Lauren Licensed Stores | 87 | 102 | |||
Club Monaco Licensed Stores | 62 | 59 | |||
Total Licensed Stores | 149 | 161 | |||
Licensed Concessions | 122 | 102 | |||
RALPH LAUREN CORPORATION | ||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | ||||||||||||
(in millions, except per share data) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | ||||||||||||
December 31, 2017 | ||||||||||||
As |
Total |
As |
||||||||||
Net revenues | $ | 1,641.8 | $ | - | $ | 1,641.8 | ||||||
Gross profit | 996.2 | - | 996.2 | |||||||||
Gross profit margin | 60.7 | % | 60.7 | % | ||||||||
Total other operating expenses, net | (807.0 | ) | 27.2 | (779.8 | ) | |||||||
Operating expense margin | 49.2 | % | 47.5 | % | ||||||||
Operating income | 189.2 | 27.2 | 216.4 | |||||||||
Operating margin | 11.5 | % | 13.2 | % | ||||||||
Income before income taxes | 186.3 | 27.2 | 213.5 | |||||||||
Income tax provision | (268.1 | ) | 222.0 | (46.1 | ) | |||||||
Effective tax rate | 143.9 | % | 21.6 | % | ||||||||
Net income (loss) | $ | (81.8 | ) | $ | 249.2 | $ | 167.4 | |||||
Net income (loss) per diluted share | $ | (1.00 | ) | $ | 2.03 | |||||||
Weighted average shares outstanding - Basic | 81.7 | 81.7 | ||||||||||
Weighted average shares outstanding - Diluted | 81.7 | 82.6 | ||||||||||
SEGMENT INFORMATION - | ||||||||||||
OPERATING INCOME: | ||||||||||||
North America | $ | 196.6 | $ | 1.7 | $ | 198.3 | ||||||
Operating margin | 22.2 | % | 22.4 | % | ||||||||
Europe | 81.0 | - | 81.0 | |||||||||
Operating margin | 21.4 | % | 21.4 | % | ||||||||
Asia | 44.3 | 0.2 | 44.5 | |||||||||
Operating margin | 17.6 | % | 17.7 | % | ||||||||
Other non-reportable segments | 37.1 | 0.1 | 37.2 | |||||||||
Operating margin | 29.5 | % | 29.6 | % | ||||||||
Unallocated corporate expenses and restructuring and other charges, net | (169.8 | ) | 25.2 | (144.6 | ) | |||||||
Total operating income | $ | 189.2 | $ | 27.2 | $ | 216.4 | ||||||
Nine Months Ended | ||||||||||||
December 31, 2017 | ||||||||||||
As |
Total |
As |
||||||||||
Net revenues | $ | 4,653.1 | $ | - | $ | 4,653.1 | ||||||
Gross profit | 2,843.2 | 1.3 | 2,844.5 | |||||||||
Gross profit margin | 61.1 | % | 61.1 | % | ||||||||
Total other operating expenses, net | (2,370.4 | ) | 103.5 | (2,266.9 | ) | |||||||
Operating expense margin | 50.9 | % | 48.7 | % | ||||||||
Operating income | 472.8 | 104.8 | 577.6 | |||||||||
Operating margin | 10.2 | % | 12.4 | % | ||||||||
Income before income taxes | 464.3 | 104.8 | 569.1 | |||||||||
Income tax provision | (342.8 | ) | 196.3 | (146.5 | ) | |||||||
Effective tax rate | 73.8 | % | 25.7 | % | ||||||||
Net income | $ | 121.5 | $ | 301.1 | $ | 422.6 | ||||||
Net income per diluted share | $ | 1.47 | $ | 5.12 | ||||||||
Weighted average shares outstanding - Basic | 81.7 | 81.7 | ||||||||||
Weighted average shares outstanding - Diluted | 82.5 | 82.5 | ||||||||||
SEGMENT INFORMATION - | ||||||||||||
OPERATING INCOME: | ||||||||||||
North America | $ | 549.3 | $ | 3.4 | $ | 552.7 | ||||||
Operating margin | 22.2 | % | 22.4 | % | ||||||||
Europe | 273.6 | 1.3 | 274.9 | |||||||||
Operating margin | 23.5 | % | 23.6 | % | ||||||||
Asia | 101.0 | 1.1 | 102.1 | |||||||||
Operating margin | 14.9 | % | 15.1 | % | ||||||||
Other non-reportable segments | 96.9 | 9.1 | 106.0 | |||||||||
Operating margin | 28.6 | % | 31.2 | % | ||||||||
Unallocated corporate expenses and restructuring and other charges, net | (548.0 | ) | 89.9 | (458.1 | ) | |||||||
Total operating income | $ | 472.8 | $ | 104.8 | $ | 577.6 | ||||||
RALPH LAUREN CORPORATION | |||||||||||||
Reconciliation of Certain Non-U.S. GAAP Financial Measures | |||||||||||||
(in millions, except per share data) | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended | |||||||||||||
December 31, 2016 | |||||||||||||
As |
Total |
As |
|||||||||||
Net revenues | $ | 1,714.6 | $ | - | $ | 1,714.6 | |||||||
Gross profit | 983.2 | 14.4 | 997.6 | ||||||||||
Gross profit margin | 57.3 | % | 58.2 | % | |||||||||
Total other operating expenses, net | (854.9 | ) | 77.0 | (777.9 | ) | ||||||||
Operating expense margin | 49.9 | % | 45.4 | % | |||||||||
Operating income | 128.3 | 91.4 | 219.7 | ||||||||||
Operating margin | 7.5 | % | 12.8 | % | |||||||||
Income before income taxes | 123.1 | 91.4 | 214.5 | ||||||||||
Income tax provision | (41.8 | ) | (17.8 | ) | (59.6 | ) | |||||||
Effective tax rate | 34.0 | % | 27.8 | % | |||||||||
Net income | $ | 81.3 | $ | 73.6 | $ | 154.9 | |||||||
Net income per diluted share | $ | 0.98 | $ | 1.86 | |||||||||
Weighted average shares outstanding - Basic | 82.6 | 82.6 | |||||||||||
Weighted average shares outstanding - Diluted | 83.3 | 83.3 | |||||||||||
SEGMENT INFORMATION - | |||||||||||||
OPERATING INCOME: | |||||||||||||
North America | $ | 206.4 | $ | 2.3 | $ | 208.7 | |||||||
Operating margin | 20.6 | % | 20.8 | % | |||||||||
Europe | 63.8 | 1.6 | 65.4 | ||||||||||
Operating margin | 18.3 | % | 18.7 | % | |||||||||
Asia | 23.3 | 15.0 | 38.3 | ||||||||||
Operating margin | 9.9 | % | 16.3 | % | |||||||||
Other non-reportable segments | 33.2 | 5.6 | 38.8 | ||||||||||
Operating margin | 25.7 | % | 29.9 | % | |||||||||
Unallocated corporate expenses and restructuring and other charges, net | (198.4 | ) | 66.9 | (131.5 | ) | ||||||||
Total operating income | $ | 128.3 | $ | 91.4 | $ | 219.7 | |||||||
Nine Months Ended | |||||||||||||
December 31, 2016 | |||||||||||||
As |
Total |
As |
|||||||||||
Net revenues | $ | 5,087.4 | $ | - | $ | 5,087.4 | |||||||
Gross profit | 2,832.0 | 149.4 | 2,981.4 | ||||||||||
Gross profit margin | 55.7 | % | 58.6 | % | |||||||||
Total other operating expenses, net | (2,658.6 | ) | 250.6 | (2,408.0 | ) | ||||||||
Operating expense margin | 52.3 | % | 47.3 | % | |||||||||
Operating income | 173.4 | 400.0 | 573.4 | ||||||||||
Operating margin | 3.4 | % | 11.3 | % | |||||||||
Income before income taxes | 163.6 | 400.0 | 563.6 | ||||||||||
Income tax provision | (58.9 | ) | (102.0 | ) | (160.9 | ) | |||||||
Effective tax rate | 36.0 | % | 28.6 | % | |||||||||
Net income | $ | 104.7 | $ | 298.0 | $ | 402.7 | |||||||
Net income per diluted share | $ | 1.25 | $ | 4.82 | |||||||||
Weighted average shares outstanding - Basic | 82.9 | 82.9 | |||||||||||
Weighted average shares outstanding - Diluted | 83.6 | 83.6 | |||||||||||
SEGMENT INFORMATION - | |||||||||||||
OPERATING INCOME/(LOSS): | |||||||||||||
North America | $ | 574.6 | $ | 34.8 | $ | 609.4 | |||||||
Operating margin | 19.8 | % | 21.0 | % | |||||||||
Europe | 239.2 | 15.7 | 254.9 | ||||||||||
Operating margin | 20.4 | % | 21.7 | % | |||||||||
Asia | (80.3 | ) | 144.6 | 64.3 | |||||||||
Operating margin | (12.1 | %) | 9.7 | % | |||||||||
Other non-reportable segments | 91.0 | 10.2 | 101.2 | ||||||||||
Operating margin | 25.9 | % | 28.8 | % | |||||||||
Unallocated corporate expenses and restructuring charges, net | (651.1 | ) | 194.7 | (456.4 | ) | ||||||||
Total operating income | $ | 173.4 | $ | 400.0 | $ | 573.4 | |||||||
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 one-time charges recorded in connection with the Tax Cuts and Jobs Act (the "TCJA") are recorded within the income tax provision in the consolidated statement 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 December 30, 2017 include (i) charges of $22.0 million recorded in connection with the Way Forward plan, consisting of restructuring charges, impairment of assets, and accelerated stock-based compensation expense; (ii) additional impairment of assets of $1.7 million related to underperforming shop-within-shops 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 one-time charges of $231.3 million recorded in connection with the TCJA. | ||
(c) | Adjustments for the nine months ended December 30, 2017 include (i) charges of $79.0 million recorded in connection with the Way Forward plan, consisting of restructuring charges, impairment of assets, inventory-related charges, and accelerated stock-based compensation expense; (ii) additional impairment of assets of $10.8 million related to underperforming stores and shop-within-shops as a result of on-going store portfolio evaluation; and (iii) net other charges of $15.0 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. The income tax provision reflects one-time charges of $231.3 million recorded in connection with the TCJA. | ||
(d) | Adjustments for the three-month and nine-month periods ended December 31, 2016 include charges of $91.4 million and $400.0 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/20180201005642/en/
Source:
Ralph Lauren Corporation
Investor Relations:
Evren Kopelman,
212-813-7862
or
Corporate Communications:
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212-650-4401
rl-press@ralphlauren.com