- Third Quarter Revenue Increased 1% on a Reported Basis and 7%
in Constant Currency, Ahead of Expectations, with Positive Sales
Growth Across All Regions
- Operating Margin of 15.4% on a Reported Basis; Adjusted
Operating Margin of 16.0% at High End of Expected Range Driven by
Operating Expense Discipline
- Continued to Invest in Key Strategic Priorities While Returning
Approximately $560 Million in Cash to Shareholders Through
Dividends and Share Repurchases This Fiscal Year-to-Date
- Reiterated Full Year Fiscal 2023 Outlook of High-Single Digit
Net Revenue Growth in Constant Currency While Foreign Currency
Outlook Improved; Adjusted Operating Margin Expected in Range of
13.5% to 14.0% in Constant Currency
Ralph Lauren Corporation (NYSE:RL), a global leader in the
design, marketing, and distribution of luxury lifestyle products,
today reported earnings per diluted share of $3.20 on a reported
basis and $3.35 on an adjusted basis, excluding
restructuring-related and other net charges for the third quarter
of Fiscal 2023. This compared to earnings per diluted share of
$2.93 on a reported basis and $2.94 on an adjusted basis, excluding
restructuring-related and other net charges for the third quarter
of Fiscal 2022.
"Our iconic lifestyle brand endures through both good and tough
times because it stands for more than any single product or
category," said Ralph Lauren, Executive Chairman and Chief Creative
Officer. "It inspires people all over the world to step into their
dreams — and they turn to Ralph Lauren to help create the lifestyle
they want to live — forever grounded in authenticity, quality and
timelessness."
"Our core consumer remains resilient and our iconic products are
resonating around the world — evidenced by our strong third quarter
and year-to-date performance," said Patrice Louvet, President and
Chief Executive Officer. "While we remain very attuned to the
dynamic global operating environment, the breadth of our portfolio
of products and our multiple engines of growth create the
flexibility that will enable our teams to continue to be agile,
adapt and deliver even in this challenging backdrop."
Key Achievements in Third Quarter Fiscal 2023
We delivered the following highlights across our Next Great
Chapter: Accelerate priorities in the third quarter of Fiscal
2023:
- Elevate and Energize Our Lifestyle Brand
- Delivered continued growth in younger, high-value new consumer
acquisition with social media followers exceeding 51 million and
digital search trends continuing to significantly outpace peers.
Consumer metrics were strong led by growth in brand awareness and
value perception scores
- Fueled consumer recruitment and engagement through key brand
moments including: our global 'Gift of Togetherness' holiday
campaign; California Dreaming fashion show; innovative partnership
with Epic Games, creator and publisher of the popular game
Fortnite, in the metaverse; and successful Singles Day event
- Drive the Core and Expand for More
- Increased average unit retail ("AUR") by 10% across our
direct-to-consumer network in the third quarter, on top of a 19%
increase last year, driven by continued elevation of our product
offering and promotional discipline
- Drove strong revenue growth in our Core business, up
high-single digits to last year, as well as our high-potential
categories — including Women's, Outerwear and Home — up low-teens
to last year, both in constant currency
- Product highlights this quarter included: the launch of our
Polo Originals line, the most elevated, authentic expression of our
core brand; our exclusive capsule with Japanese retailer BEAMS; our
7 Days 7 Drops of limited edition and vintage Polo Ski items on the
Polo 67 app; and Polo Stadium collection of digital and physical
product as part of our Fortnite collaboration
- Win in Key Cities with Our Consumer Ecosystem
- Delivered positive revenue growth across every region in the
quarter on both a reported and constant currency basis, including
positive comp store sales growth in all three regions
- By region, constant currency sales performance was led by Asia,
up 1% on a reported basis but increasing 16% in constant currency
with the Chinese mainland up high-single digits. Europe also grew
1% on a reported basis but was up 13% in constant currency, while
North America increased 1% on top of strong post-pandemic reopening
compares last year
- Total digital ecosystem revenues increased high-single digits
in the third quarter, in-line with our expectations and on top of
40% growth last year, with solid underlying performance along with
the benefit of post-Christmas selling days shifting into the fiscal
period. Digital operating margin continued to meaningfully benefit
the total Company margin rate
Our business is supported by our fortress foundation, which we
define through our five key enablers, including: our people and
culture, best-in-class digital technology and analytics, superior
operational capabilities, a powerful balance sheet, and leadership
in citizenship and sustainability.
Third Quarter Fiscal 2023 Income Statement Review
Net Revenue. In the third quarter of Fiscal 2023, revenue
increased by 1% to $1.8 billion on a reported basis and was up 7%
in constant currency. Foreign currency negatively impacted revenue
growth by approximately 630 basis points in the third 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 increased 1% to $938 million. In retail, comparable store
sales in North America were up 2%, with a 9% increase in digital
commerce partly offset by a 1% decrease in brick and mortar stores.
Our brands continued to gain share in the North America wholesale
channel, though revenue decreased 2% driven by a roughly 300 basis
point headwind from a receipt delay, as expected.
- Europe Revenue. Europe revenue in the third quarter increased
1% to $469 million on a reported basis and 13% in constant
currency. In retail, comparable store sales in Europe were up 11%,
with an 11% increase in brick and mortar stores and a 12% increase
in digital commerce. Europe wholesale revenue decreased 1% on a
reported basis and increased 11% in constant currency.
- Asia Revenue. Asia revenue in the third quarter increased 1% to
$386 million on a reported basis and 16% in constant currency.
Comparable store sales in Asia increased 8%, with a 7% increase in
our brick and mortar stores and a 21% increase in digital
commerce.
Gross Profit. Gross profit for the third quarter of
Fiscal 2023 was $1.2 billion and gross margin was 65.0%. Adjusted
gross margin was 65.2%, 80 basis points below the prior year on a
reported basis but up 80 basis points in constant currency driven
by better pricing, product mix elevation and lower air freight
expenses compared to the prior year. Compared to third quarter
Fiscal 2020, adjusted gross margins expanded 300 basis points on
strong pricing and product elevation.
Operating Expenses. Operating expenses in the third
quarter of Fiscal 2023 were $909 million on a reported basis. On an
adjusted basis, operating expenses were $901 million, down 1% to
last year, primarily driven by lower marketing spend due to a more
normalized quarterly marketing cadence compared to last year.
Adjusted operating expense rate was 49.2%, compared to 50.1% in the
prior year period.
Operating Income. Operating income for the third quarter
of Fiscal 2023 was $282 million and operating margin was 15.4% on a
reported basis. Adjusted operating income was $294 million and
operating margin was 16.0%, 10 basis points above the prior year.
Operating income for the Company's reportable segments in the third
quarter compared to the prior year period was as follows:
- North America Operating Income. North America operating income
in the third quarter was $215 million on a reported basis and $219
million on an adjusted basis. Adjusted North America operating
margin was 23.3%, down 140 basis points to last year, driven by
increased compensation, shipping and other selling expenses.
- Europe Operating Income. Europe operating income in the third
quarter was $110 million on both a reported basis and an adjusted
basis. Adjusted Europe operating margin was 23.4%, up 250 basis
points to last year. Foreign currency negatively impacted adjusted
operating margin rate by 290 basis points in the third
quarter.
- Asia Operating Income. Asia operating income in the third
quarter was $90 million on both a reported basis and an adjusted
basis. Adjusted Asia operating margin was 23.3%, up 90 basis points
to last year. Foreign currency negatively impacted adjusted
operating margin rate by 220 basis points in the third
quarter.
Net Income and EPS. Net income in the third quarter of
Fiscal 2023 was $216 million, or $3.20 per diluted share on a
reported basis. On an adjusted basis, net income was $226 million,
or $3.35 per diluted share. This compared to net income of $218
million, or $2.93 per diluted share on a reported basis, and net
income of $218 million, or $2.94 per diluted share on an adjusted
basis, for the third quarter of Fiscal 2022.
In the third quarter of Fiscal 2023, the Company had an
effective tax rate of approximately 23% on both a reported basis
and an adjusted basis. This compared to an effective tax rate of
approximately 21% on both a reported basis and an adjusted basis in
the prior year period.
Balance Sheet and Cash Flow Review
The Company ended the third quarter of Fiscal 2023 with $1.7
billion in cash and short-term investments and $1.1 billion in
total debt, compared to $3.0 billion and $1.6 billion,
respectively, at the end of the third quarter of Fiscal 2022.
Inventory at the end of the third quarter of Fiscal 2023 was
$1.2 billion, up 33% compared to the prior year period and
moderating from first half trends. Inventory growth primarily
reflected earlier receipts compared to the prior year, increased
product costs and continued elevation in product mix.
The Company repurchased approximately $28 million of Class A
Common Stock in the third quarter and a total of $412 million
during the first three quarters of Fiscal 2023.
Full Year Fiscal 2023 and Fourth Quarter Outlook
The Company's outlook is based on its best assessment of the
current macroeconomic environment, including ongoing global supply
chain and other inflationary pressures, foreign currency
volatility, the war in Ukraine, COVID-19 variants and other
COVID-related disruptions. The full year Fiscal 2023 and fourth
quarter guidance excludes restructuring-related and other net
charges, as described in the "Non-U.S. GAAP Financial Measures"
section of this press release.
For Fiscal 2023, the Company continues to expect constant
currency revenues to increase approximately high-single digits to
last year, or about 8%, on a 52-week comparable basis. Based on
current exchange rates, foreign currency is now expected to
negatively impact revenue growth by approximately 600 basis points
in Fiscal 2023, compared to the previous estimate of 730 basis
points. On a 53-week comparable basis, Fiscal 2023 revenue growth
is still expected to be negatively impacted by approximately 100
basis points due to the absence of the 53rd week compared to the
prior year.
The Company expects operating margin for Fiscal 2023 in the
range of 13.5% to 14.0% in constant currency, slightly below the
previous outlook of approximately 14.0% on moderated gross margin
expectations. Foreign currency is now expected to negatively impact
operating margin by approximately 180 basis points in Fiscal 2023.
This compares to operating margin of 13.1% on a 52-week comparable
basis and 13.4% on a 53-week basis in the prior year, both on a
reported basis. Gross margin is expected to be about flat in
constant currency on a 52-week comparable basis, with AUR growth
and favorable product mix offset by higher freight and product cost
inflation. Foreign currency is expected to negatively impact gross
margins by approximately 150 basis points in Fiscal 2023.
For the fourth quarter, the Company expects revenue to increase
mid- to high-single digits in constant currency to last year on a
13-week comparable basis. Including last year's 53rd week, the
Company expects reported revenue to increase 1% to 2% in constant
currency to last year. Foreign currency is expected to negatively
impact revenue growth by approximately 500 basis points.
Operating margin for the fourth quarter is expected to be
approximately 5.5% in constant currency, with operating expense
leverage more than offsetting continued long-term investments in
new consumer recruitment and key city ecosystem expansion. Foreign
currency is expected to negatively impact fourth quarter operating
margin by approximately 160 basis points and gross margin by
approximately 140 basis points.
Full year Fiscal 2023 tax rate is expected in the range of
approximately 24% to 25%, while fourth quarter tax rate is expected
at approximately 29%, assuming a continuation of current tax
laws.
The Company moderated its plan for capital expenditures for
Fiscal 2023 to approximately $240 million to $250 million based on
timing of projects.
Conference Call
As previously announced, the Company will host a conference call
and live online webcast today, Thursday, February 9, 2023, at 9:00
A.M. Eastern. Listeners may access a live broadcast of the
conference call on the Company investor relations website at
http://investor.ralphlauren.com or by dialing 517-623-4963 or
800-857-5209. To access the conference call, listeners should dial
in by 8:45 A.M. Eastern and request to be connected to the Ralph
Lauren Third Quarter 2023 conference call.
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 12:00 P.M. Eastern, Thursday, February 9,
2023 through 6:00 P.M. Eastern, Thursday, February 16, 2023 by
dialing 203-369-3270 or 800-395-6236 and entering passcode
5661.
ABOUT RALPH LAUREN
Ralph Lauren Corporation (NYSE:RL) is a global leader in the
design, marketing and distribution of luxury lifestyle products in
five categories: apparel, footwear & accessories, home,
fragrances and hospitality. For more than 50 years, Ralph Lauren
has sought to inspire the dream of a better life through
authenticity and timeless style. Its reputation and distinctive
image have been developed across a wide range of products, brands,
distribution channels and international markets. The Company’s
brand names – which include Ralph Lauren, Ralph Lauren Collection,
Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren
Ralph Lauren, Polo Ralph Lauren Children and Chaps, among others –
constitute one of the world’s most widely recognized families of
consumer brands. For more information, go to
https://investor.ralphlauren.com.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release, and oral statements made from time to time
by representatives of the Company, 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 and closings,
employee reductions, margins, expenses, earnings, quarterly cash
dividend and Class A common stock repurchase programs, and
environmental, social, and governance goals and are indicated by
words or phrases such as "anticipate," "outlook," "estimate,"
"expect," "project," "believe," "envision," "goal," "target,"
"can," "will," 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 certain
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, including
those resulting from the recent reduction to our global workforce
in connection with our long-term growth strategy, and our ability
to effectively transfer knowledge and maintain adequate controls
and procedures during periods of transition; the potential impact
to our business resulting from inflationary pressures, including
increases in the costs of raw materials, transportation, wages,
healthcare, and other benefit-related costs; the impact of
economic, political, and other conditions on us, our customers,
suppliers, vendors, and lenders, including potential business
disruptions related to the war between Russia and Ukraine, civil
and political unrest, and diplomatic tensions between the U.S. and
other countries; the potential impact to our business resulting
from supply chain disruptions, including those caused by capacity
constraints, closed factories and/or labor shortages (stemming from
pandemic diseases, labor disputes, strikes, or otherwise), scarcity
of raw materials, port congestion, and scrutiny or detention of
goods produced in certain territories resulting from laws,
regulations, or trade restrictions, such as those imposed by the
Uyghur Forced Labor Prevention Act ("UFLPA"), which could result in
shipment approval delays leading to inventory shortages and lost
sales; the impact to our business resulting from the COVID-19
pandemic, including periods of reduced operating hours and capacity
limits and/or temporary closure of our stores, distribution
centers, and corporate facilities, as well as those of our
customers, suppliers, and vendors, and potential changes to
consumer behavior, spending levels, and/or shopping preferences,
such as willingness to congregate in shopping centers or other
populated locations; our ability to effectively manage inventory
levels and the increasing pressure on our margins in a highly
promotional retail environment; our exposure to currency exchange
rate fluctuations from both a transactional and translational
perspective; our ability to recruit and retain employees to operate
our retail stores, distribution centers, and various corporate
functions; the impact to our business resulting from a recession or
changes in consumers' ability, willingness, or preferences to
purchase discretionary items and luxury retail products, which
tends to decline during recessionary periods, and our ability to
accurately forecast consumer demand, the failure of which could
result in either a build-up or shortage of inventory; our ability
to successfully implement our long-term growth strategy; our
ability to continue to expand and grow our business internationally
and the impact of related changes in our customer, channel, and
geographic sales mix as a result, as well as our ability to
accelerate growth in certain product categories; our ability to
open new retail stores and concession shops, as well as enhance and
expand our digital footprint and capabilities, all in an effort to
expand our direct-to-consumer presence; our ability to respond to
constantly changing fashion and retail trends and consumer demands
in a timely manner, develop products that resonate with our
existing customers and attract new customers, and execute marketing
and advertising programs that appeal to consumers; our ability to
competitively price our products and create an acceptable value
proposition for consumers; our ability to continue to maintain our
brand image and reputation and protect our trademarks; our ability
to achieve our goals regarding environmental, social, and
governance practices, including those related to climate change and
our human capital; our ability and the ability of our third-party
service providers to secure our respective facilities and systems
from, among other things, cybersecurity breaches, acts of
vandalism, computer viruses, ransomware, or similar Internet or
email events; our efforts to successfully enhance, upgrade, and/or
transition our global information technology systems and digital
commerce platforms; the potential impact to our business if any of
our distribution centers were to become inoperable or inaccessible;
the potential impact on our operations and on our suppliers and
customers resulting from man-made or natural disasters, including
pandemic diseases such as COVID-19, severe weather, geological
events, and other catastrophic events; our ability to achieve
anticipated operating enhancements and cost reductions from our
restructuring plans, as well as the impact to our business
resulting from restructuring-related charges, which may be dilutive
to our earnings in the short term; the impact to our business
resulting from potential costs and obligations related to the early
or temporary closure of our stores or termination of our long-term,
non-cancellable leases; our ability to maintain adequate levels of
liquidity to provide for our cash needs, including our debt
obligations, tax obligations, capital expenditures, and potential
payment of dividends and 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 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;
our ability to access capital markets and maintain compliance with
covenants associated with our existing debt instruments; a variety
of legal, regulatory, tax, political, and economic risks, including
risks related to the importation and exportation of products 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; the
impact to our business resulting from the potential imposition of
additional duties, tariffs, taxes, and other charges or barriers to
trade, including those resulting from trade developments between
the U.S. and China or other countries, and any related impact to
global stock markets, as well as our ability to implement
mitigating sourcing strategies; changes in our tax obligations and
effective tax rate due to a variety of factors, including potential
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; 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; the potential impact to the trading prices of our
securities if our operating results, Class A common stock share
repurchase activity, and/or cash dividend payments differ from
investors' expectations; our ability to maintain our credit profile
and ratings within the financial community; our intention to
introduce new products or brands, or enter into or renew alliances;
changes in the business of, and our relationships with, major
wholesale customers and licensing partners; our ability to make
strategic acquisitions and successfully integrate the acquired
businesses into our existing operations; 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 Securities and Exchange
Commission. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
RALPH LAUREN
CORPORATION
CONSOLIDATED BALANCE
SHEETS
Prepared in accordance with
U.S. Generally Accepted Accounting Principles
(Unaudited)
December 31,
2022
April 2, 2022
December 25,
2021
(millions)
ASSETS
Current assets:
Cash and cash equivalents
$
1,566.1
$
1,863.8
$
2,276.8
Short-term investments
131.4
734.6
710.2
Accounts receivable, net of allowances
424.0
405.4
410.7
Inventories
1,238.4
977.3
929.1
Income tax receivable
50.5
63.7
48.0
Prepaid expenses and other current
assets
220.9
172.5
192.5
Total current assets
3,631.3
4,217.3
4,567.3
Property and equipment, net
947.5
969.5
965.4
Operating lease right-of-use assets
1,073.0
1,111.3
1,131.6
Deferred tax assets
270.4
303.8
339.6
Goodwill
890.4
908.7
920.0
Intangible assets, net
92.3
102.9
107.6
Other non-current assets
135.0
111.2
104.1
Total assets
$
7,039.9
$
7,724.7
$
8,135.6
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
$
—
$
499.8
$
499.4
Accounts payable
468.0
448.7
472.8
Current income tax payable
118.7
53.8
119.8
Current operating lease liabilities
264.4
262.0
264.0
Accrued expenses and other current
liabilities
898.5
991.4
1,073.6
Total current liabilities
1,749.6
2,255.7
2,429.6
Long-term debt
1,138.0
1,136.5
1,136.0
Long-term finance lease liabilities
320.9
341.6
350.5
Long-term operating lease liabilities
1,079.2
1,132.2
1,168.8
Non-current income tax payable
75.5
98.9
104.8
Non-current liability for unrecognized tax
benefits
97.4
91.9
75.1
Other non-current liabilities
111.5
131.9
147.9
Total liabilities
4,572.1
5,188.7
5,412.7
Equity:
Common stock
1.3
1.3
1.3
Additional paid-in-capital
2,808.7
2,748.8
2,729.7
Retained earnings
6,615.1
6,274.9
6,298.6
Treasury stock, Class A, at cost
(6,754.5
)
(6,308.7
)
(6,156.5
)
Accumulated other comprehensive loss
(202.8
)
(180.3
)
(150.2
)
Total equity
2,467.8
2,536.0
2,722.9
Total liabilities and equity
$
7,039.9
$
7,724.7
$
8,135.6
Net Cash & Short-term
Investments(a)
$
559.5
$
962.1
$
1,351.6
Cash & Short-term Investments
1,697.5
2,598.4
2,987.0
________________________________ (a)
Calculated as cash and cash equivalents,
plus short-term investments, less total debt.
RALPH LAUREN
CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
Prepared in accordance with
U.S. Generally Accepted Accounting Principles
(Unaudited)
Three Months Ended
Nine Months Ended
December 31,
2022
December 25,
2021
December 31,
2022
December 25,
2021
(millions, except per share
data)
Net revenues
$
1,832.3
$
1,815.4
$
4,902.8
$
4,695.8
Cost of goods sold
(641.6
)
(617.3
)
(1,687.6
)
(1,514.4
)
Gross profit
1,190.7
1,198.1
3,215.2
3,181.4
Selling, general, and administrative
expenses
(900.8
)
(908.8
)
(2,530.7
)
(2,391.9
)
Impairment of assets
—
—
(0.2
)
(19.3
)
Restructuring and other charges, net
(7.8
)
(0.2
)
(20.3
)
(8.6
)
Total other operating expenses,
net
(908.6
)
(909.0
)
(2,551.2
)
(2,419.8
)
Operating income
282.1
289.1
664.0
761.6
Interest expense
(12.0
)
(13.4
)
(33.3
)
(40.3
)
Interest income
8.6
1.4
18.8
4.4
Other income (expense), net
1.7
0.1
(6.8
)
(0.4
)
Income before income taxes
280.4
277.2
642.7
725.3
Income tax provision
(63.9
)
(59.5
)
(152.3
)
(149.6
)
Net income
$
216.5
$
217.7
$
490.4
$
575.7
Net income per common share:
Basic
$
3.26
$
2.98
$
7.19
$
7.82
Diluted
$
3.20
$
2.93
$
7.07
$
7.68
Weighted-average common shares
outstanding:
Basic
66.5
73.2
68.2
73.7
Diluted
67.6
74.3
69.4
75.0
Dividends declared per share
$
0.75
$
0.6875
$
2.25
$
2.0625
RALPH LAUREN
CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
Prepared in accordance with
U.S. Generally Accepted Accounting Principles
(Unaudited)
Nine Months Ended
December 31,
2022
December 25,
2021
(millions)
Cash flows from operating
activities:
Net income
$
490.4
$
575.7
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
163.3
169.3
Deferred income tax expense (benefits)
21.3
(1.8
)
Stock-based compensation expense
59.9
62.6
Impairment of assets
0.2
19.3
Bad debt expense (reversals)
0.2
(2.7
)
Other non-cash charges (benefits)
(1.3
)
5.1
Changes in operating assets and
liabilities:
Accounts receivable
(30.5
)
31.7
Inventories
(282.7
)
(211.6
)
Prepaid expenses and other current
assets
(54.2
)
(37.8
)
Accounts payable and accrued
liabilities
(24.3
)
296.1
Income tax receivables and payables
69.9
(11.0
)
Operating lease right-of-use assets and
liabilities, net
(9.8
)
(42.2
)
Other balance sheet changes
(5.4
)
(31.0
)
Net cash provided by operating
activities
397.0
821.7
Cash flows from investing
activities:
Capital expenditures
(155.9
)
(113.6
)
Purchases of investments
(562.2
)
(1,234.8
)
Proceeds from sales and maturities of
investments
1,161.5
714.7
Other investing activities
(5.2
)
(2.1
)
Net cash provided by (used in)
investing activities
438.2
(635.8
)
Cash flows from financing
activities:
Repayments of long-term debt
(500.0
)
—
Payments of finance lease obligations
(15.9
)
(16.8
)
Payments of dividends
(148.8
)
(101.1
)
Repurchases of common stock, including
shares surrendered for tax withholdings
(445.8
)
(340.4
)
Net cash used in financing
activities
(1,110.5
)
(458.3
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(23.2
)
(30.2
)
Net decrease in cash, cash equivalents,
and restricted cash
(298.5
)
(302.6
)
Cash, cash equivalents, and restricted
cash at beginning of period
1,872.0
2,588.0
Cash, cash equivalents, and restricted
cash at end of period
$
1,573.5
$
2,285.4
RALPH LAUREN
CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended
Nine Months Ended
December 31,
2022
December 25,
2021
December 31,
2022
December 25,
2021
(millions)
Net revenues:
North America
$
937.6
$
928.7
$
2,364.9
$
2,293.9
Europe
469.3
462.9
1,378.4
1,313.3
Asia
386.2
382.6
1,036.7
940.7
Other non-reportable segments
39.2
41.2
122.8
147.9
Total net revenues
$
1,832.3
$
1,815.4
$
4,902.8
$
4,695.8
Operating income:
North America
$
214.9
$
229.6
$
474.8
$
586.5
Europe
109.6
97.1
317.4
353.4
Asia
89.8
85.6
234.2
189.4
Other non-reportable segments
36.9
38.5
114.1
106.2
451.2
450.8
1,140.5
1,235.5
Unallocated corporate expenses
(161.3
)
(161.5
)
(456.2
)
(465.3
)
Unallocated restructuring and other
charges, net
(7.8
)
(0.2
)
(20.3
)
(8.6
)
Total operating income
$
282.1
$
289.1
$
664.0
$
761.6
RALPH LAUREN
CORPORATION
CONSTANT CURRENCY FINANCIAL
MEASURES
(Unaudited)
Comparable Store Sales Data
December 31, 2022
Three Months Ended
Nine Months Ended
% Change
% Change
Constant Currency
Constant Currency
North America:
Digital commerce
9
%
5
%
Brick and mortar
(1
%)
2
%
Total North America
2
%
2
%
Europe:
Digital commerce
12
%
11
%
Brick and mortar
11
%
16
%
Total Europe
11
%
14
%
Asia:
Digital commerce
21
%
26
%
Brick and mortar
7
%
15
%
Total Asia
8
%
16
%
Total Ralph Lauren Corporation
5
%
8
%
Operating Segment Net Revenues
Data
Three Months Ended
% Change
December 31,
2022
December 25,
2021
As Reported
Constant
Currency
(millions)
North America
$
937.6
$
928.7
1.0
%
1.2
%
Europe
469.3
462.9
1.4
%
13.2
%
Asia
386.2
382.6
0.9
%
15.7
%
Other non-reportable segments
39.2
41.2
(5.0
%)
(5.0
%)
Net revenues
$
1,832.3
$
1,815.4
0.9
%
7.2
%
Nine Months Ended
% Change
December 31,
2022
December 25,
2021
As Reported
Constant
Currency
(millions)
North America
$
2,364.9
$
2,293.9
3.1
%
3.3
%
Europe
1,378.4
1,313.3
5.0
%
18.0
%
Asia
1,036.7
940.7
10.2
%
23.8
%
Other non-reportable segments
122.8
147.9
(17.0
%)
(16.9
%)
Net revenues
$
4,902.8
$
4,695.8
4.4
%
10.9
%
RALPH LAUREN
CORPORATION
NET REVENUES BY SALES
CHANNEL
(Unaudited)
Three Months Ended
December 31, 2022
December 25, 2021
North America
Europe
Asia
Other
Total
North America
Europe
Asia
Other
Total
(millions)
Sales Channel:
Retail
$
653.5
$
254.9
$
361.5
$
—
$
1,269.9
$
638.4
$
246.4
$
364.2
$
—
$
1,249.0
Wholesale
284.1
214.4
24.7
—
523.2
290.3
216.5
18.4
0.2
525.4
Licensing
—
—
—
39.2
39.2
—
—
—
41.0
41.0
Net revenues
$
937.6
$
469.3
$
386.2
$
39.2
$
1,832.3
$
928.7
$
462.9
$
382.6
$
41.2
$
1,815.4
Nine Months Ended
December 31, 2022
December 25, 2021
North America
Europe
Asia
Other
Total
North America
Europe
Asia
Other
Total
(millions)
Sales Channel:
Retail
$
1,515.3
$
675.6
$
963.6
$
—
$
3,154.5
$
1,472.5
$
646.7
$
885.4
$
27.2
$
3,031.8
Wholesale
849.6
702.8
73.1
—
1,625.5
821.4
666.6
55.3
5.5
1,548.8
Licensing
—
—
—
122.8
122.8
—
—
—
115.2
115.2
Net revenues
$
2,364.9
$
1,378.4
$
1,036.7
$
122.8
$
4,902.8
$
2,293.9
$
1,313.3
$
940.7
$
147.9
$
4,695.8
RALPH LAUREN
CORPORATION
GLOBAL RETAIL STORE
NETWORK
(Unaudited)
December 31,
2022
December 25,
2021
North
America
Ralph Lauren Stores
46
44
Polo Factory Stores
190
195
Total Directly Operated Stores
236
239
Concessions
1
1
Europe
Ralph Lauren Stores
43
36
Polo Factory Stores
61
61
Total Directly Operated Stores
104
97
Concessions
29
29
Asia
Ralph Lauren Stores
115
93
Polo Factory Stores
94
76
Total Directly Operated Stores
209
169
Concessions
698
646
Global Directly
Operated Stores and Concessions
Ralph Lauren Stores
204
173
Polo Factory Stores
345
332
Total Directly Operated Stores
549
505
Concessions
728
676
Global Licensed
Stores
Total Licensed Stores
104
141
RALPH LAUREN
CORPORATION
RECONCILIATION OF NON-U.S.
GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
December 31, 2022
As Reported
Total
Adjustments(a)(b)
As Adjusted
(millions, except per share
data)
Net revenues
$
1,832.3
$
—
$
1,832.3
Gross profit
1,190.7
4.0
1,194.7
Gross profit margin
65.0
%
65.2
%
Total other operating expenses, net
(908.6
)
7.8
(900.8
)
Operating expense margin
49.6
%
49.2
%
Operating income
282.1
11.8
293.9
Operating margin
15.4
%
16.0
%
Other non-operating income (expense),
net
(1.7
)
—
(1.7
)
Income before income taxes
280.4
11.8
292.2
Income tax provision
(63.9
)
(2.2
)
(66.1
)
Effective tax rate
22.8
%
22.6
%
Net income
$
216.5
$
9.6
$
226.1
Net income per diluted common share
$
3.20
$
3.35
Weighted average common shares outstanding
- Diluted
67.6
67.6
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
214.9
$
3.7
$
218.6
Operating margin
22.9
%
23.3
%
Europe
109.6
0.2
109.8
Operating margin
23.3
%
23.4
%
Asia
89.8
—
89.8
Operating margin
23.3
%
23.3
%
Other non-reportable segments
36.9
0.1
37.0
Operating margin
94.3
%
94.3
%
Unallocated corporate expenses and
restructuring & other charges, net
(169.1
)
7.8
(161.3
)
Total operating income
$
282.1
$
11.8
$
293.9
RALPH LAUREN
CORPORATION
RECONCILIATION OF NON-U.S.
GAAP FINANCIAL MEASURES (Continued)
(Unaudited)
Nine Months Ended
December 31, 2022
As Reported
Total
Adjustments(a)(c)
As Adjusted
(millions, except per share
data)
Net revenues
$
4,902.8
$
—
$
4,902.8
Gross profit
3,215.2
13.2
3,228.4
Gross profit margin
65.6
%
65.8
%
Total other operating expenses, net
(2,551.2
)
18.1
(2,533.1
)
Operating expense margin
52.0
%
51.7
%
Operating income
664.0
31.3
695.3
Operating margin
13.5
%
14.2
%
Other non-operating income (expense),
net
(21.3
)
—
(21.3
)
Income before income taxes
642.7
31.3
674.0
Income tax provision
(152.3
)
(7.0
)
(159.3
)
Effective tax rate
23.7
%
23.6
%
Net income
$
490.4
$
24.3
$
514.7
Net income per diluted common share
$
7.07
$
7.42
Weighted average common shares outstanding
- Diluted
69.4
69.4
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
474.8
$
10.2
$
485.0
Operating margin
20.1
%
20.5
%
Europe
317.4
0.5
317.9
Operating margin
23.0
%
23.1
%
Asia
234.2
—
234.2
Operating margin
22.6
%
22.6
%
Other non-reportable segments
114.1
0.1
114.2
Operating margin
93.0
%
93.0
%
Unallocated corporate expenses and
restructuring & other charges, net
(476.5
)
20.5
(456.0
)
Total operating income
$
664.0
$
31.3
$
695.3
RALPH LAUREN
CORPORATION
RECONCILIATION OF NON-U.S.
GAAP FINANCIAL MEASURES (Continued)
(Unaudited)
Three Months Ended
December 25, 2021
As Reported
Total
Adjustments(a)(d)
As Adjusted
(millions, except per share
data)
Net revenues
$
1,815.4
$
—
$
1,815.4
Gross profit
1,198.1
—
1,198.1
Gross profit margin
66.0
%
66.0
%
Total other operating expenses, net
(909.0
)
0.1
(908.9
)
Operating expense margin
50.1
%
50.1
%
Operating income
289.1
0.1
289.2
Operating margin
15.9
%
15.9
%
Other non-operating income (expense),
net
(11.9
)
—
(11.9
)
Income before income taxes
277.2
0.1
277.3
Income tax provision
(59.5
)
0.3
(59.2
)
Effective tax rate
21.4
%
21.3
%
Net income
$
217.7
$
0.4
$
218.1
Net income per diluted common share
$
2.93
$
2.94
Weighted average common shares outstanding
- Diluted
74.3
74.3
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
229.6
$
—
$
229.6
Operating margin
24.7
%
24.7
%
Europe
97.1
(0.1
)
97.0
Operating margin
21.0
%
20.9
%
Asia
85.6
—
85.6
Operating margin
22.4
%
22.4
%
Other non-reportable segments
38.5
—
38.5
Operating margin
93.4
%
93.4
%
Unallocated corporate expenses and
restructuring & other charges, net
(161.7
)
0.2
(161.5
)
Total operating income
$
289.1
$
0.1
$
289.2
RALPH LAUREN
CORPORATION
RECONCILIATION OF NON-U.S.
GAAP FINANCIAL MEASURES (Continued)
(Unaudited)
Nine Months Ended
December 25, 2021
As Reported
Total
Adjustments(a)(e)
As Adjusted
(millions, except per share
data)
Net revenues
$
4,695.8
$
—
$
4,695.8
Gross profit
3,181.4
(11.5
)
3,169.9
Gross profit margin
67.8
%
67.5
%
Total other operating expenses, net
(2,419.8
)
26.7
(2,393.1
)
Operating expense margin
51.5
%
51.0
%
Operating income
761.6
15.2
776.8
Operating margin
16.2
%
16.5
%
Other non-operating income (expense),
net
(36.3
)
—
(36.3
)
Income before income taxes
725.3
15.2
740.5
Income tax provision
(149.6
)
(3.4
)
(153.0
)
Effective tax rate
20.6
%
20.7
%
Net income
$
575.7
$
11.8
$
587.5
Net income per diluted common share
$
7.68
$
7.83
Weighted average common shares outstanding
- Diluted
75.0
75.0
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
586.5
$
(11.1
)
$
575.4
Operating margin
25.6
%
25.1
%
Europe
353.4
(1.2
)
352.2
Operating margin
26.9
%
26.8
%
Asia
189.4
1.1
190.5
Operating margin
20.1
%
20.2
%
Other non-reportable segments
106.2
0.3
106.5
Operating margin
71.8
%
72.0
%
Unallocated corporate expenses and
restructuring & other charges, net
(473.9
)
26.1
(447.8
)
Total operating income
$
761.6
$
15.2
$
776.8
RALPH LAUREN
CORPORATION
RECONCILIATION OF NON-U.S.
GAAP FINANCIAL MEASURES (Continued)
(Unaudited)
Three Months Ended
December 28, 2019
As Reported
Total
Adjustments(a)(f)
As Adjusted
(millions, except per share
data)
Net revenues
$
1,750.7
$
—
$
1,750.7
Gross profit
1,089.1
—
1,089.1
Gross profit margin
62.2
%
62.2
%
Total other operating expenses, net
(864.7
)
21.4
(843.3
)
Operating expense margin
49.4
%
48.2
%
Operating income
224.4
21.4
245.8
Operating margin
12.8
%
14.0
%
Other non-operating income (expense),
net
6.0
—
6.0
Income before income taxes
230.4
21.4
251.8
Income tax benefit (provision)
103.7
(138.7
)
(35.0
)
Effective tax rate
(45.1
%)
13.9
%
Net income
$
334.1
$
(117.3
)
$
216.8
Net income per diluted common share
$
4.41
$
2.86
Weighted average common shares outstanding
- Diluted
75.8
75.8
SEGMENT INFORMATION - OPERATING
INCOME:
North America
$
193.1
$
0.4
$
193.5
Operating margin
21.2
%
21.3
%
Europe
111.9
—
111.9
Operating margin
25.6
%
25.6
%
Asia
46.6
2.4
49.0
Operating margin
16.1
%
16.9
%
Other non-reportable segments
29.5
8.6
38.1
Operating margin
26.2
%
33.8
%
Unallocated corporate expenses and
restructuring & other charges, net
(156.7
)
10.0
(146.7
)
Total operating income
$
224.4
$
21.4
$
245.8
RALPH LAUREN CORPORATION
FOOTNOTES TO RECONCILIATION OF NON-U.S. GAAP
FINANCIAL MEASURES
(a)
Adjustments for non-routine
inventory-related charges (benefits) are recorded within cost of
goods sold in the consolidated statements of operations.
Adjustments for non-routine bad debt expense (benefit) is recorded
within selling, general, and administrative ("SG&A") expenses
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 within restructuring and other charges,
net in the consolidated statements of operations.
(b)
Adjustments for the three months ended
December 31, 2022 include (i) other charges of $7.0 million
primarily related to rent and occupancy costs associated with
certain previously exited real estate locations for which the
related lease agreements have not yet expired; (ii) charges of $4.0
million attributable to inventory adjustments due to delays in U.S.
customs shipment reviews and approvals; and (iii) charges of $0.8
million recorded in connection with the Company's restructuring
activities.
(c)
Adjustments for the nine months ended
December 31, 2022 include (i) other charges of $17.6 million
primarily related to rent and occupancy costs associated with
certain previously exited real estate locations for which the
related lease agreements have not yet expired; (ii) non-routine
inventory charges of $13.2 million largely recorded in connection
with the Russia-Ukraine war and delays in U.S. customs shipment
reviews and approvals, partially offset by reversals of amounts
previously recognized in connection with the COVID-19 pandemic;
(iii) charges of $6.4 million recorded in connection with the
Company's restructuring activities, consisting of restructuring
charges and impairment of assets; (iv) income of $3.5 million
related to consideration received from Regent, L.P. ("Regent") as a
result of the Club Monaco business exceeding certain previously
defined revenue thresholds over a specified time period; and (v)
benefit of $2.4 million related to Russia-related bad debt reserve
adjustments.
(d)
Adjustments for the three months ended
December 25, 2021 include (i) charges of $1.9 million recorded in
connection with the Company's restructuring activities; (ii) other
charges of $1.4 million primarily related to rent and occupancy
costs associated with certain previously exited real estate
locations for which the related lease agreements have not yet
expired; (iii) income of $3.1 million primarily related to a
certain revenue share clause in the Company's agreement with Regent
that entitled it to receive a portion of the sales generated by the
Club Monaco business during a four-month business transition
period; and (iv) benefit of $0.1 million related to
COVID-19-related bad debt reserve adjustments.
(e)
Adjustments for the nine months ended
December 25, 2021 include (i) charges of $23.7 million recorded in
connection with the Company's restructuring activities, consisting
of restructuring charges, impairment of assets, and accelerated
stock-based compensation expense; (ii) benefit of $11.5 million
related to COVID-19-related inventory adjustments; (iii) other
charges of $7.3 million primarily related to rent and occupancy
costs associated with certain previously exited real estate
locations for which the related lease agreements have not yet
expired; (iv) income of $3.1 million primarily related to a certain
revenue share clause in the Company's agreement with Regent that
entitled it to receive a portion of the sales generated by the Club
Monaco business during a four-month business transition period; and
(v) benefit of $1.2 million related to COVID-19-related bad debt
reserve adjustments.
(f)
Adjustments for the three months ended
December 28, 2019 include (i) charges of $7.0 million recorded in
connection with the Company's restructuring activities, consisting
of restructuring charges and impairment of assets; (ii) additional
impairment of assets of $11.4 million related to underperforming
stores as a result of on-going store portfolio evaluation; and
(iii) other charges of $3.0 million primarily related to rent and
occupancy costs associated with certain previously exited real
estate locations for which the related lease agreements have not
yet expired. Additionally, the income tax benefit (provision)
reflects a one-time benefit of $134.1 million recorded in
connection with Swiss tax reform.
NON-U.S. GAAP FINANCIAL MEASURES
Because Ralph Lauren Corporation is a global company, the
comparability of its operating results reported in U.S. Dollars is
affected by foreign currency exchange rate fluctuations because the
underlying currencies in which it transacts change in value over
time compared to the U.S. Dollar. Such fluctuations can have a
significant effect on the Company's reported results. As such, in
addition to financial measures prepared in accordance with
accounting principles generally accepted in the U.S. ("U.S. GAAP"),
the Company's discussions often contain references to constant
currency measures, which are calculated by translating current-year
and prior-year reported amounts into comparable amounts using a
single foreign exchange rate for each currency. The Company
presents constant currency financial information, which is a
non-U.S. GAAP financial measure, as a supplement to its reported
operating results. The Company uses constant currency information
to provide a framework for assessing how its businesses performed
excluding the effects of foreign currency exchange rate
fluctuations. Management believes this information is useful to
investors for facilitating comparisons of operating results and
better identifying trends in the Company's businesses. The constant
currency performance measures should be viewed in addition to, and
not in lieu of or superior to, the Company's operating performance
measures calculated in accordance with U.S. GAAP.
This earnings release also includes certain other non-U.S. GAAP
financial measures relating to the impact of charges and other
items as described herein. The Company uses non-U.S. GAAP financial
measures, among other things, to evaluate its operating performance
and to better represent the manner in which it conducts and views
its business. The Company believes that excluding items that are
not comparable from period to period helps investors and others
compare operating performance between two periods. While the
Company considers non-U.S. GAAP measures useful in analyzing its
results, they are not intended to replace, nor act as a substitute
for, any presentation included in the consolidated financial
statements prepared in conformity with U.S. GAAP, and may be
different from non-U.S. GAAP measures reported by other
companies.
Adjustments made during the fiscal periods presented include
charges recorded in connection with the Company's restructuring
activities, as well as certain other charges (benefits) associated
with other non-recurring events, as described in the footnotes to
the non-U.S. GAAP financial measures above. The income tax benefit
(provision) has been adjusted for the tax-related effects of these
charges, which were calculated using the respective statutory tax
rates for each applicable jurisdiction. The income tax benefit
(provision) has also been adjusted for certain other one-time
income tax events and other adjustments, as described in the
footnotes to the non-U.S. GAAP financial measures above. Included
in this earnings release are reconciliations between the non-U.S.
GAAP financial measures and the most directly comparable U.S. GAAP
measures before and after these adjustments.
Additionally, the Company's full year Fiscal 2023 and fourth
quarter guidance excludes certain anticipated restructuring-related
and other charges. The Company is not able to provide a full
reconciliation of these non-U.S. GAAP financial measures to U.S.
GAAP because certain material items that impact these measures,
such as the timing and exact amount of charges related to its
restructuring plans, have not yet occurred or are out of the
Company's control. Accordingly, a reconciliation of the Company's
non-U.S. GAAP based financial measure guidance to the most directly
comparable U.S. GAAP measures is not available without unreasonable
effort. However, the Company has identified the estimated impact of
certain items excluded from its financial outlook. Specifically,
the Company's financial outlook excludes estimated pretax charges
of up to approximately $30 million related to its Fiscal 2021
Strategic Realignment Plan that have not yet been incurred.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230208005689/en/
Investor Relations: Corinna Van der Ghinst ir@ralphlauren.com Or
Corporate Communications rl-press@ralphlauren.com
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