Market Overview

Ralph Lauren Reports First Quarter Fiscal 2019 Results

Share:

Ralph Lauren Corporation (NYSE:RL), a global leader in the design,
marketing, and distribution of premium lifestyle products, today
reported earnings per diluted share of $1.31 on a reported basis and
$1.54 on an adjusted basis, excluding restructuring-related and other
charges, for the first quarter of Fiscal 2019. This compared to earnings
per diluted share of $0.72 on a reported basis and $1.11 on an adjusted
basis, excluding restructuring-related and other charges, for the first
quarter of Fiscal 2018.

"I continue to be inspired and energized by the passion our teams have
for our brand and our Company," said Ralph Lauren, Executive Chairman
and Chief Creative Officer. "This passion along with Patrice's
partnership over the last year, the clear plan he and the team laid out
in June, and the initial progress in this quarter, give me confidence in
our future as we celebrate 50 years in business."

"We are off to an encouraging start to the new fiscal year on both the
top and the bottom line. Our teams around the world are fully engaged
and focused on executing the Next Great Chapter plan we shared at our
recent Investor Day," said Patrice Louvet, President and Chief Executive
Officer. "Guided by our three core principles of putting the consumer at
the center of all we do, elevating and energizing our brand and
balancing productivity and growth, we are on track to return the Company
to long-term, sustainable growth and value creation."

We delivered across the following strategic initiatives in the first
quarter of Fiscal 2019:

  • Win Over a New Generation of Consumers
    • Increased marketing investment by about 20% to last year,
      primarily through our Spring Polo campaign featuring our iconic
      white Polo shirt, which drove strong growth in global polo shirt
      sales including double-digit growth in men's
    • Continued to shift marketing investment towards digital and social
      media channels, with an emphasis on influencers, increasing our
      reach with new consumers
    • Elevated our brand voice with CP93 Limited Edition launch and
      amplification of our sponsorship of Wimbledon
  • Energize Core Products and Accelerate Under-Developed Categories
    • Renewed our core styles and focused on our icons, driving
      sequential improvement in the sell-out trend for the Spring/Summer
      season
    • Average unit retail across our direct-to-consumer network was up
      8% through improved full price selling and lower discounts
    • Under-developed categories outpaced overall growth, led by denim
      and outerwear
  • Drive Targeted Expansion in Our Regions and Channels
    • Strong growth in international markets, including Asia revenue up
      19%, with strength across Japan, South Korea and China, and Europe
      up 8% in the first quarter
    • Delivered 6% constant currency comp growth and expanded our store
      network in Asia, driven by eight new points of distribution in
      China in the first quarter which puts us on track to open more
      than 50 new points of distribution in China in Fiscal 2019
  • Lead With Digital
    • Digital sales outpaced overall growth and on track to achieve our
      long term goals
    • Upgraded our European digital commerce platform, significantly
      improving the consumer experience, and continued to enhance the
      functionality of our North America site including improved product
      detail pages, 360-degree product videos and automated product
      recommendations
  • Operate With Discipline to Fuel Growth
    • Gross margin was up 120 basis points with lower discount rates
    • Adjusted operating expenses, excluding our marketing investment
      and the impact of foreign currency, were up only modestly to last
      year

First Quarter Fiscal 2019 Income Statement Review

Net Revenue. In the first quarter of Fiscal 2019, revenue
increased by 3% to $1.4 billion on a reported basis and was up 1% in
constant currency, driven by Asia and Europe. Foreign currency benefited
revenue growth by approximately 210 basis points in the first quarter.

Revenue performance for the Company's reportable segments in the first
quarter compared to the prior year period was as follows:

  • North America Revenue. North America revenue in the first
    quarter decreased 2% on both a reported and constant currency basis to
    $698 million. North America wholesale revenue declined primarily due
    to deliberate actions to improve quality of sales and exits from lower
    quality distribution. In retail, comparable store sales in North
    America were down 3% in constant currency, driven by a 3% decline in
    brick and mortar stores and a 2% decline at ralphlauren.com. Excluding
    the impact of Easter timing, comparable store sales in North America
    were approximately flat to last year. The comparable store sales
    decline at ralphlauren.com represents a significant sequential
    improvement, in line with our expectations.
  • Europe Revenue. Europe revenue in the first quarter increased
    8% to $351 million on a reported basis and 2% in constant currency.
    Europe wholesale revenue grew, partially due to a shift in timing of
    shipments. In retail, comparable store sales in Europe were down 8% on
    a constant currency basis, as a 9% decline in brick and mortar stores,
    related to assortment and inventory challenges, was partly offset by a
    2% increase in digital commerce.
  • Asia Revenue. Asia revenue in the first quarter increased 19%
    to $248 million on a reported basis and increased 16% in constant
    currency, driven by strength in both retail and wholesale channels.
    Comparable store sales in Asia increased 6% in constant currency,
    reflecting growth in both brick and mortar and digital commerce
    operations.

Gross Profit. Gross profit for the first quarter of Fiscal
2019 was $896 million and gross margin was 64.4%, 120 basis points above
the prior year.

The gross margin increase was driven by initiatives to improve quality
of sales through reduced promotional activity and improved pricing as
well as favorable product mix. Foreign currency benefited gross margin
by 10 basis points in the first quarter.

Operating Expenses. Operating expenses in the first
quarter of Fiscal 2019 were $766 million on a reported basis, including
$24 million in restructuring-related and other charges. On an adjusted
basis, excluding such charges, operating expenses were $742 million, up
4% to prior year driven by 21% growth in planned marketing investment.
Excluding marketing and the impact of foreign currency, adjusted
operating expenses were up slightly to last year.

Adjusted operating expense rate was 53.3%, 30 basis points above the
prior year period, excluding restructuring-related and other charges.
This increase was due to the increased marketing investment and an
unfavorable geographic and 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 for the first quarter
of Fiscal 2019 was $130 million on a reported basis, including
restructuring-related and other charges of $24 million, and operating
margin was 9.4%. Adjusted operating income was $154 million and adjusted
operating margin was 11.1%, 90 basis points above the prior year,
excluding restructuring-related and other charges from both periods,
driven by gross margin expansion. Foreign currency benefited operating
margin by 20 basis points in the first quarter.

  • North America Operating Income. North America operating income
    in the first quarter was $160 million on both a reported and adjusted
    basis. Adjusted North America operating margin was 22.9%, up 150 basis
    points from last year.
  • Europe Operating Income. Europe operating income in the first
    quarter was $74 million on both a reported and adjusted basis.
    Adjusted Europe operating margin was 21.1%, flat to the prior year
    period. In constant currency, the adjusted operating margin declined
    by 10 basis points.
  • Asia Operating Income. Asia operating income in the first
    quarter was $43 million on both a reported and adjusted basis.
    Adjusted Asia operating margin was 17.3%, up 280 basis points to the
    prior year and 290 basis points higher in constant currency.

Net Income and EPS. On a reported basis, net income in the
first quarter of Fiscal 2019 was $109 million or $1.31 per diluted
share. On an adjusted basis, net income was $128 million, or $1.54 per
diluted share, excluding restructuring-related and other charges. This
compared to net income of $60 million, or $0.72 per diluted share on a
reported basis, and net income of $91 million, or $1.11 per diluted
share on an adjusted basis, for the first quarter of Fiscal 2018.

In the first quarter of Fiscal 2019, the Company had an effective tax
rate of 18% on both a reported and adjusted basis, excluding
restructuring and related other charges. This compared to a reported and
an adjusted effective tax rate of 31% and 32%, respectively, in the
prior year period. The year-over-year decline is primarily driven by the
effects of stock-based compensation and the lower U.S. federal income
tax rate as a result of tax reform.

Balance Sheet and Cash Flow Review

The Company ended the first quarter of Fiscal 2019 with $2.1 billion in
cash and short and long term investments and $587 million in total debt,
compared to $1.7 billion and $590 million, respectively, at the end of
the first quarter of Fiscal 2018.

Inventory at the end of the first quarter of Fiscal 2019 was $890
million, up 3.5% compared to the prior year period, reflecting
investments to support store expansion. The Company continues to improve
operating processes, including moving towards a demand driven supply
chain.

The Company repurchased approximately $100 million of Class A Common
Stock during the first quarter. Approximately $1 billion remained
available under the Company's authorized share repurchase programs at
the end of the first quarter.

Full Year Fiscal 2019 and Second Quarter Outlook

The full year Fiscal 2019 and second quarter guidance excludes
restructuring-related and other charges, as described in the "Non-U.S.
GAAP Financial Measures" section of this press release.

For Fiscal 2019, the Company now expects net revenue to be down slightly
in constant currency. Foreign currency is expected to have minimal
impact on revenue growth in Fiscal 2019.

The Company now expects operating margin for Fiscal 2019 to be up 40 to
60 basis points in constant currency driven by gross margin expansion.
Foreign currency is expected to have minimal impact on operating margin
in Fiscal 2019.

In the second quarter of Fiscal 2019, the Company expects net revenue to
be flat to down slightly in constant currency. Foreign currency is
expected to pressure revenue growth by approximately 30 to 50 basis
points in the second quarter of Fiscal 2019.

Operating margin for the second quarter of Fiscal 2019 is expected to be
up about 30 basis points in constant currency. Foreign currency is
estimated to be a slight benefit to operating margin in the second
quarter.

We expect the full year Fiscal 2019 tax rate to be approximately 21%.
Second quarter of Fiscal 2019 tax rate is estimated at approximately 22%.

The Company continues to plan capital expenditures of approximately $275
million for Fiscal 2019.

Conference Call

As previously announced, the Company will host a conference call and
live online webcast today, Tuesday, July 31st, at 9:00 A.M.
Eastern. Listeners may access a live broadcast of the conference call on
the Company's 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 First Quarter 2019 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, Tuesday, July 31, 2018 through 6:00 P.M. Eastern, Tuesday,
August 7, 2018 by dialing 203-369-3026 or 888-296-6941 and entering
passcode 6498.

ABOUT RALPH LAUREN

Ralph Lauren Corporation (NYSE:RL) is a global leader in the design,
marketing and distribution of premium lifestyle products in four
categories: apparel, home, accessories and fragrances. For 50 years,
Ralph Lauren's reputation and distinctive image have been consistently
developed across an expanding number of products, brands and
international markets. The Company's brand names, which include Ralph
Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph
Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children,
Chaps, and Club Monaco, among others, constitute one of the world's most
widely recognized families of consumer brands. For more information, go
to http://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 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 Fiscal 2019 and Second Quarter 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," "can" 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; 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
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 open new retail stores, concession shops, and
digital commerce sites in an effort to expand our direct-to-consumer
presence; the impact to our business resulting from changes in
consumers' ability, willingness, 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 continue to maintain our brand image and
reputation and protect our trademarks; 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; the
impact of economic, political, and other conditions on us, our
customers, suppliers, vendors, and lenders; 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; our efforts to
successfully enhance, upgrade, and/or transition our global information
technology systems and digital commerce platform; a variety of legal,
regulatory, tax, political, and economic risks, including risks related
to the importation and exportation of products, tariffs, and other trade
barriers which our operations are currently subject to, or may become
subject to as a result of potential changes in legislation, and other
risks associated with our international operations, such as compliance
with the Foreign Corrupt Practices Act or violations of other
anti-bribery and corruption laws prohibiting improper payments, and the
burdens of complying with a variety of foreign laws and regulations,
including tax laws, trade and labor restrictions, and related laws that
may reduce the flexibility of our business; changes in our tax
obligations and effective tax 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; 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 enactment-related charges
that were recorded during 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;
the impact to our business resulting from the United Kingdom's decision
to exit the European Union and the uncertainty surrounding the terms and
conditions of such a withdrawal, as well as the related impact to global
stock markets and currency exchange rates; the impact to our business
resulting from increases in the costs of raw materials, transportation,
and labor; our exposure to currency exchange rate fluctuations from both
a transactional and translational perspective; 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 potential impact on our operations and on our suppliers
and customers resulting from natural or man-made disasters; 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 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; our intention to introduce new products or
enter into or renew alliances; changes in the business of, and our
relationships with, major department store customers and licensing
partners; our ability to make certain 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
(in millions)
(Unaudited)
       
 
 
June 30, March 31, July 1,
2018 2018 2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 532.3 $ 1,304.6 $ 830.4
Short-term investments 1,487.7 699.4 740.5
Accounts receivable, net of allowances 260.0 421.4 279.2
Inventories 890.0 761.3 859.9
Income tax receivable 37.3 38.0 77.5
Prepaid expenses and other current assets   342.8     323.7     299.2  
 
Total current assets 3,550.1 3,548.4 3,086.7
 
Property and equipment, net 1,141.7 1,186.3 1,273.3
Deferred tax assets 70.7 86.6 141.4
Goodwill 928.7 950.5 924.2
Intangible assets, net 181.4 188.0 213.7
Other non-current assets(a)   162.7     183.5     174.7  
 
Total assets $ 6,035.3   $ 6,143.3   $ 5,814.0  
 
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ - $ 10.1 $ -
Current portion of long-term debt 299.0 298.1 -
Accounts payable 202.7 165.6 160.9
Income tax payable 45.4 30.0 36.6
Accrued expenses and other current liabilities   1,016.6     1,083.4     1,019.4  
 
Total current liabilities 1,563.7 1,587.2 1,216.9
 
Long-term debt 288.0 288.0 590.4
Income tax payable 124.8 124.8 -
Non-current liability for unrecognized tax benefits 77.8 79.2 64.7
Other non-current liabilities   560.0     606.7     581.9  
 
Total liabilities   2,614.3     2,685.9     2,453.9  
 
Equity:
Common stock 1.3 1.3 1.3
Additional paid-in-capital 2,426.7 2,383.4 2,330.4
Retained earnings 5,805.4 5,752.2 5,770.8
Treasury stock, Class A, at cost (4,711.0 ) (4,581.0 ) (4,578.3 )
Accumulated other comprehensive loss   (101.4 )   (98.5 )   (164.1 )
 
Total equity   3,421.0     3,457.4     3,360.1  
 
Total liabilities and equity $ 6,035.3   $ 6,143.3   $ 5,814.0  
 
 
 
Net Cash (incl. LT Investments) 1,502.5 1,494.0 1,060.6
Cash & Investments (ST & LT) 2,089.5 2,090.2 1,651.0
 
Net Cash (excl. LT Investments) 1,433.0 1,407.8 980.5
Cash & ST Investments 2,020.0 2,004.0 1,570.9
 
(a) Includes non-current investments of: $ 69.5   $ 86.2   $ 80.1  
 
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

June 30, July 1,
2018 2017
 
 
North America $ 697.6 $ 709.7
Europe 350.6 323.5
Asia 248.0 209.1
Other non-reportable segments   94.4     104.8  
 
Net revenues 1,390.6 1,347.1
 
Cost of goods sold   (494.9 )   (495.9 )
 
Gross profit 895.7 851.2
 
Selling, general, and administrative expenses (741.9 ) (714.4 )
 
Impairment of assets (1.3 ) (9.7 )
 
Restructuring and other charges   (22.4 )   (36.8 )
 
Total other operating expenses, net (765.6 ) (760.9 )
 
Operating income 130.1 90.3
 
Interest expense (4.4 ) (5.0 )
 
Interest income 9.2 2.0
 
Other expense, net   (2.0 )   (0.5 )
 
Income before income taxes 132.9 86.8
 
Income tax provision   (23.9 )   (27.3 )
 
Net income $ 109.0   $ 59.5  
 
Net income per share - Basic $ 1.33   $ 0.73  
 
Net income per share - Diluted $ 1.31   $ 0.72  
 
Weighted average shares outstanding - Basic   81.9     81.6  
 
Weighted average shares outstanding - Diluted   83.3     82.5  
 
Dividends declared per share $ 0.625   $ 0.50  
 
RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Prepared in accordance with U.S. Generally Accepted Accounting
Principles
(in millions)
(Unaudited)
     
Three Months Ended
June 30, July 1,
2018 2017
Cash flows from operating activities:
Net income $ 109.0 $ 59.5
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense 70.3 72.9
Deferred income tax expense (benefit) 7.3 (14.7 )
Non-cash stock-based compensation expense 21.5 21.6
Non-cash impairment of assets 1.3 9.7
Non-cash restructuring-related inventory charges - 0.7
Other non-cash charges 5.8 2.0
Changes in operating assets and liabilities:
Accounts receivable 153.8 174.0
Inventories (147.1 ) (55.4 )
Prepaid expenses and other current assets (35.9 ) (4.6 )
Accounts payable and accrued liabilities (0.1 ) 42.4
Income tax receivables and payables 19.4 8.7
Deferred income (4.8 ) 0.6
Other balance sheet changes   30.1     16.8  
Net cash provided by operating activities   230.6     334.2  
 
Cash flows from investing activities:
Capital expenditures (42.3 ) (41.9 )
Purchases of investments (1,250.1 ) (270.4 )
Proceeds from sales and maturities of investments 469.8 187.4
Acquisitions and ventures   (4.5 )   (3.6 )
Net cash used in investing activities   (827.1 )   (128.5 )
 
Cash flows from financing activities:
Repayments of short-term debt (9.9 ) -
Payments of capital lease obligations (5.7 ) (6.2 )
Payments of dividends (40.6 ) (40.5 )
Repurchases of common stock, including shares surrendered for tax
withholdings
(130.0 ) (14.4 )
Proceeds from exercise of stock options   21.8     0.1  
Net cash used in financing activities   (164.4 )   (61.0 )
 
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
  (18.8 )   19.9  
Net increase (decrease) in cash, cash equivalents, and restricted
cash
(779.7 ) 164.6
Cash, cash equivalents, and restricted cash at beginning of period   1,355.5     711.8  
Cash, cash equivalents, and restricted cash at end of period $ 575.8   $ 876.4  
 
RALPH LAUREN CORPORATION
OTHER INFORMATION
(in millions)
(Unaudited)
     
SEGMENT INFORMATION
Net revenues and operating income for the periods ended June 30,
2018 and July 1, 2017 for each segment were as follows:
 
Three Months Ended
June 30, July 1,
2018 2017
 
Net revenues:
North America $ 697.6 $ 709.7
Europe 350.6 323.5
Asia 248.0 209.1
Other non-reportable segments   94.4     104.8  
Total net revenues $ 1,390.6   $ 1,347.1  
 
Operating income:
North America $ 159.9 $ 150.5
Europe 73.9 67.1
Asia 42.7 30.2
Other non-reportable segments   30.8     33.0  
307.3 280.8
 
Unallocated corporate expenses (154.8 ) (153.7 )
Unallocated restructuring and other charges   (22.4 )   (36.8 )
Total operating income $ 130.1   $ 90.3  
 
RALPH LAUREN CORPORATION
Constant Currency Financial Measures
(in millions)
(Unaudited)
         
Comparable Store Sales Data
 
Three Months Ended
June 30, 2018
% Change
Constant Currency
North America
Digital commerce (2 %)
Excluding Digital commerce   (3 %)
Total North America (3 %)
 
Europe
Digital commerce 2 %
Excluding Digital commerce   (9 %)
Total Europe (8 %)
 
Asia
Digital commerce 46 %
Excluding Digital commerce   6 %
Total Asia 6 %
 
Total Ralph Lauren   (3 %)
 
 
Operating Segment Net Revenue Data
 
Three Months Ended % Change
June 30, 2018 July 1, 2017 As Reported Constant Currency
North America $ 697.6 $ 709.7 (1.7 %) (1.8 %)
Europe 350.6 323.5 8.4 % 1.5 %
Asia 248.0 209.1 18.6 % 16.0 %
Other non-reportable segments   94.4     104.8 (10.0 %) (10.1 %)
Net revenues $ 1,390.6   $ 1,347.1 3.2 % 1.1 %
 
RALPH LAUREN CORPORATION
Revenue by Sales Channel
(in millions)
(Unaudited)
                     
Three Months Ended
June 30, 2018 July 1, 2017

North
America

  Europe

Asia

Other Total

North
America

  Europe Asia Other Total
 
Sales Channel:
Wholesale $ 310.1 $ 138.0 $ 12.6 $ 5.5 $ 466.2 $ 313.3 $ 115.6 $ 7.9 $ 6.0 $ 442.8
Retail 387.5 212.6 235.4 49.9 885.4 396.4 207.9 201.2 57.0 862.5
Licensing   -   -   -   39.0   39.0   -   -   -   41.8   41.8
Total net revenues $ 697.6 $ 350.6 $ 248.0 $ 94.4 $ 1,390.6 $ 709.7 $ 323.5 $ 209.1 $ 104.8 $ 1,347.1
 
RALPH LAUREN CORPORATION
Global Retail Store Network
   
June 30, July 1,
2018 2017
 
 

North America

Ralph Lauren Stores 42 44
Polo Factory Stores 178 172
Total Directly Operated Stores 220 216
Concessions 2 1
 

Europe

Ralph Lauren Stores 20 20
Polo Factory Stores 63 62
Total Directly Operated Stores 83 82
Concessions 25 31
 

Asia

Ralph Lauren Stores 53 42
Polo Factory Stores 54 48
Total Directly Operated Stores 107 90
Concessions 604 591
 

Other

Club Monaco Stores 74 79
Club Monaco Concessions 2 2
 

Global Directly Operated Stores and
Concessions

Ralph Lauren Stores 115 106
Polo Factory Stores 295 282
Club Monaco Stores 74 79
Total Directly Operated Stores 484 467
Concessions 633 625
 

Global Licensed Stores and Concessions

Ralph Lauren Licensed Stores 88 105
Club Monaco Licensed Stores 59 59
Total Licensed Stores 147 164
Licensed Concessions 132 99
 
RALPH LAUREN CORPORATION
Reconciliation of Certain Non-U.S. GAAP Financial Measures
(in millions, except per share data)
(Unaudited)
       
Three Months Ended
June 30, 2018
 
As

Reported

Total
Adjustments(a)(b)

  As

Adjusted

Net revenues $ 1,390.6 $ - $ 1,390.6
Gross profit 895.7 - 895.7
Gross profit margin 64.4 % 64.4 %
Total other operating expenses, net (765.6 ) 23.7 (741.9 )
Operating expense margin 55.1 % 53.3 %
Operating income 130.1 23.7 153.8
Operating margin 9.4 % 11.1 %
Income before income taxes 132.9 23.7 156.6
Income tax provision (23.9 ) (4.8 ) (28.7 )
Effective tax rate 18.0 % 18.3 %
Net income $ 109.0 $ 18.9 $ 127.9
Net income per diluted share $ 1.31 $ 1.54
Weighted average shares outstanding - Diluted 83.3 83.3
SEGMENT INFORMATION -
OPERATING INCOME:
North America $ 159.9 $ - $ 159.9
Operating margin 22.9 % 22.9 %
Europe 73.9 0.2 74.1
Operating margin 21.1 % 21.1 %
Asia 42.7 0.2 42.9
Operating margin 17.2 % 17.3 %
Other non-reportable segments 30.8 0.8 31.6
Operating margin 32.7 % 33.5 %
Unallocated corporate expenses and restructuring and other charges,
net
  (177.2 )   22.5     (154.7 )
Total operating income $ 130.1   $ 23.7   $ 153.8  
 
 
Three Months Ended
July 1, 2017
 
As

Reported

 

Total
Adjustments(a)(c)

  As

Adjusted

Net revenues $ 1,347.1 $ - $ 1,347.1
Gross profit 851.2 0.7 851.9
Gross profit margin 63.2 % 63.2 %
Total other operating expenses, net (760.9 ) 46.5 (714.4 )
Operating expense margin (56.5 %) 53.0 %
Operating income 90.3 47.2 137.5
Operating margin 6.7 % 10.2 %
Income before income taxes 86.8 47.2 134.0
Income tax provision (27.3 ) (15.6 ) (42.9 )
Effective tax rate 31.4 % 32.0 %
Net income $ 59.5 $ 31.6 $ 91.1
Net income per diluted share $ 0.72 $ 1.11
Weighted average shares outstanding - Basic 81.6 81.6
Weighted average shares outstanding - Diluted 82.5 82.5
SEGMENT INFORMATION -
OPERATING INCOME:
North America $ 150.5 $ 1.3 $ 151.8
Operating margin 21.2 % 21.4 %
Europe 67.1 1.2 68.3
Operating margin 20.7 % 21.1 %
Asia 30.2 0.1 30.3
Operating margin 14.4 % 14.5 %
Other non-reportable segments 33.0 0.1 33.1
Operating margin 31.5 % 31.5 %
Unallocated corporate expenses and restructuring and other charges,
net
  (190.5 )   44.5     (146.0 )
Total operating income $ 90.3   $ 47.2   $ 137.5  
 
RALPH LAUREN CORPORATION
Footnotes to Non-U.S. GAAP Financial Measures
 
(a)

Adjustments for inventory-related charges are recorded within cost
of goods sold in the consolidated statements of operations.

Adjustments for impairment-related charges are recorded within
impairment of assets in the consolidated statements of operations.

Adjustments for all other charges are recorded within
restructuring and other charges in the consolidated statements of
operations.

 
(b) Adjustments for the three months ended June 30, 2018 include (i)
charges of $16.0 million recorded in connection with the Company's
restructuring plans, consisting of restructuring charges and
impairment of assets; and (ii) other charges of $7.7 million
primarily related to its customs audit and depreciation expense
associated with the Company's former Polo store at 711 Fifth Avenue
in New York City.
 
(c) Adjustments for the three months ended July 1, 2017 include (i)
charges of $37.0 million recorded in connection with the Way Forward
Plan, consisting of restructuring charges, impairment of assets, and
inventory-related charges; and (ii) other charges of $10.2 million
primarily related to the departure of Mr. Stefan Larsson and
depreciation expense associated with the Company's former Polo store
at 711 Fifth Avenue in New York City.
 

NON-U.S. GAAP FINANCIAL MEASURES

Since 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. These rate 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 the 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 plans, as well
as depreciation expense associated with the Company's former Polo store
at 711 Fifth Avenue in New York City recorded after the store closed
during the first quarter of Fiscal 2018 in connection with the Way
Forward plan. Although the Company is no longer generating revenue or
has any other economic activity associated with its former Polo store,
it continues to incur depreciation expense due to its involvement at the
time of construction. Adjustments also include certain other charges
associated with other non-recurring events, as described in the
footnotes to the non-U.S. GAAP financial measures above. The income tax
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. 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 2019 and second quarter
Fiscal 2019 guidance excludes certain anticipated restructuring-related
and other one-time 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 our restructuring plans,
have not yet occurred or are out of the Company's control. Accordingly,
a reconciliation of our 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 long-term financial
outlook. Specifically, the Company's long-term financial outlook
excludes estimated pretax charges of approximately $95 million related
to its Way Forward Plan and approximately $90 million to $140 million
related to its Fiscal 2019 Restructuring Plan.

View Comments and Join the Discussion!