RALPH LAUREN CORPORATION |
(Exact Name of Registrant as Specified in Its Charter) |
DELAWARE |
(State or Other Jurisdiction of Incorporation) |
001-13057 | 13-2622036 |
(Commission File Number) | (IRS Employer Identification No.) |
650 MADISON AVENUE, NEW YORK, NEW YORK | 10022 |
(Address of Principal Executive Offices) | (Zip Code) |
(212) 318-7000
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(Registrant’s Telephone Number, Including Area Code)
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NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2.02.
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RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
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ITEM 9.01.
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FINANCIAL STATEMENTS AND EXHIBITS.
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(a)
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Financial Statements of Business Acquired.
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Not applicable.
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(b)
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Pro Forma Financial Information.
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Not applicable.
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(c)
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Shell Company Transactions.
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Not applicable.
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(d)
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Exhibits.
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EXHIBIT NO.
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DESCRIPTION
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99.1
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Press Release, dated February 4, 2015
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RALPH LAUREN CORPORATION
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Date: February 4, 2015
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By:
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/s/ Christopher Peterson | ||
Name: | Christopher Peterson | |||
Title: |
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
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—
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Third Quarter Net Revenues Increased 1% on a Reported Basis and 3% in Constant Currency
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Operating Margin of 15.5% Reflects Disciplined Operational Management and Continued Investments in the Company’s Strategic Growth Initiatives
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Earnings Per Diluted Share Was $2.41 in the Third Quarter
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The Company Announces New Global Brand Management Structure
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The Board of Directors Authorizes an 11% Increase in the Company’s Quarterly Cash Dividend
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Wholesale Sales. Wholesale segment sales of $837 million in the third quarter of Fiscal 2015 were in line with the prior year period. Growth in European wholesale shipments was offset by lower shipments in the Americas and unfavorable foreign currency translation. Excluding negative foreign currency effects, wholesale segment sales increased 2%.
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Retail Sales. Retail sales increased 2% to $1.1 billion in the third quarter, led by double-digit growth in global e-commerce and the contribution from new store openings. Excluding the negative impact from foreign currency translation, retail sales rose 5% over the prior year period. Consolidated comparable store sales declined 2% on a reported basis during the third quarter and were in line with the prior year in constant currency.
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Licensing. Licensing revenues of $47 million in the third quarter were 6% above the prior year period, reflecting higher royalties from increased sales of Ralph Lauren, Polo and Lauren products worldwide.
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Wholesale Operating Income. Wholesale operating income of $207 million was 5% below the prior year period. Wholesale operating margin declined 120 basis points to 24.7% due to product mix impacts.
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Retail Operating Income. Retail operating income of $194 million in the third quarter of Fiscal 2015 was 12% lower than the prior year period. Retail operating margin declined 260 basis points to 16.9% due to a more promotional U.S. marketplace and increased expenses associated with the Company’s global store and e-commerce development efforts.
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Licensing Operating Income. Licensing operating income of $42 million increased 7% from the prior year period, consistent with the increase in licensing revenues.
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RALPH LAUREN CORPORATION
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CONSOLIDATED BALANCE SHEETS
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Prepared in accordance with U.S. Generally Accepted Accounting Principles
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(in millions, except per share data)
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(Unaudited)
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December 27,
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March 29,
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December 28,
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||||||||||
2014
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2014
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2013
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 763 | $ | 797 | $ | 882 | ||||||
Short-term investments
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644 | 488 | 533 | |||||||||
Accounts receivable, net of allowances
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416 | 588 | 425 | |||||||||
Inventories
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1,211 | 1,020 | 1,117 | |||||||||
Income tax receivable
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60 | 62 | 32 | |||||||||
Deferred tax assets
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149 | 150 | 125 | |||||||||
Prepaid expenses and other current assets
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276 | 224 | 228 | |||||||||
Total current assets
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3,519 | 3,329 | 3,342 | |||||||||
Property and equipment, net
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1,454 | 1,322 | 1,299 | |||||||||
Deferred tax assets
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49 | 39 | 21 | |||||||||
Goodwill
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917 | 964 | 958 | |||||||||
Intangible assets, net
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273 | 299 | 305 | |||||||||
Other non-current assets
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132 | 137 | 135 | |||||||||
Total assets
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$ | 6,344 | $ | 6,090 | $ | 6,060 | ||||||
LIABILITIES AND EQUITY
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Current liabilities:
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Short-term debt
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$ | 113 | $ | - | $ | - | ||||||
Accounts payable
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229 | 203 | 207 | |||||||||
Income tax payable
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132 | 77 | 49 | |||||||||
Accrued expenses and other current liabilities
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784 | 690 | 728 | |||||||||
Total current liabilities
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1,258 | 970 | 984 | |||||||||
Long-term debt
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300 | 300 | 300 | |||||||||
Non-current liability for unrecognized tax benefits
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112 | 132 | 122 | |||||||||
Other non-current liabilities
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599 | 654 | 620 | |||||||||
Total liabilities
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2,269 | 2,056 | 2,026 | |||||||||
Equity:
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Common stock
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1 | 1 | 1 | |||||||||
Additional paid-in-capital
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2,089 | 1,979 | 1,952 | |||||||||
Retained earnings
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5,706 | 5,257 | 5,144 | |||||||||
Treasury stock, Class A, at cost
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(3,699 | ) | (3,317 | ) | (3,167 | ) | ||||||
Accumulated other comprehensive income (loss)
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(22 | ) | 114 | 104 | ||||||||
Total equity
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4,075 | 4,034 | 4,034 | |||||||||
Total liabilities and equity
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$ | 6,344 | $ | 6,090 | $ | 6,060 |
RALPH LAUREN CORPORATION
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CONSOLIDATED STATEMENTS OF INCOME
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Prepared in accordance with U.S. Generally Accepted Accounting Principles
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(in millions, except per share data)
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(Unaudited)
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Three Months Ended | ||||||||
December 27,
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December 28,
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2014
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2013
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Wholesale net sales
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$ | 837 | $ | 840 | ||||
Retail net sales
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1,149 | 1,130 | ||||||
Net sales
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1,986 | 1,970 | ||||||
Licensing revenue
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47 | 45 | ||||||
Net revenues
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2,033 | 2,015 | ||||||
Cost of goods sold(a)
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(874 | ) | (843 | ) | ||||
Gross profit
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1,159 | 1,172 | ||||||
Selling, general, and administrative expenses(a)
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(837 | ) | (815 | ) | ||||
Amortization of intangible assets
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(6 | ) | (9 | ) | ||||
Restructuring and other charges
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(1 | ) | (14 | ) | ||||
Total other operating expenses, net
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(844 | ) | (838 | ) | ||||
Operating income
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315 | 334 | ||||||
Foreign currency losses
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(8 | ) | (4 | ) | ||||
Interest expense
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(3 | ) | (4 | ) | ||||
Interest and other income, net
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- | - | ||||||
Equity in losses of equity-method investees
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(3 | ) | (2 | ) | ||||
Income before provision for income taxes
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301 | 324 | ||||||
Provision for income taxes
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(86 | ) | (87 | ) | ||||
Net income
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$ | 215 | $ | 237 | ||||
Net income per share - Basic
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$ | 2.44 | $ | 2.62 | ||||
Net income per share - Diluted
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$ | 2.41 | $ | 2.57 | ||||
Weighted average shares outstanding - Basic
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88.1 | 90.1 | ||||||
Weighted average shares outstanding - Diluted
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89.0 | 91.8 | ||||||
Dividends declared per share
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$ | 0.45 | $ | 0.45 | ||||
(a) Includes total depreciation expense of:
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$ | (72 | ) | $ | (58 | ) |
CONSOLIDATED STATEMENTS OF INCOME
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Prepared in accordance with U.S. Generally Accepted Accounting Principles
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(in millions, except per share data)
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(Unaudited)
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Nine Months Ended | ||||||||
December 27,
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December 28,
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2014
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2013
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Wholesale net sales
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$ | 2,488 | $ | 2,503 | ||||
Retail net sales
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3,115 | 2,953 | ||||||
Net sales
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5,603 | 5,456 | ||||||
Licensing revenue
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132 | 127 | ||||||
Net revenues
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5,735 | 5,583 | ||||||
Cost of goods sold(a)
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(2,401 | ) | (2,323 | ) | ||||
Gross profit
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3,334 | 3,260 | ||||||
Selling, general, and administrative expenses(a)
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(2,463 | ) | (2,327 | ) | ||||
Amortization of intangible assets
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(19 | ) | (28 | ) | ||||
Gain on acquisition of Chaps
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- | 16 | ||||||
Restructuring and other charges
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(7 | ) | (16 | ) | ||||
Total other operating expenses, net
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(2,489 | ) | (2,355 | ) | ||||
Operating income
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845 | 905 | ||||||
Foreign currency losses
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(14 | ) | (9 | ) | ||||
Interest expense
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(12 | ) | (16 | ) | ||||
Interest and other income, net
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4 | 4 | ||||||
Equity in losses of equity-method investees
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(9 | ) | (7 | ) | ||||
Income before provision for income taxes
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814 | 877 | ||||||
Provision for income taxes
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(236 | ) | (254 | ) | ||||
Net income
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$ | 578 | $ | 623 | ||||
Net income per share - Basic
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$ | 6.53 | $ | 6.89 | ||||
Net income per share - Diluted
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$ | 6.46 | $ | 6.74 | ||||
Weighted average shares outstanding - Basic
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88.5 | 90.4 | ||||||
Weighted average shares outstanding - Diluted
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89.5 | 92.4 | ||||||
Dividends declared per share
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$ | 1.35 | $ | 1.25 | ||||
(a) Includes total depreciation expense of:
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$ | (200 | ) | $ | (165 | ) |
RALPH LAUREN CORPORATION | |||||||||||
OTHER INFORMATION | |||||||||||
(in millions) | |||||||||||
(Unaudited) | |||||||||||
SEGMENT INFORMATION
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Net revenues and operating income for the periods ended December 27, 2014 and December 28, 2013 for each segment were as follows:
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Three Months Ended
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Nine Months Ended
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December 27,
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December 28,
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December 27,
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December 28,
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2014
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2013
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2014
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2013
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Net revenues: | |||||||||||||||||||
Wholesale | $ | 837 | $ | 840 | $ | 2,488 | $ | 2,503 | |||||||||||
Retail | 1,149 | 1,130 | 3,115 | 2,953 | |||||||||||||||
Licensing | 47 | 45 | 132 | 127 | |||||||||||||||
Total net revenues | $ | 2,033 | $ | 2,015 | $ | 5,735 | $ | 5,583 | |||||||||||
* Operating income: | |||||||||||||||||||
Wholesale | $ | 207 | $ | 217 | $ | 634 | $ | 667 | |||||||||||
Retail | 194 | 221 | 499 | 521 | |||||||||||||||
Licensing | 42 | 40 | 120 | 115 | |||||||||||||||
443 | 478 | 1,253 | 1,303 | ||||||||||||||||
Unallocated corporate expenses | (127 | ) | (130 | ) | (401 | ) | (398 | ) | |||||||||||
Gain on acquisition of Chaps | - | - | - | 16 | |||||||||||||||
Unallocated restructuring and other charges | (1 | ) | (14 | ) | (7 | ) | (16 | ) | |||||||||||
Total operating income | $ | 315 | $ | 334 | $ | 845 | $ | 905 |
*
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During the fourth quarter of Fiscal 2014, the Company changed the manner in which it allocates certain costs for management reporting due to strategic changes it implemented to globalize certain functions that will position the Company for future growth. These changes included realigning certain costs between segments and retaining other costs at the corporate level for some of the Company's global functions. Management believes these changes allow for a better representation of segment profitability and are aligned with how segment performance is assessed. This expense realignment did not result in a change to the Company’s reportable segments. However, as a result of these changes, the Company determined that it is more appropriate to retain certain previously allocated corporate expenses within its corporate unallocated expenses. All prior period segment information has been recast to reflect the change in the Company’s segment measurement on a comparable basis. This recast had no impact on the Company’s consolidated financial statements in any period.
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RALPH LAUREN CORPORATION
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Constant Currency Financial Measures
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(in millions)
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(Unaudited)
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Same - Store Sales Data
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Three Months Ended
December 27, 2014
% Change
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Nine Months Ended
December 27, 2014
% Change
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As Reported
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Constant Currency
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As Reported
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Constant Currency
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Total Ralph Lauren
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(2 | %) | 0 | % | 0 | % | 1 | % | ||||||||
Operating Segment Data
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Three Months Ended
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% Change
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December 27, 2014
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December 28, 2013
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As Reported
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Constant Currency
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Wholesale net sales
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$ | 837 | $ | 840 | (0.4 | %) | 1.5 | % | ||||||||
Retail net sales
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1,149 | 1,130 | 1.7 | % | 4.5 | % | ||||||||||
Net sales
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1,986 | 1,970 | 0.8 | % | 3.2 | % | ||||||||||
Licensing revenue
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47 | 45 | 6.1 | % | 6.1 | % | ||||||||||
Net revenues
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$ | 2,033 | $ | 2,015 | 0.9 | % | 3.3 | % | ||||||||
Nine Months Ended
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% Change
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December 27, 2014
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December 28, 2013
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As Reported
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Constant Currency
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Wholesale net sales
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$ | 2,488 | $ | 2,503 | (0.6 | %) | (0.1 | %) | ||||||||
Retail net sales
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3,115 | 2,953 | 5.5 | % | 5.9 | % | ||||||||||
Net sales
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5,603 | 5,456 | 2.7 | % | 3.2 | % | ||||||||||
Licensing revenue
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132 | 127 | 3.9 | % | 3.9 | % | ||||||||||
Net revenues
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$ | 5,735 | $ | 5,583 | 2.7 | % | 3.2 | % |