Polo Ralph Lauren Reports Second Quarter Fiscal 2010 Results
More News related to RL
- Goldman Sachs Removed Coca-Cola Enterprises (CCE) from their Conviction Buy List
- Goldman Sachs Added Polo Ralph Lauren (RL) to its Conviction Buy List
- Polo Ralph Lauren (RL) Declares $0.10 Quarterly Dividend; 0.5% Yield
- Polo Ralph Lauren Announces Increase of Its Quarterly Cash Dividend and Additional $225 Million Stock Repurchase Authorization
- Polo Ralph Lauren (RL) Q3 Results Shows Why It Is Well Dressed (Update)
-- Second Quarter Revenues Were $1.4 billion
-- Second Quarter Diluted EPS Increased 11% to $1.75
-- The Company Updates Its Fiscal 2010 Outlook
NEW YORK--(BUSINESS WIRE)-- Polo Ralph Lauren Corporation (NYSE: RL) today reported net income of $178 million, or $1.75 per diluted share, for the second quarter of Fiscal 2010, compared to net income of $161 million, or $1.58 per diluted share, for the second quarter of Fiscal 2009.
Net income for the first six months of Fiscal 2010 declined 1% to $254 million from $256 million in the comparable period last fiscal year. Net income per diluted share of $2.51 in the first six months of Fiscal 2010 was equivalent to the prior year period.
"Today's results confirm the resilience and vitality of our strategy and demonstrate the superb execution of our management team," said Ralph Lauren, Chairman and Chief Executive Officer. "We continue to invest in our competitive advantages in design and marketing and to grow our presence around the world, which is helping to mitigate sustained market challenges. We are operating today as a leaner, stronger organization than ever before, even as our long-term growth prospects remain compelling," Mr. Lauren added.
"Our results have exceeded our expectations for the first half of the year, reflecting market share gains across products and regions and disciplined operational management," said Roger Farah, President and Chief Operating Officer. "In the back half of Fiscal 2010, we will continue to invest in high growth international markets and exciting new product categories, both critical components of our long-term strategic objectives. We are raising our sales expectations for the remainder of the year, but we continue to be cautious with our outlook and are planning accordingly. Nevertheless, our global teams are engaged to read and react to evolving market trends as we have done successfully in the first half of the year."
Second Quarter and First Half Fiscal 2010 Income Statement Review
Net Revenues. Net revenues for the second quarter of Fiscal 2010 were $1.4 billion, 4% below net revenues for the comparable period last year. The decline in net revenues primarily reflects lower domestic wholesale sales, a reduction in same-store sales at the Company's retail segment and an approximate 1% net unfavorable effect of foreign currency translation that more than offset the wholesale contribution of formerly licensed childrenswear and golf apparel products in Japan and low single-digit constant currency growth in Europe.
First half net revenues were $2.4 billion, 6% below the comparable period of Fiscal 2009. The decline in net revenues is primarily attributable to lower domestic wholesale revenues, a reduction in same-store sales at the Company's retail segment and an approximate 1% net unfavorable effect of foreign currency translation that more than offset the wholesale contribution of formerly licensed childrenswear and golf apparel products in Japan and low single-digit constant currency growth in Europe.
-- Wholesale Sales. Wholesale sales of $815 million were 4% below the prior
year period. Lower global shipment volumes and the net unfavorable
effect of foreign currency translation more than offset the incremental
benefit of formerly licensed childrenswear and golf apparel products in
Japan.
For the first six months of Fiscal 2010, wholesale sales were $1.3
billion, 6% below the first half of Fiscal 2009. The year-over-year
decline in wholesale sales reflects lower global shipment volumes and
the net unfavorable effect of foreign currency translation that more
than offset the incremental benefit of formerly licensed childrenswear
and golf apparel products in Japan.
-- Retail Sales. Retail sales declined 3% to $513 million from $531 million
in the second quarter last year, reflecting a net reduction in
comparable store sales and the net unfavorable effect of foreign
currency translation. Comparable store sales, which include
RalphLauren.com, declined 6%, reflecting reductions of 18% at Ralph
Lauren stores, 4% at factory stores and 3% at Club Monaco stores.
RalphLauren.com sales increased 12% in the second quarter of Fiscal
2010.
Retail sales in the first half were $976 million, 5% below the first
half last fiscal year. Comparable store sales for the first half of
Fiscal 2010 declined 7%, reflecting reductions of 21% at Ralph Lauren
stores, 4% at factory stores and 9% at Club Monaco stores.
RalphLauren.com sales grew 13% over the comparable six month period last
year.
-- Licensing. Licensing royalties declined 10% to $47 million from $52
million in the second quarter last year. A decline in Japanese product
licensing revenues associated with the Company assuming direct control
of certain product categories in Japan and lower fragrance and home
product licensing revenues were partially offset by higher Chaps
licensing royalties.
Licensing royalties in the first half of Fiscal 2010 were down 11% to
$88 million from $99 million in the prior year period. A decline in
Japanese product licensing revenues associated with the Company assuming
direct control of certain product categories in Japan and lower
fragrance and home product licensing revenues were partially offset by
higher Chaps licensing royalties.
Gross Profit. Gross profit of $785 million for the second quarter was essentially in line with the prior year period. The gross profit rate increased 190 basis points to 57.1% from 55.2% in the second quarter last year. The expansion in the gross profit rate reflects improved wholesale and retail segment margins, particularly in international markets, as well as supply chain cost savings initiatives.
Gross profit for the first half of Fiscal 2010 declined 3% to $1.4 billion. First half gross profit rate of 57.8% was 170 basis points greater than the prior year, primarily due to higher wholesale and retail segment margins, particularly in international markets, as well as supply chain cost savings initiatives.
Operating Expenses. Operating expenses declined 1% in the second quarter to $539 million from $545 million in the second quarter of Fiscal 2009. Operating expense margin was 39.2%, 100 basis points greater than last year, primarily as a result of lower sales and incremental expenses associated with business expansion that were partially offset by Company-wide expense savings initiatives.
Operating expenses in the first half of Fiscal 2010 were $1.0 billion, 1% below the prior year period. Operating expense margin was 42.7%, 190 basis points greater than the first half of Fiscal 2009, primarily due to lower sales and incremental expenses associated with business expansion that were partially offset by Company-wide expense savings initiatives.
Operating Income. Operating income for the second quarter of Fiscal 2010 rose 1% to $246 million from $243 million in the second quarter last year. The operating margin was 17.9%, representing a 90 basis point improvement compared to the second quarter last year, primarily due to the higher gross profit margin and expense savings initiatives described above that were partially offset by lower sales volumes and higher operating expenses associated with business expansion.
For the first half of Fiscal 2010, operating income declined 7% to $363 million from $390 million in the first half of Fiscal 2009. Operating margin rate for the first six months of Fiscal 2010 was 15.1%, 20 basis points below the prior year period.
-- Wholesale Operating Income. Wholesale operating income increased 4% in
the second quarter of Fiscal 2010 to $221 million from $212 million last
year. Wholesale operating margin was 27.1% in the second quarter, 210
basis points greater than last year, primarily as a result of gross
profit rate improvement and disciplined expense management that more
than offset the impact of lower global shipment volumes.
Wholesale operating income declined 7% in the first half of Fiscal 2010
to $297 million from $319 million in the first half last year. Wholesale
operating margin for the first half of Fiscal 2010 was 22.2%, 30 basis
points below the first half last year, as lower global shipment volumes
and expenses associated with integrating the Japanese childrenswear and
golf apparel operations more than offset an improved wholesale segment
gross profit rate and disciplined expense management.
-- Retail Operating Income. Retail operating income was $64 million, 11%
greater than the $57 million achieved in the second quarter of Fiscal
2009, and retail operating margin was 12.4% compared to 10.8% in the
prior year period. The growth in retail operating income and the
expansion in margin rate is a result of strong international and
RalphLauren.com performance, in addition to expense reduction
initiatives, that more than offset the decline in retail segment
revenues.
Retail operating income increased 7% in the first half of Fiscal 2010 to
$133 million from $125 million in the prior year period, and the retail
operating margin was 13.7%, 150 basis points greater than the first half
of Fiscal 2009. The growth in retail operating income and the expansion
in margin rate is a result of strong international and RalphLauren.com
performance, in addition to expense reduction initiatives, that more
than offset the decline in retail segment revenues.
-- Licensing Operating Income. Licensing operating income declined 12% to
$24 million from $27 million in the second quarter of Fiscal 2009 as
lower international licensing income more than offset improved
profitability for domestic product licenses.
First half 2010 licensing operating income declined 4% to $49 million
from $51 million in the prior year period as lower international
licensing income more than offset improved profitability for domestic
product licenses and lower net costs associated with the transition of
formerly licensed operations to directly controlled operations.
Net Income and Diluted EPS. Net income for the second quarter of Fiscal 2010 grew 10% to $178 million from $161 million last year. Net income per diluted share rose 11% to $1.75 per share from $1.58 last year. The growth in net income and diluted EPS results for the second quarter of Fiscal 2010 principally relates to an effective tax rate of 26.7%, 750 basis points below the prior year. The lower effective tax rate for the second quarter of Fiscal 2010 was primarily a result of the resolution of certain discrete tax items and a more favorable geographic income mix.
Net income for the first six months of Fiscal 2010 declined 1% to $254 million from $256 million last year. Net income per diluted share of $2.51 in the first six months of Fiscal 2010 was equivalent to the prior year period. The net income and diluted EPS results for the first half of Fiscal 2010 include the impact of a 28.6% effective tax rate, which is 580 basis points below the prior year period, a function of the resolution of certain discrete tax items and a more favorable geographic income mix.
Second Quarter Fiscal 2010 Balance Sheet Review
The Company ended the second quarter with $970 million in cash, cash equivalents and short-term and non-current investments, or $663 million in cash, cash equivalents and short-term and non-current investments net of debt ("net cash and investments"), compared to $528 million in cash, cash equivalents and short-term and non-current investments and $88 million in net cash and investments at the end of the second quarter of Fiscal 2009.
During the second quarter, the Company repurchased approximately 0.9 million shares of Class A Common Stock, utilizing $60 million of its authorized share repurchase programs, and has approximately $206 million remaining under such programs. The Company had $35 million in capital expenditures in the second quarter, compared to $29 million in the prior year period. The second quarter ended with inventory down 1% to $610 million from $619 million in the second quarter of last year.
Global Retail Store Network
During the second quarter, the Company opened five directly operated stores and closed two directly operated stores. Over the last twelve months, the Company has opened twelve directly operated stores and closed twelve directly operated stores.
At the end of the second quarter, the Company operated 328 stores with a total of approximately 2.5 million square feet, both consistent with the prior year period. The current retail group consists of 87 Ralph Lauren stores, 62 Club Monaco stores, 168 Polo factory stores and 11 Rugby stores. In addition, at the end of the second quarter, international licensing partners operated 94 Ralph Lauren stores and 61 Club Monaco stores and dedicated shops.
Fiscal 2010 Outlook
Due to the better-than-expected revenue performance for the first six months of the year, the Company now expects Fiscal 2010 net revenues to decline by a mid single digit rate, which compares to prior guidance of a high single digit decline in net revenues. In the third quarter of Fiscal 2010, the Company expects net revenues to decline at a low single digit rate, inclusive of flat to low single digit comparable store sales growth for its retail segment. The Company expects operating expenses for the third quarter of Fiscal 2010 to grow at a high single digit rate from the prior year period, primarily reflecting incremental spending related to its Asia-Pacific initiatives and higher incentive compensation accruals.
Conference Call
As previously announced, the Company will host a conference call and live online webcast today, Tuesday, November 3, 2009, 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 (719) 457-2710. To access the conference call, listeners should dial in by 8:45 a.m. Eastern and request to be connected to the Polo Ralph Lauren Second Quarter Fiscal Year 2010 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 1:00 P.M. Eastern, Tuesday, November 3, 2009 through 1:00 P.M. Eastern, Monday, November 9, 2009 by dialing (719) 457-0820 and entering passcode 4259973.
ABOUT POLO RALPH LAUREN
Polo Ralph Lauren Corporation (NYSE: RL) is a leader in the design, marketing and distribution of premium lifestyle products in four categories: apparel, home, accessories and fragrances. For more than 40 years, Polo'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 Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren Collection, Black Label, Blue Label, Lauren by Ralph Lauren, RRL, RLX, Rugby, Ralph Lauren Childrenswear, American Living, Chaps and Club Monaco, constitute one of the world's most widely recognized families of consumer brands. For more information, go to http://investor.ralphlauren.com.
This press release, including the statements in the "Fiscal 2010 Outlook" section and oral statements made from time to time by representatives of the Company, contain certain "forward-looking statements" concerning current expectations about the Company's future results and condition, including revenues, store openings, gross margins, expenses and earnings. These expectations contain risks and uncertainties. Actual results might differ materially from those projected in the forward-looking statements. Among the factors that could cause actual results to materially differ include, among others, changes in the competitive marketplace, including the introduction of new products or pricing changes by our competitors, changes in the economy and other events leading to a reduction in discretionary consumer spending; risks associated with the Company's dependence on sales to a limited number of large department store customers, including risks related to extending credit to customers; risks associated with the Company's dependence on its licensing partners for a substantial portion of its net income and risks associated with a lack of operational and financial control over licensed businesses; risks associated with changes in social, political, economic and other conditions affecting foreign operations or sourcing (including foreign exchange fluctuations) and the possible adverse impact of changes in import restrictions; risks associated with uncertainty relating to the Company's ability to implement its growth strategies or its ability to successfully integrate acquired businesses; risks arising out of litigation or trademark conflicts, 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 update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
POLO RALPH LAUREN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
September 26, March 28, September 27,
2009 2009 2008
ASSETS
Current assets:
Cash and cash equivalents $ 423.5 $ 481.2 $ 417.6
Short-term investments 502.2 338.7 92.3
Accounts receivable, net 482.4 474.9 531.1
of allowances
Inventories 610.4 525.1 619.3
Deferred tax assets 116.6 101.8 80.3
Prepaid expenses and 116.0 135.0 125.9
other
Total current assets 2,251.1 2,056.7 1,866.5
Non-current investments 44.4 29.3 17.7
Property and equipment, 643.7 651.6 692.4
net
Deferred tax assets 104.0 102.8 113.5
Goodwill 989.0 966.4 962.0
Intangible assets, net 342.2 348.9 350.8
Other assets 197.6 200.8 273.3
Total assets $ 4,572.0 $ 4,356.5 $ 4,276.2
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 168.1 $ 165.9 $ 221.3
Income tax payable 77.5 35.9 46.4
Accrued expenses and 487.6 472.3 467.4
other
Total current liabilities 733.2 674.1 735.1
Long-term debt 307.5 406.4 439.2
Non-current liability for unrecognized 132.6 154.8 157.7
tax benefits
Other non-current 403.1 386.1 418.8
liabilities
Total liabilities 1,576.4 1,621.4 1,750.8
Equity:
Common stock 1.1 1.1 1.1
Additional 1,151.8 1,108.4 1,066.3
paid-in-capital
Retained earnings 2,709.9 2,465.5 2,325.5
Treasury stock, Class A, (1,041.2 ) (966.7 ) (966.2 )
at cost
Accumulated other 174.0 126.8 98.7
comprehensive income
Total equity 2,995.6 2,735.1 2,525.4
Total liabilities and $ 4,572.0 $ 4,356.5 $ 4,276.2
equity
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Prepared in accordance with Generally Accepted Accounting Principles (GAAP)
(In millions, except per share data)
(Unaudited)
Three Months Ended
September 26, September 27,
2009 2008
Wholesale Net Sales $ 814.6 $ 846.2
Retail Net Sales 512.5 530.6
Net Sales 1,327.1 1,376.8
Licensing Revenue 47.1 52.1
Net Revenues 1,374.2 1,428.9
Cost of Goods Sold (a) (589.4 ) (640.7 )
Gross Profit 784.8 788.2
Selling, General & Administrative Expenses (a) (525.7 ) (532.3 )
Amortization of Intangible Assets (5.2 ) (5.0 )
Impairment of Assets (1.7 ) (7.1 )
Restructuring Charges (6.3 ) (0.9 )
Total SG&A Expenses (538.9 ) (545.3 )
Operating Income 245.9 242.9
Foreign Currency Gains (Losses) (2.6 ) 2.7
Interest Expense (5.6 ) (6.1 )
Interest and Other Income, Net 6.4 5.9
Equity in Income (Loss) of Equity-Method Investees (1.8 ) (0.8 )
Income Before Provision for Income Taxes 242.3 244.6
Provision for Income Taxes (64.8 ) (83.6 )
Net Income $ 177.5 $ 161.0
Net Income Per Share - Basic $ 1.79 $ 1.62
Net Income Per Share - Diluted $ 1.75 $ 1.58
Weighted Average Shares Outstanding - Basic 99.4 99.3
Weighted Average Shares Outstanding - Diluted 101.6 101.8
Dividends declared per share $ 0.05 $ 0.05
(a) Includes total depreciation expense of: $ (39.9 ) $ (42.0 )
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Prepared in accordance with Generally Accepted Accounting Principles (GAAP)
(In millions, except per share data)
(Unaudited)
Six Months Ended
September 26, September 27,
2009 2008
Wholesale Net Sales $ 1,334.1 $ 1,420.7
Retail Net Sales 975.5 1,023.0
Net Sales 2,309.6 2,443.7
Licensing Revenue 88.3 98.7
Net Revenues 2,397.9 2,542.4
Cost of Goods Sold (a) (1,011.9 ) (1,115.8 )
Gross Profit 1,386.0 1,426.6
Selling, General & Administrative Expenses (a) (1,004.6 ) (1,018.8 )
Amortization of Intangible Assets (10.4 ) (9.9 )
Impairment of Assets (1.7 ) (7.1 )
Restructuring Charges (6.7 ) (1.3 )
Total SG&A Expenses (1,023.4 ) (1,037.1 )
Operating Income 362.6 389.5
Foreign Currency Gains (Losses) (1.7 ) 2.9
Interest Expense (12.2 ) (13.1 )
Interest and Other Income, Net 9.2 13.1
Equity in Income (Loss) of Equity-Method Investees (1.5 ) (1.6 )
Income Before Provision for Income Taxes 356.4 390.8
Provision for Income Taxes (102.1 ) (134.6 )
Net Income $ 254.3 $ 256.2
Net Income Per Share - Basic $ 2.56 $ 2.58
Net Income Per Share - Diluted $ 2.51 $ 2.51
Weighted Average Shares Outstanding - Basic 99.3 99.4
Weighted Average Shares Outstanding - Diluted 101.5 102.0
Dividends declared per share $ 0.10 $ 0.10
(a) Includes total depreciation expense of: $ (79.0 ) $ (83.2 )
POLO RALPH LAUREN CORPORATION
OTHER INFORMATION
(In millions)
(Unaudited)
SEGMENT INFORMATION
The net revenues and operating income for the periods ended September 26, 2009
and September 27, 2008 for each segment were as follows:
Three Months Ended Six Months Ended
September 26, September 27, September 26, September 27,
2009 2008 2009 2008
Net revenues:
Wholesale $ 814.6 $ 846.2 $ 1,334.1 $ 1,420.7
Retail 512.5 530.6 975.5 1,023.0
Licensing 47.1 52.1 88.3 98.7
Total Net Revenues $ 1,374.2 $ 1,428.9 $ 2,397.9 $ 2,542.4
Operating Income
(Loss):
Wholesale $ 220.7 $ 211.7 $ 296.6 $ 319.1
Retail 63.5 57.4 133.2 124.5
Licensing 23.5 26.8 49.2 51.0
307.7 295.9 479.0 494.6
Less:
Unallocated (55.5 ) (52.1 ) (109.7 ) (103.8 )
Corporate Expenses
Unallocated
Restructuring (6.3 ) (0.9 ) (6.7 ) (1.3 )
Charges
Total Operating $ 245.9 $ 242.9 $ 362.6 $ 389.5
Income
Constant Currency Financial Measures
(In millions)
(Unaudited)
Same - Store Sales Data
Three Months Ended Six Months Ended
September 26, 2009 September 26, 2009
As Reported Constant Currency As Reported Constant
Currency
Ralph Lauren (18%) (16%) (21%) (19%)
Stores
Factory Stores (4%) (3%) (4%) (3%)
Club Monaco (3%) (3%) (9%) (9%)
RL Media 12% 12% 13% 13%
Total (6%) (5%) (7%) (6%)
Operating Segment Data
Three Months Ended Percent Change
September 26, 2009 September 27, 2008 As Reported Constant
Currency
Wholesale Net $ 814.6 $ 846.2 (4%) (3%)
Sales
Retail Net Sales 512.5 530.6 (3%) (3%)
Net Sales 1,327.1 1,376.8 (4%) (3%)
Licensing 47.1 52.1 (10%) (10%)
Revenue
Net Revenue $ 1,374.2 $ 1,428.9 (4%) (3%)
Six Months Ended Percent Change
September 26, 2009 September 27, 2008 As Reported Constant
Currency
Wholesale Net $ 1,334.1 $ 1,420.7 (6%) (5%)
Sales
Retail Net Sales 975.5 1,023.0 (5%) (3%)
Net Sales 2,309.6 2,443.7 (5%) (4%)
Licensing 88.3 98.7 (11%) (11%)
Revenue
Net Revenue $ 2,397.9 $ 2,542.4 (6%) (4%)
Polo Ralph Lauren is a global company that reports its financial information in U.S. dollars, in accordance with U.S. GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by the Company in U.S. dollars because the underlying currencies in which the Company transacts change in value over time compared to the U.S. dollar. These rate fluctuations can have a significant effect on reported operating results. As a supplement to its reported operating results, the Company presents constant currency financial information, which is a non-GAAP financial measure. The Company uses constant currency information to provide a framework to assess how its businesses performed excluding the effects of foreign currency exchange rate fluctuations. The Company believes this information is useful to investors to facilitate comparisons of operating results and better identify trends in its businesses. These 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 GAAP.
Source: Polo Ralph Lauren Corporation
Related Categories
Press ReleasesStocks Mentioned
-2.05Related Entities
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
