Ralph Lauren (RL) Tops Q4 EPS by 11c, Revenues In-Line

Ralph Lauren (NYSE: RL) reported Q4 EPS of $0.89, $0.11 better than the analyst estimate of $0.78. Revenue for the quarter came in at $1.57 billion versus the consensus estimate of $1.56 billion.

Full Year Fiscal 2018 and First Quarter Outlook

The full year Fiscal 2018 and first quarter guidance excludes foreign currency impacts, restructuring and other related charges expected to be recorded in connection with the Company’s Way Forward plan, and severance-related payments associated with the CEO departure.

For Fiscal 2018, net revenue is expected to decrease 8-9%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have approximately 150 basis points of negative impact on revenue growth in Fiscal 2018.

The Company expects operating margin for Fiscal 2018 to be 9.0-10.5%, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to pressure operating margin for Fiscal 2018 by 50-75 basis points.

In the first quarter of Fiscal 2018, the Company expects net revenue to be down low double-digits, excluding the impact of foreign currency. Based on current exchange rates, foreign currency is expected to have approximately 225 basis points of negative impact on revenue growth in the first quarter of Fiscal 2018.

Operating margin for the first quarter of Fiscal 2018 is expected to be about 9.5-10.0%, excluding foreign currency impacts. Foreign currency is estimated to pressure operating margin by approximately 75 basis points.

In Fiscal 2018, the Company is adopting Accounting Standard Update (ASU) 2016-09 for the accounting of employee share-based payments, which was recently issued by the Financial Accounting Standards Board (FASB). This will affect the Company’s effective tax rate and increase its variability, with one of the key variables being the price of our stock.

Excluding the impact of ASU 2016-09, the Fiscal 2018 tax rate is estimated at 25%. Based on a stock price of $75 per share, the adoption of ASU 2016-09 is expected to raise the Fiscal 2018 tax rate to 28%.

The adoption of ASU 2016-09 is expected to be most impactful in the first and second quarters of the fiscal year due to the timing of vesting and exercise of certain stock compensation. Including the impact of ASU 2016-09, the first quarter of Fiscal 2018 tax rate is estimated at 33%.

We are planning capital expenditures of $300-320 million for Fiscal 2018.

Fiscal Year 2018 Outlook – Non-GAAP Disclosure:

The Company is not able to provide a full reconciliation of the non-GAAP financial measures to GAAP because certain material items that impact these measures, such as the timing and exact amount of charges related to our Way Forward plan, have not yet occurred or are out of the Company’s control. Accordingly, a reconciliation of our non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort. The Company has identified the estimated impact of the items excluded from its Fiscal 2018 guidance.

This Fiscal 2018 non-GAAP guidance excludes estimated pretax charges related to our Way Forward plan and severance-related payments associated with the CEO departure, which collectively are anticipated to result in estimated charges of approximately $200 million.

For earnings history and earnings-related data on Ralph Lauren (RL) click here.

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