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Ralph Lauren Reports Third Quarter Fiscal 2012 Results

Stocks in this article: RL

Conference Call

As previously announced, the Company will host a conference call and live online webcast today, Wednesday, February 8, 2012, 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) 325-2133. 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 Fiscal Year 2012 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, Wednesday, February 8, 2012 through 1:00 P.M. Eastern, Tuesday, February 14, 2012 by dialing (719) 457-0820 and entering passcode 5748811.

ABOUT RALPH LAUREN

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 44 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 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, Denim & Supply Ralph Lauren, 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 and oral statements made from time to time by representatives of the Company contain certain "forward-looking statements" within the meaning of the federal securities laws. Forward looking statements are made concerning current expectations about the Company's future results and condition, including revenues, store openings, gross margins, expenses and earnings. 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 global 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, the price of raw materials and labor costs), the possible adverse impact of changes in import restrictions and other risks associated with the Company’s international operations, such as violations of laws prohibiting improper payments, and the burdens of complying with a variety of foreign laws and regulations, including trade and labor restrictions and related laws; 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; changes in the Company’s effective tax rates or credit profile and ratings within the financial community; the impact of the downgrade by Standard & Poor’s (“S&P”) on the credit rating of the United States and other countries, and the risk of further downgrades by S&P or other credit agencies on the credit rating of the United States and other countries; risks associated with securing the Company’s facilities and systems and those of its third party service providers from, among other things, cybersecurity breaches, acts of vandalism, computer viruses or similar events; risks associated with the Company’s distribution and global information technology systems; the loss of key personnel; 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.

 
RALPH LAUREN CORPORATION
CONSOLIDATED BALANCE SHEETS
Prepared in accordance with Generally Accepted Accounting Principles
(in millions)
(Unaudited)
                 
 
 
December 31, April 2, January 1,
2011 2011 2011
 
ASSETS
Current assets:
Cash and cash equivalents $ 815.8 $ 453.0 $ 643.4
Short-term investments 386.3 593.9 599.4
Accounts receivable, net of allowances 440.2 442.8 338.1
Inventories 894.7 702.1 697.7
Income tax receivable 9.8 57.8 3.1
Deferred tax assets 101.9 92.1 82.3
Prepaid expenses and other   177.8     136.3     149.1  
 
Total current assets 2,826.5 2,478.0 2,513.1
 
Non-current investments 72.5 83.6 65.5
Property and equipment, net 826.5 788.8 756.4
Deferred tax assets 72.2 76.7 137.5
Goodwill 1,013.4 1,016.3 996.7
Intangible assets, net 370.2 387.7 392.0
Other assets   145.2     150.0     147.4  
 
Total assets $ 5,326.5   $ 4,981.1   $ 5,008.6  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 169.7 $ 141.3 $ 107.8
Income tax payable 142.8 8.9 39.9
Accrued expenses and other   666.7     681.8     644.8  
 
Total current liabilities 979.2 832.0 792.5
 
Long-term debt 265.6 291.9 275.1
Non-current liability for unrecognized tax benefits 162.8 156.4 144.7
Other non-current liabilities   389.2     396.1     383.3  
 
Total liabilities   1,796.8     1,676.4     1,595.6  
 
Equity:
Common stock 1.2 1.2 1.2
Additional paid-in-capital 1,567.0 1,444.7 1,394.2
Retained earnings 3,966.5 3,435.3 3,381.0
Treasury stock, Class A, at cost (2,211.7 ) (1,792.3 ) (1,545.4 )
Accumulated other comprehensive income   206.7     215.8     182.0  
 
Total equity   3,529.7     3,304.7     3,413.0  
 
Total liabilities and equity $ 5,326.5   $ 4,981.1   $ 5,008.6  
 
           
RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Prepared in accordance with Generally Accepted Accounting Principles
(in millions, except per share data)
(Unaudited)
 
 

 

Three Months Ended

December 31, January 1,
2011 2011
 
 
Wholesale Net Sales $ 750.0 $ 676.3
Retail Net Sales   1,006.0     821.6  
 
Net Sales 1,756.0 1,497.9
 
Licensing Revenue   49.6     50.1  
 
Net Revenues 1,805.6 1,548.0
 
Cost of Goods Sold (a)   (774.0 )   (640.1 )
 
Gross Profit 1,031.6 907.9
 
Selling, General & Administrative Expenses (a) (754.3 ) (655.3 )
Amortization of Intangible Assets   (7.2 )   (6.3 )
Total Operating Expenses (761.5 ) (661.6 )
 
Operating Income 270.1 246.3
 
Foreign Currency Gains (Losses) (2.2 ) (2.6 )
 
Interest Expense (6.3 ) (4.3 )
 
Interest and Other Income, Net 2.7 1.8
 
Equity in Income (Loss) of Equity-Method Investees   (2.2 )   (2.8 )
 
Income Before Provision for Income Taxes 262.1 238.4
 
Provision for Income Taxes   (93.1 )   (70.0 )
 
Net Income $ 169.0   $ 168.4  
 
Net Income Per Share - Basic $ 1.83   $ 1.76  
 
Net Income Per Share - Diluted $ 1.78   $ 1.72  
 
Weighted Average Shares Outstanding - Basic   92.2     95.5  
 
Weighted Average Shares Outstanding - Diluted   94.9     98.1  
 
Dividends declared per share $ 0.20   $ 0.10  
 
(a) Includes total depreciation expense of: $ (49.6 ) $ (44.1 )
 
           
RALPH LAUREN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Prepared in accordance with Generally Accepted Accounting Principles
(in millions, except per share data)
(Unaudited)
 
 

 

Nine Months Ended

December 31, January 1,
2011 2011
 
 
Wholesale Net Sales $ 2,418.5 $ 2,026.1
Retail Net Sales   2,680.8     2,072.9  
 
Net Sales 5,099.3 4,099.0
 
Licensing Revenue   137.3     134.4  
 
Net Revenues 5,236.6 4,233.4
 
Cost of Goods Sold (a)   (2,164.9 )   (1,725.4 )
 
Gross Profit 3,071.7 2,508.0
 
Selling, General & Administrative Expenses (a) (2,146.9 ) (1,761.6 )
Amortization of Intangible Assets   (21.8 )   (18.5 )
Total Operating Expenses (2,168.7 ) (1,780.1 )
 
Operating Income 903.0 727.9
 
Foreign Currency Gains (Losses) (4.2 ) (1.2 )
 
Interest Expense (18.8 ) (13.2 )
 
Interest and Other Income, Net 9.3 5.2
 
Equity in Income (Loss) of Equity-Method Investees   (5.2 )   (4.8 )
 
Income Before Provision for Income Taxes 884.1 713.9
 
Provision for Income Taxes   (297.5 )   (219.5 )
 
Net Income $ 586.6   $ 494.4  
 
Net Income Per Share - Basic $ 6.32   $ 5.15  
 
Net Income Per Share - Diluted $ 6.14   $ 5.01  
 
Weighted Average Shares Outstanding - Basic   92.8     96.0  
 
Weighted Average Shares Outstanding - Diluted   95.6     98.7  
 
Dividends declared per share $ 0.60   $ 0.30  
 
(a) Includes total depreciation expense of: $ (146.4 ) $ (124.3 )
 
 
RALPH LAUREN CORPORATION
OTHER INFORMATION
(in millions)
(Unaudited)
                   
SEGMENT INFORMATION
Net revenues and operating income for the periods ended December 31, 2011 and January 1, 2011 for each segment were as follows:
 

Three Months Ended

Nine Months Ended

December 31, January 1, December 31, January 1,
2011 2011 2011 2011
 
 
Net revenues:
Wholesale $ 750.0 $ 676.3 $ 2,418.5 $ 2,026.1
Retail 1,006.0 821.6 2,680.8 2,072.9
Licensing   49.6     50.1     137.3     134.4  
Total Net Revenues $ 1,805.6   $ 1,548.0   $ 5,236.6   $ 4,233.4  
 
Operating Income (Loss):
Wholesale $ 115.5 $ 130.3 $ 513.1 $ 475.9
Retail 194.4 152.9 513.5 362.0
Licensing   31.9     29.7     86.8     80.8  
341.8 312.9 1,113.4 918.7
Less:
Unallocated Corporate Expenses   (71.7 )   (66.6 )   (210.4 )   (190.8 )
Total Operating Income $ 270.1   $ 246.3   $ 903.0   $ 727.9  
 
                   
RALPH LAUREN CORPORATION
Constant Currency Financial Measures
(in millions)
(Unaudited)
 
Same - Store Sales Data
 
Three Months Ended Nine Months Ended
December 31, 2011 December 31, 2011
% Change % Change
As Reported

Constant Currency

As Reported

Constant Currency

Ralph Lauren Stores (a) 7% 5% 8% 4%
Factory Stores 9% 9% 14% 12%
Club Monaco 17% 17% 19% 19%
RalphLauren.com 31% 31% 29% 29%
Total 12% 12% 14% 12%
(a) Includes comparable sales for concession shops.
 
 
Operating Segment Data
 
Three Months Ended % Change
December 31, 2011 January 1, 2011 As Reported Constant Currency
Wholesale Net Sales $ 750.0 $ 676.3 10.9% 11.0%
Retail Net Sales 1,006.0 821.6 22.4% 21.7%
Net Sales 1,756.0 1,497.9 17.2% 16.8%
Licensing Revenue 49.6 50.1 (1.0%) (1.6%)
Net Revenue $ 1,805.6 $ 1,548.0 16.6% 16.2%
 
Nine Months Ended % Change
December 31, 2011 January 1, 2011 As Reported Constant Currency
Wholesale Net Sales $ 2,418.5 $ 2,026.1 19.4% 17.0%
Retail Net Sales 2,680.8 2,072.9 29.3% 26.5%
Net Sales 5,099.3 4,099.0 24.4% 21.8%
Licensing Revenue 137.3 134.4 2.2% 1.2%
Net Revenue $ 5,236.6 $ 4,233.4 23.7% 21.1%
 

Ralph Lauren is a global company that reports its financial information in U.S. dollars, in accordance with U.S. GAAP (“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.

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