Ralph Lauren Corporation (NYSE:RL) today reported net income of $216 million, or $2.31 per diluted share, for the third quarter of Fiscal 2013, compared to net income of $169 million, or $1.78 per diluted share, for the third quarter of Fiscal 2012. In the third quarter of Fiscal 2013, the Company recorded approximately $13 million in pre-tax impairment and restructuring charges associated with the discontinuation of its Rugby operations. Excluding the Rugby-related charges, net income rose 33% to $224 million and net income per diluted share increased 35% to $2.40 in the third quarter of Fiscal 2013.
“Our third quarter performance is a testament to the enduring appeal of our brand and the dedication of our passionate team,” said Ralph Lauren, Chairman and Chief Executive Officer. “Our orientation as a design-led, marketing and merchandising organization has enabled us to deepen our connection with our customers, particularly as we expand our portfolio of products and lifestyle sensibilities. I am inspired by how our Company continues to evolve in compelling new ways, and the progress we are making with our global e-commerce and store development efforts is especially exciting. We have a successful track record of investing for growth and we remain committed to nurturing the incredible vitality of our long-term initiatives.”
“The robust profit growth we achieved in the third quarter demonstrates the strength of our operating model,” said Roger Farah, President and Chief Operating Officer. “The relevance of our brand, product and merchandising strategies resulted in a strong holiday season for us, one that was characterized by continued momentum in the Americas and improved trends in Europe. The consistent investment in our long-term growth initiatives has created a steadily improving, highly resilient profit margin structure for our organization.”
Third Quarter Fiscal 2013 Income Statement ReviewNet Revenues. Net revenues for the third quarter of Fiscal 2013 rose 2% to $1.8 billion. The increase in net revenues primarily reflects strong retail segment expansion that was partially offset by a planned contraction in wholesale shipments. Excluding the impact of strategic decisions to discontinue American Living and store closures associated with the Company’s Greater China network repositioning efforts, in addition to the net negative impact from foreign currency translation, net revenues increased approximately 5% in the third quarter.
- Wholesale Sales. Wholesale segment sales of $734 million in the third quarter were 2% below the prior year period, as the discontinuation of American Living in Fiscal 2013, a proactive reduction in shipments to certain European customers and the net negative impact of foreign currency translation more than offset continued growth in core and emerging merchandise categories in the Americas.
- Retail Sales. Retail sales rose 6% to $1.1 billion from $1.0 billion in the third quarter last year, reflecting growth in comparable store sales and the incremental contribution from new stores and e-commerce operations that were partially offset by lower sales at Asian concession shops and store closures associated with the Company’s Greater China network repositioning efforts. Consolidated comparable store sales rose 4% on both a reported and constant currency basis during the third quarter. The Company estimates that disruption caused by Super Storm Sandy negatively impacted third quarter comparable store sales growth by 1%-2%.
- Licensing. Licensing revenues of $50 million in the third quarter were 1% greater than the prior year period. The increase in licensing revenues is principally due to higher domestic product licensing revenues that were partially offset by the transition of certain formerly licensed international regions to directly controlled operations.
- Wholesale Operating Income. Wholesale operating income increased 29% in the third quarter of Fiscal 2013 to $145 million from $113 million last year. Wholesale operating margin was 19.7% in the third quarter, 470 basis points stronger than the prior year. The improvement in wholesale operating margin was primarily due to higher gross margins as a result of lower input costs, favorable product mix and operational discipline.
- Retail Operating Income. Retail operating income was $201 million, 4% greater than the $193 million achieved in the third quarter of Fiscal 2012, and retail operating margin was 18.9%, 30 basis points below the prior year period. The decline in retail operating margin was principally a result of impairment and restructuring charges associated with the discontinuation of Rugby. Excluding the Rugby-related charges, retail operating margin was 19.8%, 60 basis points greater than the prior year period, as a result of improved profitability in the Americas and Europe that was partially offset by a less favorable geographic mix due to lower Asian sales and continued investment in global retail expansion, including e-commerce.
- Licensing Operating Income. Licensing operating income increased 3% to $37 million from $36 million in the third quarter of Fiscal 2012, primarily due to higher licensing revenues and lower net costs.