Ralph Lauren Corporation (RL) on Q3 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren Third Quarter Fiscal 2021 Earnings Call. . As a reminder, this conference is being recorded. I'd now like to turn over the conference to our host, Ms. Corinna Van Ghinst. Please go ahead. Corinna Van Ghinst: Good morning, and thank you for joining Ralph Lauren's Third Quarter Fiscal 2021 Conference Call. With me today are Patrice Louvet, the company's President and Chief Executive Officer; and Jane Nielsen, Chief Operating Officer and Chief Financial Officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to 1 per caller. During today's call, we will be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Patrice Louvet: Thank you, Cory. Good morning, everyone, and thank you for joining today's call. Our third quarter performance reflected strong underlying progress on our path to quality, sustainable long-term growth. Overall, revenues improved sequentially and were in line with our expectations. Stronger-than-expected recovery in Asia was offset by the impact of continued COVID-19 resurgences across Europe, while North America was roughly in line with our expectations, even with additional COVID pressures. Meanwhile, our focus on brand elevation, improved quality of sales and cost discipline drove better-than-expected gross and operating margin expansion in the quarter with double-digit AUR growth and digital profitability, exceeding our expectations. And while COVID is likely to remain a near-term headwind, there is reason to be hopeful as we start the new year and vaccines begin to roll out. Ralph and I are incredibly proud of the dedication, resilience and agility our teams have shown in not only managing through the pandemic, but also positioning the company to emerge stronger than we came into it. As part of this, we balanced reset activities with an acceleration of our core strategies, including strengthening our brand and bolstering our marketing and new customer acquisition, expanding key categories in international markets, scaling our connected retail offerings globally, continuing to prune non-elevating distribution and further realigning our cost structure. These actions are consistent with the 5 strategic priorities that we laid out as part of our long-term plan prior to COVID. These include: first, win over a new generation of consumers; second, energize core products and accelerate high potential underdeveloped categories; third, drive targeted expansion in our regions and channels; fourth, lead with digital across all activities; and fifth, operate with discipline to fuel growth. I will touch on a few of these in a moment. Jane Nielsen: Thank you, Patrice, and good morning, everyone. Our third quarter results demonstrate solid execution of our strategy through this holiday season in the midst of a still challenging operating environment. We continue to focus on what we can control in this dynamic context and on positioning the company to accelerate value creation as we emerge from the pandemic. This includes investing in our powerful lifestyle brands, our digital transformation and maintaining a strong balance sheet. While also realigning and streamlining our operational and expense structures. As Patrice mentioned, today, we announced the second round of actions related to our fiscal '21 strategic realignment plan. This stage focuses on realigning our real estate footprint to our future strategic priorities. This includes: first, reducing our North America corporate office footprint up to 30%, along with selected reductions in Europe and Asia, as our teams embrace new ways of working and we pivot resources to our key strategic priorities; second, closing up to 10 retail locations globally. Pending ongoing landlord negotiations. Combined with the successful lease renegotiations completed year-to-date, we expect these savings to drive improved profitability in our existing fleet, while we continue to expand our brand elevating ecosystems; and third, completing the consolidation of our North American distribution center operations to drive greater efficiencies, improve sustainability and deliver a better consumer experience. with faster average delivery times and an increased focus on connected retail. Combined, these actions are expected to result in gross annualized pretax expense savings of approximately $200 million to $240 million, inclusive of our previously announced organization savings. While we still expect the majority of the original $180 million to $200 million in organizational savings to flow through to the bottom line, we expect to reinvest the majority of our savings related to today's actions in our future growth. We will provide any additional updates to the plan as the actions are finalized. Moving on to the third quarter performance. Third quarter revenues declined 18% following a 30% decline in the second quarter. Asia and North America both improved sequentially, while Europe was more significantly impacted by COVID and mandated closures and restrictions in the quarter. Global wholesale revenue declined 19%, and direct-to-consumer revenues were down 16%. Our digital business outperformed with sales up more than 20% to last year, including double-digit growth in all regions. And even more importantly, our digital operating margins continued to expand. With Q3 digital margins up 900 basis points to last year and accretive to our total company rate through a combination of higher quality of sales and operating expense leverage. Driving profitability in this business remains key, not only to our long-term margin accretion and shift to DTC, but also to our strategy of repositioning ralphlauren.com as our digital flagship or the best expression of our brand online. Total company adjusted gross margin was 65.4% in the third quarter, up 320 basis points to last year. Gross margin expansion was primarily driven by strong AUR growth, along with favorable geographic and channel mix shifts. Around 60 basis points of this quarter's gross margin expansion was driven by unusual mix shifts due to COVID. With the remainder driven primarily by our continued global improvements in pricing and promotions. Third quarter AUR growth of 19% was above our expectations, with North America and Europe up double digits and Asia up high single digits. We continue to elevate our brands across every touch point, significantly reduced promotions and take targeted pricing increases. Our confidence in this strategy is reinforced by our continued improvement in full price penetration, larger baskets, and better-than-expected conversion, even as AUR growth has exceeded our expectations. Operating expenses declined 11% to last year, driven by reductions in compensation, rent and other expenses as we continue to work in new ways. Adjusted operating margin for the third quarter was 13.3%, down 70 basis points to last year. Marketing in the third quarter decreased 3%. We shifted some investments into the fourth quarter of the year as store closures and in-store shopping restrictions increased due to rising COVID cases. However, we accelerated select strategic marketing investments this holiday, focusing on higher-margin, new customer acquisition in North American digital and reactivation of in-person events in Asia. We expect fourth quarter marketing to increase about 50% to support our long-term brand-building activities and key events like Lunar New Year and the Australian Open. This elevated growth rate reflects both the timing shift from Q3 and lapping of last year's depressed marketing spend as COVID hit Asia, followed by Europe and North America. Moving on to segment performance. Starting with North America. Revenue decreased 21% to last year. Retail comps declined 21%, driven by a 30% decline in bricks-and-mortar comps. While our own digital comps improved sequentially to 9%. Brick-and-mortar comps continue to be impacted by COVID-related traffic declines with third quarter traffic down 45% and foreign tourist sales down about 85%. However, we continue to drive our strategy of improving quality of sales, with our third quarter discount rate down nearly 400 basis points. AUR up mid-teens and conversion up more than 200 basis points in our brick-and-mortar channel. Our digital commerce comps were up 9%, with total digital sales up 10% in the quarter. Underlying sales to domestic consumers grew high teens, while sales to international daigou consumers declined double digits to last year as planned. We reduced our site wide promotions by 52 days compared to the prior year, as we continue to elevate our digital experience, driving AUR up 22% and gross margins up more than 800 basis points to last year in the channel. While these deliberate reductions in promotional activity are a headwind to our digital comps in fiscal '21, we continue to invest more aggressively on new consumer acquisition during this transition period. Our accelerated investment in digital marketing generated a 27% increase in new customers during this competitive holiday quarter, exceeding our expectations. Year-to-date, these new consumers are transacting at higher gross margin rates and larger basket sizes and represent a higher penetration of consumers under 35. Looking ahead, we are focused on retaining these new consumers and are encouraged thus far by repeat purchase rates. Stronger sales to domestic consumers this quarter were driven by our ongoing investments in connected retailing, like Buy Online-Pickup in store, new functionality like online exchanges and Klarna payment installments and expanded personalization and targeted marketing efforts. All of these initiatives helped deliver a significant increase in our full-price sales this quarter, which grew more than 130% to last year. In North America wholesale, third quarter revenue declined 22% as we continue to manage our shipments carefully and realigned inventories to demand. Full price sales declined at a more moderate rate, driven by stronger trends in core replenishment, Polo men's, kids and home, while Lauren Women's remain challenged, consistent with the broader category. Our inventories in the marketplace were clean and well positioned at the end of the third quarter, declining more than 30% at North America wholesale. Our sales to off-price were down meaningfully as planned as we continue to significantly reduce our penetration in this channel. Moving on to Europe. Third quarter revenue declined 28% on a reported basis and 32% in constant currency. Europe retail comps were down 38%, with a 51% decline in our bricks-and-mortar store comps, partly offset by an acceleration in our own digital commerce, up 68%. Across Europe, our bricks-and-mortar businesses were significantly impacted by traffic headwinds, with some form of store closures or restrictions across 16 of our 17 markets in the region, ranging from curfews and weekend closures to full lockdown. Despite these pressures, our conversion improved and AUR increased 12% to last year, driven by our ongoing strategy to elevate our factory channel. Strong momentum in our own digital commerce comp was driven by our new consumer acquisition, up 112%, along with expanded connected retailing initiatives gifting programs and improve digital content. Europe wholesale revenues declined 22% in constant currency as we continued to limit shipments to reset our inventories to demand. COVID-related challenges at bricks-and-mortar wholesale were partially offset by stronger performance at our wholesale digital accounts, where sell-in and sell-out rates were both positive for the quarter. Turning to Asia. Revenue increased 14% on a reported basis and 9% in constant currency. Our Asian retail comps increased 3% with bricks-and-mortar stores up 1% and digital comps up 54%. We are encouraged that growth in the Chinese mainland is not only back to pre-COVID levels of more than 40% on a reported basis, but growing versus LLY. Japan also returned to positive growth in the third quarter, with sales increasing high single digits on a reported basis following a second COVID wave in Q2. However, we continue to watch Japan closely as key areas like Tokyo and Osaka entered a state of emergency in January. Overall momentum in our Asian digital businesses continued through the quarter, driven by strong performance across all key markets and channels, including our own sites and digital pure plays, where we added 4 new partners in the quarter. Moving on to the balance sheet. We ended the third quarter with $2.8 billion in cash and investments and $1.6 billion in total debt, which compares to $1.9 billion in cash and investments and $694 million in total debt at the end of last year's third quarter. While we have managed our balance sheet carefully since the start of the pandemic to preserve liquidity, we are monitoring COVID conditions closely. And based on our current outlook, we are planning to reinstate our dividend in the first half of fiscal '22. Net inventory declined 4% to last year, including a 2% decline in North America, 15% decline in Europe and a 7% increase in Asia to support growth. While we have taken a highly cautious approach to managing inventory through the pandemic, overall, we are encouraged by our team's ability to both move inventories across regions and to merchandise around our core and iconic styles, as well as key COVID categories like home, loungewear and casual tees. Our increased agility is also enabling us to drive core product replenishment and shift back into pre-COVID categories as consumers start returning to more normalized trends. Looking ahead, our outlook is based on our best assessment of current coved lockdowns and trends and is subject to change given the dynamic nature of COVID developments around the world. We currently expect fourth quarter revenues to decline approximately mid- to high single digits, representing a meaningful sequential improvement from the first three quarters of the year. This includes the impact of third wave COVID lockdowns in the U.K. and Germany from the start of the quarter through approximately mid-February as well as partial closures in France, Spain and Italy. Third wave lockdowns in Japan through early March and a slow recovery in North America, where we have also seen increased cases and COVID-related traffic headwinds. If government-mandated lockdowns or restrictions are extended from these periods or more severe restrictions are applied, this could negatively impact our current outlook. These COVID-related headwinds should be partially mitigated by continued momentum in China and our global digital businesses. We expect gross margins to continue expanding, albeit at a more moderate rate than the first three quarters of the year as we strategically repurpose full price product from last year's COVID shutdowns to our factory channels. Improved pricing and promotions, including targeted consumer messaging should continue to be the most durable driver followed by geographic and channel mix. We expect operating expenses to increase low single digits as we reaccelerate our brand-building investments to support growth coming out of the pandemic, largely offset by our ongoing expense discipline. Excluding marketing, operating expenses are expected to decline low single digits. We expect inventories to increase in the fourth quarter as we start building back into demand and lap last year's double-digit decline in response to COVID. In closing, we are encouraged by the progress our teams have made over the first three quarters of the year. As we close out this fiscal year, we are focused on offense as we leverage all of the critical work our teams have done prior to and through the pandemic to position the company for quality, long-term growth. Led by Ralph's enduring vision to guide us through a still highly dynamic global environment, we are accelerating our core strategies, including first and foremost, elevating our brands, driving our company-wide digital transformation and targeting expansion in key geographies. All while adopting new ways of working and executing with discipline around our cost structures. With that, let's open up the call for your questions. Operator: . Our first question comes from Alexandra Walvis with Goldman Sachs. Alexandra Walvis: So my first question is on the strength of the brand. We're year into the pandemic now and you've clearly expanded digital capabilities, you've taken meaningful steps to reset distribution cost structure. But if we look at your most important asset, the Ralph Lauren brand, can you talk to what gives you confidence in your brand health now? And is this where you want it to be in order to support strong growth coming out of the pandemic? And then my second question, relatedly is on how confident you are that we should see AUR growth in F '22 off the higher AUR base in a backdrop that may well be a little more promotional than during the pandemic? Patrice Louvet: Well, thank you for your question. I'll take the first part, and then Jane will cover your AUR question. So elevating our brand and attracting high-quality new consumers across all three regions, particularly in the U.S. Our top priorities, and listen, will continue to be top priorities as we come out of COVID. The general message is we're making strong progress. A few points to kind of support that. First, our data shows that our brand has strengthened through the pandemic. Specifically, if you look at brand awareness and purchase intent, they're both up versus a year ago and continuing to progress quarter-on-quarter, with particularly encouraging progress among next-gen consumers and women. The second point is that we are acquiring more customers on our digital sites. We've seen 38% growth in North America, 79% growth in Europe and more than tenfold growth in Asia in terms of new customers on our sites year-to-date. This is clearly on the back of the deliberate targeted marketing plans that we've put in place across the regions. And it's also worth noting that we're not just driving higher traffic to our digital businesses, but we're also seeing -- and I think you heard it in Jane's remarks, an increase in our full-price sales. So we're bringing in new consumers that are higher ticket and higher margin. And I think that bodes well for the future for us. The third point is really around our social media presence, which continues to deepen and grow around the world, our followers reached a record high 45 million this quarter, and we're especially encouraged by our progress on key platforms like Instagram and TikTok, YouTube, Kakao On-Line in Asia, where, as you've likely seen, we've developed some pretty unique partnership, including our recent Bitmoji Snapchat partnership. We're also driving brand heat through product as you may have seen our recent street work collaboration with Clot, which is a brand founded by Edison Chen and Kevin Poon, based out of Hong Kong. There's a lot of excitement around these products. They virtually vaporized as we put them up for access to consumers within a few seconds, they were sold out. And now you can add them at multiples of the retail price on types like StockX. So we've been happy with the response we've seen and the contribution to overall brand heat. All this, importantly, is enabled by our strong balance sheet. Jane just touched on that, which has allowed us to continue driving our strategic priorities, like brand elevation, like investing in marketing, and also reinstate our dividend in the coming quarters. So together, if you put all these elements together, this gives us confidence that we're investing in the right places to elevate our brand and drive interest and heat particularly with the next-generation that we're specifically focused on. And then on your AUR question, I'll let Jane answer that. Jane Nielsen: Sure. So Alex, just we are confident in our AUR growth. Certainly, because it's led by brand elevation and that brand elevation is something that we focused on this year. And are committed to continuing. And just as I look in the near term, even into Q4, we're expecting AUR growth about comparable to what you saw in Q3. But even as we come out of the pandemic and looking forward into fiscal '22, while we're not guiding, we do expect to comp the underlying AUR growth. Now we know that there have been unusual mix benefits during COVID. With many of our stores and outlet doors closed during the cove period that lifted AUR. We've tried to be clear about calling that out and the impacts of COVID to our best estimates were that in Q1, underlying AUR growth was about high single digits. And in Q2 and Q3, it was in the low to mid-teens. So that is what -- that's the basis on which we expect to comp. And what we really feel good about is the long-term guidance for AUR as we move forward, which is in the low to mid-single-digit range. Because our long-term drivers are still intact. As I said, elevating our product, our marketing and shopping experiences, which we've been talking about this year, all focused on elevating our brand. That we have the capabilities and an increasing number of tools that have proved out as we drive personalization in terms of managing promotional levels, better promotional levels, more personalization, more targeted promotions that have been very favorable in terms of driving AUR. Strategic price increases. It's a muscle that I think we started in F-- in over a year ago, starting in our factory channel, and you can see that carries through today where we've seen sort of a mid-teens price increases in our outlet channels. As we elevate that product, put more quality in, and that's been -- we feel that we have more to go on that journey. And then, of course, there will be post-COVID continued mix benefits. As structurally, our international businesses grow faster as we move to be a more DTC oriented company that will also drive overall AUR. And certainly, the work that we've done in digital on AUR will continue to pay dividends into the future. So we feel really good about our trajectory. Understanding there will be some optics coming out of COVID. But I think we've been clear on the base and where we go in the future. Operator: The next question comes from Michael Binetti with Crédit Suisse. Michael Binetti: Jane, if you could just clarify. Jane, could you clarify, you mentioned shifting to offense and starting to build inventory a little to be preparing to fill demand as stores start to refill here. But you did comment on continuing to elevate the brands and your AUR commentary reflects as well. You mentioned focusing on starting '22 strong. And since that's just a few weeks away for you. Can you speak to where we'll see the most important inflections in the recent P&L trends, as you transition through into the early part of 2022? And then we're starting to hear some commentary around the sector from management team's thoughts on when they think they can approach pre-pandemic metrics. And as we look at consensus for your company, the general assumption is that the combination of all the work you've done on quality of sales to boost margins, well over $2 of net EPS, you've added from the SG&A work you've done. Consensus still has that combination landing at earnings below 2019 levels in the second half of this calendar year, so September and December quarters. I'd love to hear your thoughts on that if you have visibility. So just help us a little bit because of the fiscal year-end that you have here in March? Jane Nielsen: Sure. So let's peel that apart. So starting with inventory. As we do look at while we're very clear that there is some near term disruption, which likely could last into our fiscal '22 from COVID. Our long-term optimism and especially in the second half of our fiscal year is high. And so as I think about what we're going to be overlapping, we expect that store comps will be meaningfully better as we move through the year. And certainly, as we move through the fiscal year into the second half. And that's really contingent on the vaccine and some of the abatement in the virus, which we believe in. And so we do believe that store comp will continue to be a positive factor as we move through fiscal '22. Certainly, our wholesale businesses have not been immune to the factors of COVID. And I think that as we emerge from the crisis, you'll also see we've been very tight on our sell-in. And sell-in has been under sell-out. And so there are good inventory replenishment needs. In the wholesale channel, especially as like our own channels, they come out of COVID. We feel -- our inventories were down 30% in North American wholesale. They have been sequentially down in Europe. So we feel good about our position. They're ready for fresh product, which we feel will be able to fulfill and expect momentum coming out of there. And of course, the investments that we're making in digital, as we look across our total digital business, we expect acceleration global with our total digital business in Q4. And certainly, as we finish the cleanup in North America, and you can see that domestic consumer up high teens this quarter, will be done with a lot of the daigou cleanup, and you'll start to see that acceleration coming into fiscal '22. Those are the key drivers that give us optimism in '22. We do feel comfortable about our savings estimate of 100 -- the majority of $180 million to $200 million that we announced in the first realignment plan flowing through to be an EPS driver. And with that, our additional savings that we announced today will be used to accelerate and restart all those drivers that I talked about on sales to make sure that we have the investment funds to continue our digital expansion, elevate our brand, focus on marketing, which you've seen us approach with optimism in the fourth quarter, the marketing be up 50%. Those are the drivers. The question is timing, but we do feel confident about, certainly in the back half of '22. Operator: The next question comes from Matthew Boss with JPMorgan. Matthew Boss: Great. On North America, Patrice, maybe what inning would you peg your strategic quality of sales actions in today? And then, Jane, on SG&A, how should we think about incremental cost savings going forward relative to today's announcement, should we think about incremental cost savings from here reinvested back into the business? And if so, how would you rank more offensive investments to drive top line from here? Patrice Louvet: Jane loves your baseball analogies. So listen, I think there are 2 streams to think about when we look at North America. The first stream of work is the hard resets that we are doing on off-price penetration, shutting down over 230 wholesale doors and the daigou customer on ralphlauren.com North America that Jane referred to. On that one, assuming the game ends in 9 innings and doesn't go over time, we're likely at inning #7 on those. So we expect -- we probably need a quarter -- one more quarter, Q4, maybe a bit of Q1 to have that completed across these 3 areas. And then on the second stream, I'll be honest with you, I don't think the game ever ends on brand elevation in North America. I think we want to continuously elevate our product, elevate how we show up in marketing, elevate how we're distributed. And I think that's been part of the success of this brand historically, and that's something we will continue to drive. So I probably have us on the first inning with a never-ending game for that work stream. Jane Nielsen: Just on the SG&A, Matt, what we feel good about is that our realignment plan is on track. We feel confident about the savings from the org restructure that will flow through fiscal '22, as we've said. And then as you think about real estate, as we called out in the announcement today, the benefits of real estate will start to be realized as we move through fiscal '22. So all of those benefits won't be realized in fiscal '22, but we'll start to realize them in fiscal '22. And that -- and we will use those savings to drive important investments in our business. Like digital, like the work that we've been doing in personalization, which you've seen drive tremendous growth in Europe and is starting to bear fruit in our domestic business in North America. Certainly, investment in China, where this year alone, we've opened 85 stores. We intend to grow stores -- new stores. We intend to continue that journey as we move forward. We believe we have distribution opportunities in Asia and also more targeted distribution opportunities in Europe and North America, and we will use the savings for that as well as increased marketing. We know that our brand and the elevation of the brand is so much of what is pulling the whole ecosystem up. So continuation of increased marketing across our brand. Operator: The next question comes from Paul Lejuez with Citi. Paul Lejuez: Just how you're thinking about the range of top line outcomes in F '22, maybe relative to the pre pandemic period? And what sort of flexibility do you have in the P&L if top line is slower to recover just as I hear you talk about some of these expense initiatives. Just wondering how much you can flex those if need be as you think about F '22? And then just curious if you can share anything about what you see in the European digital business when stores close relative to how that digital business performs when stores are open? Jane Nielsen: Sure. So Paul, you -- what we have seen -- let me start with the second part of your question, and then I will go to flexibility and inflection in FY '22. So what we have seen in our Europe business specifically is that when the stores close, we do see an inflection in our digital business. Although it's not a one-for-one offset. So you can just see by this quarter with the shutdowns in our store in Europe in November and then into December, that suppress the total -- the total Europe growth, but we did see an acceleration in digital and high-quality digital growth. So we were very pleased with our reduction of discount rate in Europe and the very strong growth that we reported in digital in Europe. As I think about the volatility as we move into fiscal '22, I think you're right, it's predicated on COVID and the rollout of the vaccine. And I think what you've seen us in the past is moving with agility. And as we look at our expense structure, we've been able to reinvest in the business as we are in the fourth quarter. Elevate marketing, but do so on a timed basis and investing into high ROIC categories. And I think that, that gives us protection on the downside and protects our profitability as we are very focused on the return of that marketing. We will also have more pricing flexibility as we move forward, should there be volatility in the top line. And those are the primary factors that we'll look at as we move forward and understand the variability and volatility. Also, just a shout out to our supply chain who, given the high variability of demand and inventory planning has been able to replenish and shift by category across our broad range of categories, and that's given us the capability to meet demand even though it's been highly variable based on COVID. So that gives us a lot of confidence as well. Patrice Louvet: And Paul, the one element I would add on the European digital commerce performance, to Jane's point, is the fantastic work our teams in the markets have done relative to connected retail capabilities. I think pretty soon, we won't be talking about digital and brick-and-mortar separately because they're now so intertwined. But as you look at these new ways of selling in the context of connected retail, we're expecting that to be an accelerator for our digital performance. And so a lot of that's been pioneered in Europe. A lot of that is what you see in these very strong numbers this quarter, where we're up 60 -- I believe 68% digital commerce in Europe. And I think that is a sustainable set of capabilities that will help us continue to accelerate progress on that front. Operator: The next question comes from Ike Boruchow with Wells Fargo. Irwin Boruchow: I guess, Jane, a question for you, similar to Matthew's question on kind of where the earnings base shakes out over time. I guess I wanted to focus really on the U.S. wholesale channel. So I believe pre-COVID, you were kind of doing $1.5 billion of U.S. wholesale. You've got initiatives in place to shrink the door count and does it rationalize some of the lower margin revenue streams you had there? I guess when all is said and done, and we're on the other side of this, how much of a smaller wholesale business do you expect to be managing, if at all? And then how does that kind of translate into operating margins? Are you planning a smaller, more profitable channel? Are you kind of trying to get back to where you were? Just kind of curious at a high level how you think about it? Jane Nielsen: Yes. So just Ike, as we step back, I really believe that we should look at wholesale in 3 buckets. Obviously, this year, we announced a significant cleanup in North America wholesale, where we exited about 230 doors in North America, wholesale, will be through that. So good foundation, clean foundation. And moving from there, we know and we see we have share opportunities in the doors we are in. And so continued momentum from share. Even this quarter, we saw share gains in Men's, in Kids and Home in the wholesale channel. So with that reset base, there's no reason that we -- and we are focused on comp growth in North America wholesale. And the Wholesale Dot Com is an area of wholesale that we're very optimistic about. And so we expect to grow wholesale in their digital -- in the digital business. And then we've been clear that off-price, and especially this quarter, off-price was down meaningfully. Our full-price wholesale on a sell-in basis and sell-out basis were -- in a sell-in basis was much better than what we reported in aggregate for North America wholesale. I expect the off-price cleanout as we exit Q4, to be about done, and it will be repositioned to what it should be, which is a channel that we can liquidate excess in. And so that pressure that you're seeing from off-price will abate in fiscal '22. So we feel good about the foundation of where we'll be in wholesale. It will be a smaller channel. As you know, we announced the change of Chaps to licensing. Chaps is almost a completely wholesale business in North America. And so you'll see that part shrink the wholesale base. But we feel confident about the value creation of that change. And we feel good about the positions that we're in and how we move forward and focus on growing share in that channel and maximizing pure plays in digital. Operator: Our final question comes from Simeon Siegel with BMO Capital Markets. Simeon Siegel: Jane, sorry if I missed it, could you drill down on the 900 basis points of own digital operating margin improvement? I mean, that's really impressive for a generally variable expense business. So maybe how much of that is gross margin, AUR or just how should we think about where the improvement came from and where we go from here? Jane Nielsen: Yes. Sure. So the primary driver of our digital margin reset was our pricing and product mix strategy. So we are elevating the mix, our product mix on our digital sites. We are pulling away from -- especially in North America from those daigou discount-oriented customers. We're recruiting new customers at a higher gross margin, a bigger basket. And so that's driving a great deal of our margin expansion as well. It's primarily coming from those resets, pricing, quality consumer recruitment. And we are getting some leverage on our fixed cost base, which is well built out. And is ready to be leveraged from a growth standpoint. So we feel good about, it has multiple drivers across all the vectors. And the most work has been on the North America site. That's where we've seen the biggest ladder up in this quarter in terms of digital margins, but tremendous progress in Europe over the past over the past six quarters. And Asia, with the reboot of Asia, started off with quite healthy margins and continues to grow those margins largely on scale. Patrice Louvet: And Simeon, I would add from a key deliverable for us this past year, we really were very focused on step changing profitability of digital. Because there's no interest in driving digital, or frankly, if it's going to be completely dilutive to your overall business. And we know it is the channel of the future. So as a team, we really focused on not just improving by 10 basis points, but the step change that you saw here, which is not a one-timer, this is sustainable because we're now getting to a point where our own digital operations are accretive to our overall company margins. And therefore, we have every incentive to follow the consumer who wants to actually shop on that channel. So excited about the progress and expect this to be sustained for us moving forward. Jane Nielsen: I love the new consumer metrics and the new consumers that we're recruiting. We're really excited about that as an investment opportunity for us. And just to -- I know I mentioned it on the script, but we're really proud that full price billing on our site up over 130%. Patrice Louvet: Good. So that's a good place to mark and close. Thank you, Simeon. So thanks, everyone, for joining us today. We look forward to sharing our fourth quarter and full year fiscal '21 results with you in May. And in the meantime, please stay safe, and have a great day. Operator: Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.
Ralph Lauren Posts Q4 Beat, Strong Margins, and Solid Outlook
Ralph Lauren (NYSE:RL) reported fourth-quarter 2025 results that topped analyst expectations across the board, fueled by strong sales growth and margin expansion.
The company posted EPS of $2.27, beating the $2.04 consensus. Revenue reached $1.7 billion, ahead of the $1.64 billion estimate. On a constant currency basis, revenue rose 10%, outpacing the projected 7.3%, while comparable sales jumped 13%, well above the expected 7.68%.
Profitability also exceeded expectations, with an adjusted gross margin of 68.6% versus the 67.2% forecast, and an operating margin of 10.3%, slightly ahead of the 9.97% projection.
Looking forward, Ralph Lauren guided to low-single-digit revenue growth for fiscal 2026 in constant currency, with most of that growth anticipated in the first half of the year—suggesting continued momentum in brand demand and operational efficiency.
Ralph Lauren Corporation's Strong Financial Performance
- Ralph Lauren Corporation (NYSE:RL) reported an earnings per share (EPS) of $2.27, surpassing estimates and indicating a 33% rise year-over-year.
- The company achieved a revenue of approximately $1.7 billion, an 8% increase from the previous year, beating consensus estimates.
- Ralph Lauren's financial metrics, including a price-to-earnings (P/E) ratio of 24.52 and a price-to-sales ratio of 2.46, reflect strong investor confidence and market valuation.
Ralph Lauren Corporation, listed on the NYSE:RL, is a prominent player in the luxury apparel industry. Known for its premium clothing and accessories, the company has consistently demonstrated strong financial performance. Ralph Lauren competes with other luxury brands in the textile-apparel sector, maintaining a robust market position.
On May 22, 2025, Ralph Lauren reported earnings per share (EPS) of $2.27, surpassing the estimated $2. This represents a 33% rise in adjusted EPS compared to the previous year, as highlighted by Barron's. The company has consistently outperformed consensus EPS estimates over the past four quarters, showcasing its strong financial management.
Ralph Lauren achieved a revenue of approximately $1.7 billion, exceeding the estimated $1.65 billion. This marks an 8% year-over-year increase, as noted by Barron's, and a 3.83% beat over the Zacks Consensus Estimate. The company's total comparable sales surged by 13%, significantly outperforming the anticipated 6.1% growth.
The company's financial metrics provide further insight into its performance. Ralph Lauren's price-to-earnings (P/E) ratio is approximately 24.52, indicating investor confidence in its earnings potential. The price-to-sales ratio stands at about 2.46, reflecting the value placed on each dollar of sales. Additionally, the enterprise value to sales ratio is around 2.56, offering a perspective on the company's valuation relative to its revenue.
Ralph Lauren's CEO, Patrice Louvet, expressed confidence in the company's future, emphasizing plans to focus on growth across various lifestyle categories, geographies, and channels. The company aims to maintain agility and leverage its diversified supply chain, operating discipline, and robust balance sheet to navigate current macroeconomic challenges. Ralph Lauren also anticipates a modest expansion in its operating margin.
Ralph Lauren Corporation (NYSE: RL) Sees Optimistic Analyst Price Targets Amid Financial Growth
- The consensus price target for Ralph Lauren Corporation (NYSE: RL) has increased from $213.23 to $265.67, indicating a positive shift in analyst sentiment.
- Ralph Lauren is expected to experience earnings growth, with a potential earnings beat in its upcoming report, as suggested by analysts.
- Despite market volatility, RL's stock rose by 2.8%, showcasing resilience and market confidence in its performance.
Ralph Lauren Corporation (NYSE: RL) is a renowned name in the fashion industry, known for its premium lifestyle products. The company designs, markets, and distributes a wide range of products, including apparel, accessories, and home furnishings. Over the past year, the consensus price target for RL has increased significantly, reflecting growing optimism among analysts about the company's future performance.
A year ago, the average price target for RL was $213.23, indicating a more conservative outlook. However, recent data shows that the average price target has risen to $265.67. This upward trend suggests that analysts are more optimistic about Ralph Lauren's potential growth. Factors such as improved financial performance and strategic initiatives may have contributed to this positive sentiment.
Ralph Lauren is anticipated to experience earnings growth in its upcoming report, suggesting a potential earnings beat. Analyst Ike Boruchow from Wells Fargo has set a price target of $110 for the stock, indicating a positive outlook. This suggests that Ralph Lauren has the right combination of factors to support expected growth, making it a promising opportunity in the consumer discretionary sector.
Despite a volatile market environment, RL experienced a positive trading session, with its stock rising by 2.8%. This increase occurred even as major indices like the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 ended the day lower. This resilience highlights the market's confidence in Ralph Lauren's performance amidst broader market uncertainties.
Investors are encouraged to consider Ralph Lauren as a potential investment opportunity. The Zacks Earnings ESP tool is highlighted as a valuable resource for identifying stocks likely to exceed quarterly earnings estimates. With a strong track record of surpassing earnings expectations, RL is well-positioned to potentially exceed estimates in its upcoming quarterly report.
Ralph Lauren Corporation's Anticipated Quarterly Earnings: A Financial Overview
- Analysts have adjusted their EPS estimates to $1.96, indicating a 14.6% increase from the previous year.
- Ralph Lauren's revenue is projected to reach $1.63 billion, a 4.1% increase from the same quarter last year.
Ralph Lauren Corporation, listed on the NYSE:RL, is a renowned name in the fashion industry, known for its premium clothing and lifestyle products. As the company prepares to release its quarterly earnings on May 22, 2025, Wall Street analysts are keenly observing the anticipated financial performance.
Analysts have slightly adjusted their EPS estimates to $1.96, reflecting a 14.6% increase from the previous year. This revision, although minor, indicates a reevaluation of initial expectations. Historically, such changes in earnings estimates have been linked to short-term stock price movements, suggesting potential volatility in RL's stock following the earnings announcement.
Ralph Lauren's revenue is projected to reach $1.63 billion, marking a 4.1% increase from the same quarter last year. This growth is indicative of the company's strong brand momentum and digital expansion. However, currency fluctuations might impact the overall gains. In the previous quarter, RL exceeded earnings expectations by 7.6%, contributing to an average earnings surprise of 6.5% over the last four quarters.
The market is closely monitoring the upcoming earnings report, as it could significantly influence RL's stock price. A positive earnings surprise could lead to an upward movement, while results falling short of expectations might cause a decline. The sustainability of any immediate price changes will depend on management's discussion of business conditions during the earnings call.
Ralph Lauren's financial metrics, such as a P/E ratio of 24.85 and a price-to-sales ratio of 2.49, provide insight into its valuation. The company's enterprise value to sales ratio is 2.60, and its enterprise value to operating cash flow ratio is 14.63. With a debt-to-equity ratio of 1.06 and a current ratio of 1.76, RL maintains a stable financial position, supporting its growth prospects.
Ralph Lauren Corporation (NYSE:RL) Stock Update and Financial Outlook
- Paul Kearney from Barclays sets a price target of $260 for NYSE:RL, indicating a potential upside of 18.2%.
- Ralph Lauren's upcoming earnings report anticipates an EPS of $1.96, a 14.62% increase year-over-year, with revenue expected to rise by 4.05%.
- Despite a slight decline in the latest trading session, RL's stock demonstrates resilience with a lesser decrease over the past month compared to the Consumer Discretionary sector and the S&P 500.
Ralph Lauren Corporation, listed on the NYSE under the symbol RL, is a renowned global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, accessories, home furnishings, and fragrances. The company competes with other high-end fashion brands like Burberry and Gucci. On April 28, 2025, Paul Kearney from Barclays set a price target of $260 for RL, suggesting a potential upside of 18.2% from its current trading price of $219.96.
In the latest trading session, RL closed at $219.96, marking a slight decline of 0.09% from the previous day. This performance lagged behind the broader market, with the S&P 500 gaining 0.74%, the Dow increasing by 0.05%, and the Nasdaq rising by 1.26%. Despite this, RL's stock has shown resilience over the past month, decreasing by only 2.23%, which is better than the Consumer Discretionary sector's loss of 4.48% and the S&P 500's decline of 4.77%.
Investors are keenly awaiting Ralph Lauren's upcoming earnings report. The company is expected to announce an earnings per share (EPS) of $1.96, a 14.62% increase compared to the same quarter last year. Additionally, the consensus estimate for revenue is $1.63 billion, marking a 4.05% rise from the previous year's quarter. These figures indicate a positive outlook for the company's financial performance.
Currently, RL's stock price is $219.96, reflecting a slight decrease of 0.19, or approximately -0.09% in percentage terms. During today's trading, the stock has fluctuated between a low of $217.01 and a high of $221.55. Over the past year, RL has reached a high of $289.33 and a low of $155.96, showcasing its volatility. The company's market capitalization stands at approximately $13.59 billion, with a trading volume of 741,590 shares on the NYSE.
Ralph Lauren Corporation (NYSE:RL) Stock Update and Financial Outlook
- Paul Kearney from Barclays sets a price target of $260 for NYSE:RL, indicating a potential upside of 18.2%.
- Ralph Lauren's upcoming earnings report anticipates an EPS of $1.96, a 14.62% increase year-over-year, with revenue expected to rise by 4.05%.
- Despite a slight decline in the latest trading session, RL's stock demonstrates resilience with a lesser decrease over the past month compared to the Consumer Discretionary sector and the S&P 500.
Ralph Lauren Corporation, listed on the NYSE under the symbol RL, is a renowned global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, accessories, home furnishings, and fragrances. The company competes with other high-end fashion brands like Burberry and Gucci. On April 28, 2025, Paul Kearney from Barclays set a price target of $260 for RL, suggesting a potential upside of 18.2% from its current trading price of $219.96.
In the latest trading session, RL closed at $219.96, marking a slight decline of 0.09% from the previous day. This performance lagged behind the broader market, with the S&P 500 gaining 0.74%, the Dow increasing by 0.05%, and the Nasdaq rising by 1.26%. Despite this, RL's stock has shown resilience over the past month, decreasing by only 2.23%, which is better than the Consumer Discretionary sector's loss of 4.48% and the S&P 500's decline of 4.77%.
Investors are keenly awaiting Ralph Lauren's upcoming earnings report. The company is expected to announce an earnings per share (EPS) of $1.96, a 14.62% increase compared to the same quarter last year. Additionally, the consensus estimate for revenue is $1.63 billion, marking a 4.05% rise from the previous year's quarter. These figures indicate a positive outlook for the company's financial performance.
Currently, RL's stock price is $219.96, reflecting a slight decrease of 0.19, or approximately -0.09% in percentage terms. During today's trading, the stock has fluctuated between a low of $217.01 and a high of $221.55. Over the past year, RL has reached a high of $289.33 and a low of $155.96, showcasing its volatility. The company's market capitalization stands at approximately $13.59 billion, with a trading volume of 741,590 shares on the NYSE.
Ralph Lauren’s Price Target Boosted at TD Cowen
TD Cowen analysts increased their price target for Ralph Lauren (NYSE:RL) from $197 to $202 while maintaining a Buy rating on the stock.
The analysts highlighted that Ralph Lauren continues to achieve margin-accretive growth in its direct-to-consumer (DTC) channel, which accounts for 69% of its sales.
The analysts mentioned Jane Nielsen stepping down as CFO, and emphasizing her effective management that resulted in a mid-teens EBIT margin (excluding foreign exchange impacts) in fiscal 2025 and a 29% return on invested capital (ROIC), with potential for further growth.
The price target has been raised to $202, reflecting confidence that brand elevation can sustain a low-double-digit compound annual growth rate (CAGR) in EPS.
