01—Abstract
Summary
Summary of the 10-K filed May 27, 2009. Cited figures are marked; the original filing is the authoritative source.
Polo Ralph Lauren Corporation, founded in 1967 by Ralph Lauren, reported fiscal 2009 (year ended March 28, 2009) net revenues of $5.019 billiona, up 2.8% from $4.880 billion in Fiscal 2008, and net income of $406.0 million, down 3.3% from $419.8 million.
Diluted EPS rose slightly to $4.01b from $3.99. Results were weighed by $79.0 million of pretax charges for asset impairments ($55.4 million) and restructuring ($23.6 million), which reduced net income by $49.7 million. Operating income fell 8.9% to $595.5 million, and operating margin declined to 11.9% from 13.4%.
Wholesale revenue grew 4.7% to $2.887 billionc and operating income rose 8.5%, while Retail operating income fell 47.0% to $108.2 million amid a sharp decline in comparable store sales in the second half of the year. The company's balance sheet strengthened. It ended the year with a net cash and short-term investments position of $413.5 million, versus net debt of $53.4 million a year earlier.
Operating cash flow rose to $774.2 milliond from $695.4 million, and stockholders' equity increased to $2.735 billion. The company repurchased $169.8 million of Class A stock and spent $185.0 million on capital expenditures.
Management described the contraction in consumer spending as continuing into Fiscal 2010, noted that traditional retail partners cut Fall 2009 wholesale orders by approximately 10%, and announced a restructuring plan expected to yield about $25 million in annualized pretax savings. Mr. Ralph Lauren controls approximately 86% of the voting power.
02—Key points
Key Highlights
- Net revenues rose 2.8% to $5.019 billion, driven by Wholesale growth, American Living, and favorable foreign currency effects, partly offset by lower comparable Retail store sales.
- Operating income declined 8.9% to $595.5 million; operating margin fell to 11.9% from 13.4%, reflecting $79.0 million of pretax impairment and restructuring charges.
- Net income was $406.0 million (down 3.3%); diluted EPS was $4.01 versus $3.99, aided by lower share count.
- Retail operating income fell 47.0% to $108.2 million, with second-half comparable store sales down about 23% for full-price Ralph Lauren stores.
- Net cash and short-term investments of $413.5 million, compared with net debt of $53.4 million a year earlier; operating cash flow rose to $774.2 million.
- Management expects continued negative pressure on sales and margins across all segments, and a restructuring plan targets about $25 million in annualized pretax cash savings beginning in Fiscal 2010.
- Ralph Lauren controls about 86% of voting power, and the company has agreed to take direct control of its Southeast Asia Polo licensed businesses effective January 1, 2010 for $20 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Ralph Lauren kept $0.08.
- Revenue$4.82B100.0%
- Cost of revenue−$2.09B43.4%
- Gross profit$2.73B56.6%
- Operating costs−$2.14B44.3%
- Operating income$595.5M12.3%
- Interest, other & tax−$189.5M3.9%
- Net income$406.0M8.4%
Where FY2009 revenue went
$4.82B- Cost of revenue: $2.29B, 47% of revenue
- SG&A: $2.04B, 42% of revenue
- Net income: $406.0M, 8.4% of revenue
- Interest, other & tax: $189.5M, 3.9% of revenue
Kept 8.4% as net incomeNet income $406.0M · 8.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed May 27, 2009Financial Statements
| Revenue | $4.82B |
| Cost of Revenue | $2.29B |
| Gross Profit | $2.73B |
| SG&A Expenses | $2.04B |
| Operating Expenses | $2.14B |
| Operating Income | $595.50M |
| Interest Expense | $26.60M |
| Net Income | $406.00M |
| EPS (Basic) | $4.09 |
| EPS (Diluted) | $4.01 |
| Shares Outstanding (Basic) | 99.20M |
| Shares Outstanding (Diluted) | 101.30M |
05—Questions
Frequently Asked Questions
How did Polo Ralph Lauren perform financially in fiscal 2009?
Net revenues increased 2.8% to $5.019 billion, but operating income decreased 8.9% to $595.5 million and net income decreased 3.3% to $406.0 million. Results were reduced by $79.0 million of pretax asset impairment and restructuring charges. Diluted EPS rose slightly to $4.01 from $3.99.
Why did Retail profitability decline so sharply?
Retail operating income fell $96.0 million, or 47.0%, to $108.2 million. The decline reflected $47.0 million of higher impairment-related charges, higher reductions in the carrying cost of retail inventory, and higher rent and occupancy costs. Comparable store sales declined in the second half as consumer spending contracted.
How strong is the company's balance sheet and liquidity?
The company ended the year with net cash and short-term investments of $413.5 million, compared with net debt of $53.4 million in the prior year. Operating cash flow was $774.2 million, and the company had no revolving credit borrowings under its $450 million credit facility as of March 28, 2009.
What is the outlook management described?
Management said the global economic environment will likely continue to negatively affect sales and operating margins across all segments for the foreseeable future. Traditional retail partners reduced initial Fall 2009 wholesale orders by approximately 10%. A restructuring plan, including workforce reductions and store closures, is expected to produce about $25 million in annualized pretax savings beginning in Fiscal 2010.
Who controls the company and how are shareholders' interests affected?
Mr. Ralph Lauren, or entities he controls, owned approximately 86% of the voting power of the outstanding common stock as of March 28, 2009. This gives him significant control over matters requiring stockholder approval, including mergers and sales of substantially all assets. The company paid a quarterly dividend of $0.05 per share during the year.
06—Continue