01—Abstract
Summary
Summary of the 10-K filed May 18, 2017. Cited figures are marked; the original filing is the authoritative source.
Ralph Lauren Corporation's Fiscal 2017 (ended April 1, 2017) was a year of significant losses driven by its Way Forward restructuring plan.
Net revenues declined 10.2% to $6.653 billiona from $7.405 billion, and the company reported a net loss of $99.3 million, or $1.20 per diluted share, compared with net income of $396.4 million, or $4.62 per diluted share, in Fiscal 2016. Operating results were hit by restructuring-related charges, impairment of assets, and certain other charges totaling $770.3 million, which reduced net income by $592.1 million after tax, or $7.10 per diluted share. Gross profit as a percentage of net revenues fell 160 basis points to 54.9%, and SG&A rose to 47.3% of net revenues.
The Way Forward Plan aims to refocus on core brands, shorten supply chain lead times, rightsize the cost structure, and reduce the number of store and wholesale doors. The company expects gross annualized expense savings of approximately $180 million to $220 millionb from the initial actions, plus about $140 million from the additional March 2017 actions. Total estimated plan charges are approximately $770 million, of which about $450 million are cash-related.
Leadership is also changing: Stefan Larsson departed as CEO effective May 1, 2017, and Patrice Louvet was announced as the new President and CEO, effective July 10, 2017 or a mutually agreed date. Balance sheet strength remained intact. The company ended the year with $1.353 billionc in cash, cash equivalents, and short-term investments, and a net cash and investments position of $786.2 million.
Operating cash flow was $952.3 milliond, capital expenditures were $284.0 million, and dividends paid were $164.8 million. Management stated it does not currently expect to repurchase shares under the Class A repurchase program during Fiscal 2018, citing uncertainty around U.S. tax policy. The Lauren family held approximately 83% of voting power as of April 1, 2017.
02—Key points
Key Highlights
- Net revenues fell 10.2% to $6.653 billion in Fiscal 2017; North America net revenues declined 15.6% to $3.795 billion.
- Net loss of $99.3 million, or $1.20 per diluted share, versus net income of $396.4 million ($4.62 per diluted share) in Fiscal 2016.
- Restructuring, impairment, and other charges totaled $770.3 million, reducing net income by $592.1 million after tax ($7.10 per diluted share).
- Way Forward Plan targets gross annualized expense savings of about $180–220 million plus an additional about $140 million, with total estimated charges of about $770 million.
- Gross profit margin declined 160 basis points to 54.9%, and SG&A rose to 47.3% of net revenues due to deleverage.
- Cash, cash equivalents, and short-term investments of $1.353 billion; net cash and investments of $786.2 million; operating cash flow of $952.3 million.
- CEO transition: Stefan Larsson departed May 1, 2017, and Patrice Louvet was named successor, effective July 10, 2017 or a mutually agreed date; no share repurchases expected in Fiscal 2018.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2017, Ralph Lauren lost $0.01.
- Revenue$6.65B100.0%
- Cost of revenue−$3.00B45.1%
- Gross profit$3.65B54.9%
- Operating costs−$3.74B56.3%
- Operating income−$92.3M1.4%
- Interest, other & tax−$7.0M0.1%
- Net income−$99.3M1.5%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed May 18, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $6.65B$7.41B | −10.2% |
| Cost of Revenue | $3.00B$3.22B | −6.7% |
| Gross Profit | $3.65B$4.19B | −12.8% |
| SG&A Expenses | $3.17B$3.41B | −7.1% |
| Operating Expenses | $3.74B$3.60B | +3.9% |
| Operating Income | -$92.30M$582.80M | −115.8% |
| Interest Expense | $12.40M$21.00M | −41.0% |
| Net Income | -$99.30M$396.40M | −125.1% |
| EPS (Basic) | $-1.20$4.65 | −125.8% |
| EPS (Diluted) | $-1.20$4.62 | −126.0% |
| Shares Outstanding (Basic) | 82.70M85.20M | −2.9% |
| Shares Outstanding (Diluted) | 82.70M85.90M | −3.7% |
05—Questions
Frequently Asked Questions
Why did Ralph Lauren report a net loss in Fiscal 2017?
The loss was primarily driven by $770.3 million of restructuring-related charges, impairment of assets, and other charges tied to the Way Forward Plan and the Stefan Larsson departure, along with a 10.2% decline in net revenues and gross margin compression to 54.9%. Net loss was $99.3 million, or $1.20 per diluted share.
What is the Way Forward Plan and what savings does it target?
The Way Forward Plan, approved June 2, 2016, aims to refocus on core brands, shorten supply chain lead times, rightsize the cost structure, and execute a disciplined multi-channel distribution strategy. The filing cites gross annualized expense savings of approximately $180 million to $220 million, with an additional approximately $140 million from actions approved March 30, 2017. Total estimated charges are about $770 million, including about $450 million in cash-related charges.
Who is leading Ralph Lauren going forward?
Stefan Larsson departed as President and CEO effective May 1, 2017. Patrice Louvet was announced as the new President and CEO on May 17, 2017, effective July 10, 2017 or another mutually agreed date. Ralph Lauren, Executive Chairman and Chief Creative Officer, has performed the functions of the principal executive officer through the filing date.
How strong is the company's liquidity and balance sheet?
As of April 1, 2017, the company had $1.353 billion in cash, cash equivalents, and short-term investments, with $1.118 billion held by foreign subsidiaries. Net cash and investments was $786.2 million, and total debt was $588.2 million, consisting of $600 million in senior notes. The $500 million Global Credit Facility was undrawn apart from $8 million in letters of credit and commercial paper outstanding.
Will Ralph Lauren continue returning capital to shareholders?
The company paid $164.8 million in dividends in Fiscal 2017 and declared $2.00 per share, and it intends to maintain its regular quarterly dividend program. However, management said it does not currently expect to repurchase shares under its Class A repurchase program during Fiscal 2018 due to uncertainty around potential U.S. tax changes, leaving about $100 million of authorization remaining.
06—Continue