01—Abstract
Summary
Summary of the 10-K filed May 16, 2019. Cited figures are marked; the original filing is the authoritative source.
Ralph Lauren Corporation's Form 10-K for the fiscal year ended March 30, 2019 reports net revenues of $6.313 billiona, up 2.1% on a reported basis and 2.8% on a constant currency basis, with the increase driven by international businesses.
Gross profit as a percentage of net revenues rose 90 basis points to 61.6%, and operating income increased $63.6 millionb, or 12.8%, to $561.8 million. Net income rose to $430.9 million, or $5.27 per diluted share, from $162.8 million, aided by a $174.8 million decrease in the income tax provision, mainly because TCJA-related charges were lower than in the prior year ($27.6 million in Fiscal 2019 versus $221.4 million in Fiscal 2018). The company reported restructuring and other charges, impairment of assets, and certain other charges totaling $163.1 million in Fiscal 2019, which reduced net income by $129.0 million, or $1.58 per diluted share.
The Fiscal 2019 Restructuring Plan is expected to produce gross annualized expense savings of approximately $60 million to $80 millionc, with total estimated charges of $125 million to $150 million. The Way Forward Plan is now complete, with no further charges expected under it. Net cash and investments declined to $1.343 billion from $1.494 billion, as cash from operations of $783.8 million was outweighed by $502.6 million of share repurchases, $197.7 million of capital expenditures and $190.7 million of dividends.
The Lauren family held approximately 83% of the voting power as of March 30, 2019, and Mr. Ralph Lauren serves as Executive Chairman and Chief Creative Officer. The company also disclosed that the Board approved a further $600 milliond expansion of the share repurchase program and a quarterly dividend increase to $0.6875 per share on May 13, 2019.
02—Key points
Key Highlights
- Net revenues of $6.313 billion, up 2.1% reported and 2.8% constant currency; growth driven by international businesses.
- Operating income rose 12.8% to $561.8 million; operating margin improved to 8.9% from 8.1%.
- Gross profit margin increased 90 basis points to 61.6%, driven by improved pricing and lower promotional activity.
- Net income of $430.9 million ($5.27 per diluted share) versus $162.8 million ($1.97) in Fiscal 2018, largely reflecting lower TCJA enactment-related charges.
- Asia net revenues grew 11.5% reported; Europe grew 4.7%, while North America declined 0.9%.
- Net cash and investments of $1.343 billion; operating cash flow of $783.8 million funded $502.6 million in share repurchases and $190.7 million in dividends.
- Board approved an additional $600 million share repurchase authorization and raised the quarterly dividend to $0.6875 on May 13, 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Ralph Lauren kept $0.07.
- Revenue$6.31B100.0%
- Cost of revenue−$2.43B38.4%
- Gross profit$3.89B61.6%
- Operating costs−$3.32B52.7%
- Operating income$561.8M8.9%
- Interest, other & tax−$130.9M2.1%
- Net income$430.9M6.8%
Where FY2019 revenue went
$6.31B- SG&A: $3.17B, 50% of revenue
- Cost of revenue: $2.43B, 38% of revenue
- Net income: $430.9M, 6.8% of revenue
- Other operating costs: $155.9M, 2.5% of revenue
- Interest, other & tax: $130.9M, 2.1% of revenue
Kept 6.8% as net incomeNet income $430.9M · 6.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed May 16, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $6.31B$6.18B | +2.1% |
| Cost of Revenue | $2.43B$2.43B | −0.1% |
| Gross Profit | $3.89B$3.75B | +3.6% |
| SG&A Expenses | $3.17B$3.10B | +2.4% |
| Operating Expenses | $3.32B$3.25B | +2.2% |
| Operating Income | $561.80M$498.20M | +12.8% |
| Interest Expense | $20.70M$18.20M | +13.7% |
| Net Income | $430.90M$162.80M | +164.7% |
| EPS (Basic) | $5.35$1.99 | +168.8% |
| EPS (Diluted) | $5.27$1.97 | +167.5% |
| Shares Outstanding (Basic) | 80.60M81.70M | −1.3% |
| Shares Outstanding (Diluted) | 81.70M82.50M | −1.0% |
05—Questions
Frequently Asked Questions
What drove the increase in net income in Fiscal 2019?
Net income increased $268.1 million to $430.9 million, primarily due to a $174.8 million decrease in the income tax provision, which was largely driven by lower TCJA enactment-related charges. Operating income also rose $63.6 million and interest income increased $28.5 million.
How did the company's regional performance compare?
Asia net revenues increased $107.3 million, or 11.5%, and Europe increased $74.9 million, or 4.7%. North America net revenues decreased $28.1 million, or 0.9%, driven by a $57.0 million decline in North America wholesale, partially offset by a $28.9 million increase in North America retail.
What are the restructuring plans and their expected savings?
The Fiscal 2019 Restructuring Plan, approved June 4, 2018, is expected to yield gross annualized expense savings of approximately $60 million to $80 million, with total estimated charges of $125 million to $150 million; cumulative charges since inception were $97.3 million. The Way Forward Plan is complete, with cumulative charges of $838.6 million and gross annualized savings of approximately $200 million from the initial actions plus approximately $140 million from the additional activities.
How concentrated is the company's ownership and customer base?
As of March 30, 2019, Mr. Ralph Lauren or entities controlled by the Lauren family held approximately 83% of the voting power. Macy's accounted for approximately 8% of total net revenues in Fiscal 2019, and the three largest wholesale customers together accounted for approximately 19% of net revenues.
What is the company's liquidity position and capital return activity?
The company held $1.987 billion in cash, cash equivalents, and short-term investments at fiscal year-end, with $607.4 million held by foreign subsidiaries. It has $500 million in its Global Credit Facility, with no borrowings outstanding under it. In Fiscal 2019 it repurchased $470.0 million of Class A stock under its program and paid $190.7 million in dividends, and it has $630 million of remaining repurchase authorization plus a further $600 million approved in May 2019.
06—Continue