01—Abstract
Summary
Summary of the 10-K filed May 20, 2021. Cited figures are marked; the original filing is the authoritative source.
Ralph Lauren Corporation reported a difficult Fiscal 2021 (fiscal year ended March 27, 2021) as COVID-19 business disruptions drove net revenues down 28.6% to $4.401 billiona from $6.160 billion.
The company posted a net loss of $121.1 millionb, or $1.65 per diluted share, compared with net income of $384.3 million, or $4.98 per diluted share, in Fiscal 2020. Gross profit as a percentage of net revenues rose to 65.0% from 59.3%, but SG&A expenses rose to 60.0% of net revenues from 52.6%, producing an operating loss of $43.6 million. Restructuring and other charges of $170.5 million and impairment charges of $96.0 million weighed on results.
Operating cash flow fell to $380.9 millionc from $754.6 million, and capital expenditures were $107.8 million. The balance sheet remained liquid. Cash and cash equivalents were $2.579 billion, and the company reported a net cash and investments position of $1.144 billion, up from $945.3 million.
Total debt was $1.633 billiond after the company issued $1.250 billion of senior notes in June 2020. The company temporarily suspended its quarterly dividend and share repurchases during Fiscal 2021, and on May 19, 2021 its Board approved reinstating the quarterly dividend at $0.6875 per share. The Fiscal 2021 Strategic Realignment Plan carries estimated total pre-tax charges of $300 million to $350 million, of which $236.8 million was recorded in Fiscal 2021, with expected gross annualized pre-tax savings of $200 million to $240 million.
The company also announced on May 13, 2021 an agreement to sell Club Monaco to Regent, L.P. The Lauren family controls about 84% of voting power, and the company's three largest wholesale customers accounted for approximately 14% of total net revenues. Management described the outlook as highly uncertain given the continuing COVID-19 pandemic, and it expects Fiscal 2022 capital expenditures of $250 million to $275 million.
02—Key points
Key Highlights
- Net revenues fell 28.6% to $4.401 billion in Fiscal 2021, with declines in North America (down 36.6%) and Europe (down 28.6%) driven by COVID-19 disruptions.
- The company reported a net loss of $121.1 million, or $1.65 per diluted share, versus net income of $384.3 million, or $4.98 per diluted share, in Fiscal 2020.
- Gross profit as a percentage of net revenues increased to 65.0% from 59.3%, while SG&A expenses rose to 60.0% of net revenues from 52.6%.
- Net cash and investments increased to $1.144 billion at fiscal year-end, with cash and cash equivalents of $2.579 billion against total debt of $1.633 billion.
- Operating cash flow was $380.9 million, down from $754.6 million, and the company issued $1.250 billion of senior notes in June 2020 to strengthen liquidity.
- The Fiscal 2021 Strategic Realignment Plan carries estimated pre-tax charges of $300 million to $350 million, with expected gross annualized pre-tax expense savings of $200 million to $240 million.
- The Board approved reinstating the quarterly dividend at $0.6875 per share on May 19, 2021, after it had been suspended during Fiscal 2021.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2021, Ralph Lauren lost $0.03.
- Revenue$4.40B100.0%
- Cost of revenue−$1.54B35.0%
- Gross profit$2.86B65.0%
- Operating costs−$2.90B66.0%
- Operating income−$43.6M1.0%
- Interest, other & tax−$77.5M1.8%
- Net income−$121.1M2.8%
04—Financials
Financial Highlights
Figures from 10-KFY2021filed May 20, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $4.40B$6.16B | −28.6% |
| Cost of Revenue | $1.54B$2.51B | −38.6% |
| Gross Profit | $2.86B$3.65B | −21.7% |
| SG&A Expenses | $2.64B$3.24B | −18.5% |
| Operating Expenses | $2.90B$3.34B | −12.9% |
| Operating Income | -$43.60M$317.00M | −113.8% |
| Interest Expense | $48.50M$17.60M | +175.6% |
| Net Income | -$121.10M$384.30M | −131.5% |
| EPS (Basic) | $-1.65$5.07 | −132.5% |
| EPS (Diluted) | $-1.65$4.98 | −133.1% |
| Shares Outstanding (Basic) | 73.50M75.80M | −3.0% |
| Shares Outstanding (Diluted) | 73.50M77.20M | −4.8% |
05—Questions
Frequently Asked Questions
Why did Ralph Lauren report a net loss in Fiscal 2021?
The net loss of $121.1 million reflected a 28.6% decline in net revenues to $4.401 billion, driven by COVID-19 business disruptions, along with restructuring and other charges of $170.5 million, impairment of assets of $96.0 million, and a $46.6 million net incremental income tax expense. SG&A expenses as a percentage of net revenues rose to 60.0%, producing an operating loss of $43.6 million.
How strong is Ralph Lauren's liquidity position?
At March 27, 2021, the company held $2.579 billion in cash and cash equivalents and $197.5 million in short-term investments, against total debt of $1.633 billion. Its net cash and investments position was $1.144 billion, up from $945.3 million a year earlier. The company also reported $571 million of remaining availability under its credit and overdraft facilities.
What is the status of the dividend and share repurchases?
The quarterly dividend and the Class A common stock repurchase program were temporarily suspended beginning in the first quarter of Fiscal 2021. On May 19, 2021, the Board approved reinstating the quarterly dividend at the pre-pandemic amount of $0.6875 per share, payable July 9, 2021 to holders of record on June 25, 2021. The filing reports approximately $580 million remaining under the repurchase program.
What are the main actions in the Fiscal 2021 Strategic Realignment Plan?
The plan covers team organizational changes, real estate consolidation of corporate offices, distribution centers and stores, and brand portfolio changes. It includes a global workforce reduction, closing the Polo store on Regent Street in London, transitioning the Chaps brand to a fully licensed model, and selling the Club Monaco business to Regent, L.P., which is expected to close by the end of the first quarter of Fiscal 2022. Of the estimated $300 million to $350 million in charges, $236.8 million was recorded in Fiscal 2021.
How concentrated is the company's customer base and ownership?
Sales to the three largest wholesale customers accounted for approximately 14% of total net revenues in Fiscal 2021, and those customers represented about 30% of gross trade accounts receivable. Mr. Ralph Lauren or entities controlled by the Lauren family held approximately 84% of the voting power of the company's common stock as of March 27, 2021.
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