01—Abstract
Summary
Summary of the 10-K filed May 24, 2022. Cited figures are marked; the original filing is the authoritative source.
Ralph Lauren Corporation's Form 10-K for the fiscal year ended April 2, 2022 (Fiscal 2022, a 53-week year) reports a sharp recovery from the COVID-19 disruptions of Fiscal 2021.
Net revenues rose 41.3% to $6.219 billiona, and net income was $600.1 million, or $8.07 per diluted share, compared with a net loss of $121.1 million in Fiscal 2021. Operating income reached $798.4 million, or 12.8% of net revenues, up from an operating loss of $43.6 million. Gross margin improved to 66.7% from 65.0%, and SG&A fell to 53.2% of net revenues from 60.0%.
Growth was broad across North America (up 49.0% to $2.968 billionb), Europe (up 52.7% to $1.781 billion) and Asia (up 25.2% to $1.287 billion), helped by fewer store closures, stronger digital commerce and the 53rd week. Cash generation and capital returns strengthened. Operating cash flow was $715.9 million, against $380.9 million a year earlier.
The company repurchased $450.5 millionc of Class A stock during the year, paid $150.0 million in dividends, and had $1.629 billion of repurchase authorization remaining at year-end. The dividend was reinstated at $0.6875 per quarter and then raised to $0.75 in May 2022. Net cash and short-term investments were $962.1 million at year-end, down from $1.144 billion, and total debt was $1.636 billion.
Equity was $2.536 billiond. Investors should note the continuing risks the filing describes: exposure to COVID-19 variants, Russia-Ukraine war effects, supply chain and freight costs, about 97% of products made outside the U.S., and a Lauren family that controls roughly 85% of the voting power. The filing also describes a Fiscal 2021 Strategic Realignment Plan, with total expected charges of up to $300 million and expected annualized pre-tax savings of about $200 million.
02—Key points
Key Highlights
- Net revenues rose 41.3% to $6.219 billion, and net income reached $600.1 million ($8.07 per diluted share), versus a net loss of $121.1 million in Fiscal 2021.
- Operating income was $798.4 million (12.8% of net revenues), up from an operating loss of $43.6 million, with gross margin up to 66.7% and SG&A down to 53.2% of net revenues.
- Regional growth was broad: North America net revenues rose 49.0% to $2.968 billion, Europe rose 52.7% to $1.781 billion, and Asia rose 25.2% to $1.287 billion.
- Operating cash flow was $715.9 million, up from $380.9 million, while capital expenditures were $166.9 million.
- Shareholder returns resumed: $450.5 million of Class A repurchases and $150.0 million of dividends paid, with $1.629 billion of repurchase authorization remaining; the quarterly dividend was raised to $0.75 in May 2022.
- Net cash and short-term investments fell to $962.1 million from $1.144 billion, and total debt was $1.636 billion at year-end.
- Key risks include COVID-19 variants, the Russia-Ukraine war, supply chain and freight costs, reliance on about 97% foreign-sourced production, and Lauren family control of about 85% of voting power.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Ralph Lauren kept $0.10.
- Revenue$6.22B100.0%
- Cost of revenue−$2.07B33.3%
- Gross profit$4.15B66.7%
- Operating costs−$3.35B53.9%
- Operating income$798.4M12.8%
- Interest, other & tax−$198.3M3.2%
- Net income$600.1M9.7%
Where FY2022 revenue went
$6.22B- SG&A: $3.31B, 53% of revenue
- Cost of revenue: $2.07B, 33% of revenue
- Net income: $600.1M, 9.7% of revenue
- Other operating costs: $43.5M, 0.7% of revenue
- Interest, other & tax: $198.3M, 3.2% of revenue
Kept 9.7% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed May 24, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $6.22B$4.40B | +41.3% |
| Cost of Revenue | $2.07B$1.54B | +34.5% |
| Gross Profit | $4.15B$2.86B | +44.9% |
| SG&A Expenses | $3.31B$2.64B | +25.3% |
| Operating Expenses | $3.35B$2.90B | +15.3% |
| Operating Income | $798.40M-$43.60M | +1931.2% |
| Interest Expense | $54.00M$48.50M | +11.3% |
| Net Income | $600.10M-$121.10M | +595.5% |
| EPS (Basic) | $8.22$-1.65 | +598.2% |
| EPS (Diluted) | $8.07$-1.65 | +589.1% |
| Shares Outstanding (Basic) | 73.00M73.50M | −0.7% |
| Shares Outstanding (Diluted) | 74.30M73.50M | +1.1% |
05—Questions
Frequently Asked Questions
How did Ralph Lauren perform compared with the prior year?
Net revenues increased 41.3% to $6.219 billion from $4.401 billion, and net income swung to $600.1 million from a $121.1 million loss. The filing attributes the improvement mainly to fewer COVID-19-related store closures and disruptions, growth in digital commerce, stronger consumer demand and the 53rd week, partly offset by the Club Monaco divestiture and the Chaps transition to licensing.
Is Ralph Lauren generating enough cash to fund its capital returns?
Operating cash flow was $715.9 million in Fiscal 2022, which covered $166.9 million of capital expenditures, $450.5 million of share repurchases and $150.0 million of dividends. Net cash and short-term investments declined to $962.1 million from $1.144 billion, reflecting these uses. The company stated that its existing cash, credit facility availability and capital market access should suffice for its foreseeable requirements.
What are the main restructuring actions and their expected costs?
The Fiscal 2021 Strategic Realignment Plan has recorded cumulative pre-tax charges of $262.1 million. The company now expects total charges of up to $300 million, about $180 million in cash and $120 million non-cash, and expects gross annualized pre-tax expense savings of approximately $200 million, part of which is being reinvested in the business.
Who controls the company and what does that mean for shareholders?
Mr. Ralph Lauren and entities controlled by the Lauren family held approximately 85% of the voting power as of April 2, 2022. Class B shares carry ten votes each and elect a separate slate of directors, so public Class A holders have limited influence over corporate decisions, including mergers or asset sales.
What are the main risks to the outlook?
The filing highlights continued COVID-19 variant disruption, the Russia-Ukraine war and related sanctions, supply chain constraints and higher freight costs, inflationary pressures on raw materials and wages, and tariff developments between the U.S. and China, since about 19% of products are sourced from China. It also notes concentration risk, with three largest wholesale customers accounting for about 16% of net revenues.
06—Continue