01—Abstract
Summary
Summary of the 10-K filed May 25, 2023. Cited figures are marked; the original filing is the authoritative source.
Ralph Lauren Corporation's 10-K for fiscal 2023 (year ended April 1, 2023) reports net revenues of $6.444 billiona, up 3.6% on a reported basis and 9.4% on a constant currency basis, with growth across all reportable segments.
Net income declined to $522.7 millionb from $600.1 million, and diluted EPS fell to $7.58 from $8.07. Gross profit as a percentage of net revenues decreased 210 basis points to 64.6%, driven by inflationary cost pressures, unfavorable foreign currency effects and higher non-routine inventory charges, partially offset by higher pricing. Operating income fell 11.8% to $704.2 million, and operating margin declined 190 basis points to 10.9%.
Cash generation and capital returns were a major focus. Operating cash flow was $411.0 millionc, down from $715.9 million, mainly on unfavorable working capital changes. The company used cash for $488.6 million of Class A share repurchases (including tax withholdings), $217.5 million of capital expenditures and $198.3 million of dividends.
Net cash and short-term investments fell to $427.2 milliond from $962.1 million, and the remaining repurchase authorization was approximately $1.175 billion. Total long-term debt was $1,138.5 million, and the company had no borrowings under its $500 million Global Credit Facility as of April 1, 2023. The filing describes a company that remains controlled by the Lauren family, which held approximately 86% of voting power, and that is continuing its growth strategy with international expansion, particularly in Asia, where comparable store sales rose 17%.
The company also reports completing the Fiscal 2021 Strategic Realignment Plan with cumulative pre-tax charges of $281.8 million and expected gross annualized savings of approximately $200 million. Fiscal 2024 capital expenditures are expected to be $275 million to $300 million.
02—Key points
Key Highlights
- Net revenues rose 3.6% to $6.444 billion (9.4% constant currency), with growth in North America, Europe and Asia.
- Net income fell to $522.7 million from $600.1 million; diluted EPS declined to $7.58 from $8.07.
- Gross margin fell 210 basis points to 64.6%, driven by inflationary costs, unfavorable FX and higher non-routine inventory charges.
- Operating cash flow dropped to $411.0 million from $715.9 million, mainly due to working capital changes.
- Returned capital through $488.6 million of share repurchases and $198.3 million of dividends; about $1.175 billion remains under the repurchase program.
- Net cash and short-term investments declined to $427.2 million from $962.1 million; no borrowings under the $500 million Global Credit Facility.
- Asia comparable store sales grew 17%, and Asia segment operating margin improved 250 basis points to 20.3%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Ralph Lauren kept $0.08.
- Revenue$6.44B100.0%
- Cost of revenue−$2.28B35.3%
- Gross profit$4.17B64.7%
- Operating costs−$3.46B53.7%
- Operating income$704.2M10.9%
- Interest, other & tax−$181.5M2.8%
- Net income$522.7M8.1%
Where FY2023 revenue went
$6.44B- SG&A: $3.41B, 53% of revenue
- Cost of revenue: $2.28B, 35% of revenue
- Net income: $522.7M, 8.1% of revenue
- Other operating costs: $52.7M, 0.8% of revenue
- Interest, other & tax: $181.5M, 2.8% of revenue
Kept 8.1% as net incomeNet income $522.7M · 8.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed May 25, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $6.44B$6.22B | +3.6% |
| Cost of Revenue | $2.28B$2.07B | +10.0% |
| Gross Profit | $4.17B$4.15B | +0.4% |
| SG&A Expenses | $3.41B$3.31B | +3.1% |
| Operating Expenses | $3.46B$3.35B | +3.4% |
| Operating Income | $704.20M$798.40M | −11.8% |
| Interest Expense | $40.40M$54.00M | −25.2% |
| Net Income | $522.70M$600.10M | −12.9% |
| EPS (Basic) | $7.72$8.22 | −6.1% |
| EPS (Diluted) | $7.58$8.07 | −6.1% |
| Shares Outstanding (Basic) | 67.70M73.00M | −7.3% |
| Shares Outstanding (Diluted) | 69.00M74.30M | −7.1% |
05—Questions
Frequently Asked Questions
How did Ralph Lauren perform in Fiscal 2023?
Net revenues increased 3.6% to $6.444 billion, or 9.4% on a constant currency basis. Operating income fell 11.8% to $704.2 million and net income fell to $522.7 million, mainly due to lower gross margin and higher restructuring, impairment and other charges.
What drove the decline in gross margin?
The filing attributes the 210 basis point decline in gross profit as a percentage of net revenues to inflationary cost pressures, unfavorable foreign currency effects and higher non-routine inventory charges, partially offset by higher pricing.
How is the company returning capital to shareholders?
In Fiscal 2023 it repurchased $488.6 million of Class A stock, including tax withholdings, and paid $198.3 million in dividends. The quarterly dividend was raised to $0.75 per share in May 2022, and about $1.175 billion remained under the repurchase program as of April 1, 2023.
How strong is the balance sheet and liquidity position?
The company held $1.529 billion of cash and equivalents and $36.4 million of short-term investments. Long-term debt was $1,138.5 million, and net cash and short-term investments were $427.2 million, down from $962.1 million. The filing states it had no borrowings under its Global Credit Facility as of April 1, 2023.
Who controls the company and what risk does that create?
Mr. Ralph Lauren and entities controlled by the Lauren family held approximately 86% of the voting power of the outstanding common stock as of April 1, 2023. The filing notes this gives them significant control over matters requiring stockholder approval, including mergers and asset sales.
06—Continue