01—Abstract
Summary
Summary of the 10-Q filed February 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Ralph Lauren Corporation's Form 10-Q for the third quarter of Fiscal 2024, ended December 30, 2023, reports net revenues of $1.934 billiona for the three months, up 5.6% as reported and 4.7% on a constant currency basis, with net income of $276.6 million and diluted EPS of $4.19, compared with $3.20 a year earlier.
For the nine months, net revenues were $5.063 billionb (up 3.3%), net income was $555.6 million, and diluted EPS was $8.31. Growth was led by international businesses, and total comparable store sales rose 9% in the quarter. Gross margin expanded 150 basis points to 66.5% on lower freight costs, favorable channel and geographic mix, higher pricing and lower non-routine inventory charges.
SG&A rose to 50.0% of revenues from 49.2%, and operating income grew 12.6% to $317.7 millionc for the quarter. Net income was helped by $20.6 million more in interest income and a lower effective tax rate of 16.1%. The balance sheet remained strong.
Cash and cash equivalents were $1.804 billiond and short-term investments $113.8 million against long-term debt of $1.140 billion, leaving a net cash and short-term investments position of $777.4 million, up from $427.2 million at fiscal year-end. Nine-month operating cash flow was $948.7 million, versus $397.0 million a year earlier. The company repurchased $277.7 million of Class A stock and paid $146.7 million in dividends in the nine months, and about $897 million remained under its repurchase authorization.
Management expects Fiscal 2024 capital expenditures of approximately $200 million to $225 million. The Global Credit Facility of $750 million was undrawn, and no Event of Default had occurred.
The filing also flags continuing risks, including inflationary pressures, foreign currency volatility, the Russia-Ukraine and Israel-Hamas conflicts, Red Sea shipping disruption, and a promotional retail environment. Restructuring charges were $38.3 million in the nine months, and the company reports no material changes to the risk factors in its Fiscal 2023 10-K.
02—Key points
Key Highlights
- Q3 net revenues of $1.934 billion, up 5.6% as reported and 4.7% in constant currency; total comparable store sales up 9%.
- Q3 gross profit margin rose 150 basis points to 66.5%, driven by lower freight costs, favorable mix, higher pricing and lower non-routine inventory charges.
- Q3 operating income of $317.7 million, up 12.6%, with operating margin of 16.4% versus 15.4% a year earlier.
- Q3 net income of $276.6 million and diluted EPS of $4.19, versus $216.5 million and $3.20 in the prior-year quarter.
- Net cash and short-term investments position of $777.4 million at December 30, 2023, up from $427.2 million at April 1, 2023.
- Nine-month operating cash flow of $948.7 million, up from $397.0 million, with $328.8 million spent on share repurchases and dividends of $146.7 million.
- Nine-month SG&A rose to 53.2% of net revenues from 51.6%, and restructuring charges totaled $38.3 million for the period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Ralph Lauren kept $0.14.
- Revenue$1.93B100.0%
- Cost of revenue−$648.0M33.5%
- Gross profit$1.29B66.5%
- Operating costs−$968.3M50.1%
- Operating income$317.7M16.4%
- Interest, other & tax−$41.1M2.1%
- Net income$276.6M14.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed February 8, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $1.93B$1.83B | +5.6% |
| Cost of Revenue | $648.00M$641.60M | +1.0% |
| Gross Profit | $1.29B$1.19B | +8.0% |
| SG&A Expenses | $967.60M$900.80M | +7.4% |
| Operating Expenses | $968.30M$908.60M | +6.6% |
| Operating Income | $317.70M$282.10M | +12.6% |
| Interest Expense | $10.60M$12.00M | −11.7% |
| Net Income | $276.60M$216.50M | +27.8% |
| EPS (Basic) | $4.25$3.26 | +30.4% |
| EPS (Diluted) | $4.19$3.20 | +30.9% |
| Shares Outstanding (Basic) | 65.00M66.50M | −2.3% |
| Shares Outstanding (Diluted) | 66.00M67.60M | −2.4% |
05—Questions
Frequently Asked Questions
How did Ralph Lauren perform in the third quarter of Fiscal 2024?
Net revenues were $1.934 billion, up 5.6% as reported and 4.7% on a constant currency basis. Operating income rose 12.6% to $317.7 million, and net income reached $276.6 million, or $4.19 per diluted share, compared with $3.20 a year earlier.
What drove the improvement in gross margin?
The filing attributes the 150 basis point increase in gross profit as a percentage of net revenues to lower freight costs, favorable geographic and channel mix, higher pricing, and lower non-routine inventory charges, partially offset by higher product costs.
How strong is the company's balance sheet and liquidity?
Cash and cash equivalents were $1.804 billion and short-term investments were $113.8 million, against long-term debt of $1.140 billion. The net cash and short-term investments position was $777.4 million. The $750 million Global Credit Facility had no borrowings outstanding.
How is the company returning capital to shareholders?
In the nine months, the company repurchased $277.7 million of Class A common stock under its program and paid $146.7 million in dividends. About $897 million remained under the repurchase authorization as of December 30, 2023, and the quarterly dividend is $0.75 per share.
What risks does the filing highlight?
The filing cites inflationary pressures, foreign currency volatility, the Russia-Ukraine and Israel-Hamas conflicts, Red Sea shipping disruption, a highly promotional retail environment, and consumer demand for discretionary luxury goods. It states there are no material changes to the risk factors in the Fiscal 2023 10-K.
06—Continue