Ralph Lauren Corporation

2 Mar

Ralph Lauren Corporation is a global leader in the design, marketing, and distribution of luxury lifestyle products.

Over 50 years, its reputation and distinctive image have been developed across a wide range of products, brands, distribution channels, and international markets.

Employees: 18,250

Revenue: $6.4bn for FY2022

HQ Location: New York, U.S.

What they do:

They combine consumer insights with their design, marketing, and imaging skills to offer, along with their licensing alliances, broad lifestyle product collections with a unified vision.
They design, market, and distribute luxury lifestyle products in five categories: apparel, footwear & accessories, home, fragrances, and hospitality.
Apparel — Their apparel products include extensive collections of men's, women's, and children's clothing, which are sold under various brand names, including Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Golf Ralph Lauren, Ralph Lauren Golf, RLX Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others;
Footwear and Accessories — Their range of footwear and accessories encompasses men's, women's, and children's, including casual shoes, dress shoes, boots, sneakers, sandals, eyewear, watches, fashion and fine jewelry, scarves, hats, gloves, umbrellas, and leather goods, including handbags, luggage, small leather goods, and belts, which are sold under the Ralph Lauren Collection, Ralph Lauren Purple Label, Double RL, Polo Ralph Lauren, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco brands;
Fragrance — Their fragrance offerings capture the essence of Ralph Lauren's men's and women's brands with numerous labels, designed to appeal to a variety of audiences. Women's fragrance products are sold under their Ralph Lauren Collection, Woman by Ralph Lauren, Romance Collection, Ralph Collection, and Big Pony Women's brands. Men's fragrance products are sold under their Polo Blue, Safari, Purple Label, Polo Red, Polo Green, Polo Black, Polo Supreme, Polo Sport, and Big Pony Men's brands;
Home — Their coordinated home products include bedding and bath products, furniture, fabric and wallpaper, lighting, tabletop, floor coverings, and giftware; and
Hospitality — Continuing to engage their consumers with experiential and unique expressions of the brand, their hospitality portfolio is a natural extension of the World of Ralph Lauren as expressed through the culinary arts. Ralph Lauren's global hospitality collection is comprised of their restaurants including The Polo Bar in New York City, RL Restaurant located in Chicago, Ralph's located in Paris, and their Ralph's Coffee concept in various cities around the world.
They sell their products under the following key brand platforms:
- Ralph Lauren Luxury
- Polo Ralph Lauren
- Lauren Ralph Lauren
- Chaps
- Club Monaco

Their purpose:

To inspire the dream of a better life through authenticity and timeless style.

Financial and Business Goals

They aim to focus any financial and business goals on a plan coined ‘Our Next Chapter Accelerate Plan’ which has 3 main strategic growth drivers which include:
- Elevate and energize the brand
- Drive the core and expand for more
- Win in Key cities with their consumer ecosystem

Outlook for 2023

The Company continues to expect constant currency revenues to increase approximately high-single digits to last year, or about 8%
Based on current exchange rates, foreign currency is now expected to negatively impact revenue growth by approximately 600 basis points
Fiscal 2023 revenue growth is still expected to be negatively impacted by approximately 100 basis points due to the absence of the 53rd week compared to the prior year.
The Company expects operating margin for Fiscal 2023 to be in the range of 13.5% to 14.0% in constant currency
Foreign currency is now expected to negatively impact the operating margin by approximately 180 basis points in Fiscal 2023.
Gross margin is expected to be about flat in constant currency on a 52-week comparable basis, with AUR growth and favorable product mix offset by higher freight and product cost inflation.
Foreign currency is expected to negatively impact gross margins by approximately 150 basis points in Fiscal 2023.

Things to know right now

New Stores Opened
They opened 55 new stores in concessions, focused on their top cities globally this quarter, with the majority again in Asia, particularly the Chinese Mainland.
The largest Children’s Store Opens
They opened their largest children's store in the world on Via della Spiga in Milan. Located across from their flagship store , they are now able to showcase the full breadth of their luxury lifestyle proposition in this important market.
Wei Zhang joins Ralph Lauren
Wei Zhang, former President of Alibaba Pictures and SVP of Alibaba Group joins joined RL this quarter. Her leadership experience across international business development, focusing on China, entertainment, media and corporate social responsibility makes her a unique addition to their Board.
Recognitions this quarter
- Fast Company's 2022 Brands That Matter list for their collaboration with Morehouse and Spelman Colleges
- Fortune's World's Most Admired Companies, moving from #6 last year to #2 this year
- And on the sustainability front, they highlighted their first cradle-to-cradle certified product with their luxury gold Cashmere sweater.

Business Segments:

North America

Their North America segment, representing approximately 51% of their Fiscal net revenues, primarily consists of sales of their Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through their retail and wholesale businesses in the U.S. and Canada, excluding Club Monaco.

In North America, their retail business is primarily comprised of our Ralph Lauren stores, their factory stores, and their digital commerce site, www.RalphLauren.com.

Their wholesale business in North America is comprised primarily of sales to department stores, and to a lesser extent, specialty stores.

Europe

Their Europe segment represents approximately 26% of their net revenues, primarily consisting of sales of their Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through their retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club Monaco.

In Europe, their retail business is primarily comprised of their Ralph Lauren stores, their factory stores, their concession-based shop-within-shops, and their various digital commerce sites.

Their wholesale business in Europe is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various third-party digital partners.

Asia

Their Asia segment represents approximately 17% of their net revenues, and primarily consists of sales of their Ralph Lauren branded apparel, footwear, accessories, home furnishings, and related products made through their retail and wholesale businesses in Asia, Australia, and New Zealand.

Their retail business in Asia is primarily comprised of their Ralph Lauren stores, their factory stores, their concession-based shop-within-shops, and their digital commerce site, www.RalphLauren.cn.

In addition, they sell their products online through various third-party digital partner commerce sites.

In Asia, their wholesale business is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.

Their Competitors

Chanel
Christian Dior
Burberry
Gucci
Prada
Zara
Louis Vuitton
Hugo Boss

Their financial calendar

Q1: May-July - Earnings 9th August 2024

Q2: August-October- Earnings 10th November 2024

Q3: November-January - Earnings 9th February 2024

Q4: February-April - Around 24th May 2023

Next Earnings Report: 24th May 2023

Highlights across their Our Next Great Chapter accelerate program this quarter:

Elevate and Energize Our Lifestyle Brand
- Delivered continued growth in younger, high-value new consumer acquisition with social media followers exceeding 51 million and digital search trends continuing to significantly outpace peers. Consumer metrics were strongly led by growth in brand awareness and value perception scores
- Fueled consumer recruitment and engagement through key brand moments including their global 'Gift of Togetherness' holiday campaign; California Dreaming fashion show; innovative partnership with Epic Games, creator, and publisher of the popular game Fortnite, in the metaverse; and successful Singles Day event
- Drive the Core and Expand for More
  - Increased average unit retail by 10% across their direct-to-consumer network in the third quarter, on top of a 19% increase last year, driven by the continued elevation of their product offering and promotional discipline
  - Drove strong revenue growth in their Core business, up high-single digits to last year, as well as their high-potential categories — including Women's, Outerwear, and Home — up low-teens to last year, both in constant currency
  - Product highlights this quarter included: the launch of their Polo Originals line, the most elevated, authentic expression of their core brand; their exclusive capsule with Japanese retailer BEAMS; their 7 Days 7 Drops of limited edition and vintage Polo Ski items on the Polo 67 app; and Polo Stadium collection of digital and physical product as part of their Fortnite collaboration
- Win in Key Cities with Our Consumer Ecosystem
  - Delivered positive revenue growth across every region in the quarter on both a reported and constant currency basis, including positive comp store sales growth in all three regions
  - By region, constant currency sales performance was led by Asia, up 1% on a reported basis but increasing 16% in constant currency with the Chinese mainland up high-single digits. Europe also grew 1% on a reported basis but was up 13% in constant currency, while North America increased 1% on top of strong post-pandemic reopening compares to last year
  - Total digital ecosystem revenues increased by high-single digits in the third quarter, in line with their expectations and on top of 40% growth last year, with solid underlying performance along with the benefit of post-Christmas selling days shifting into the fiscal period. Digital operating margin continued to meaningfully benefit the total Company margin rate

Positives from the last earnings report:

Net revenue increased by 1% to $1.8 billion on a reported basis and was up 7% in constant currency.
Gross profit was $1.2 billion
Gross margin was 65.0%.

North America

North American revenue in the third quarter increased 1% to $938 million
In retail revenue, comparable store sales in North America were up 2%
9% revenue Increase in digital commerce.

Europe

Europe revenue in the third quarter increased 1% to $469 million on a reported basis
Revenue increased 13% in constant currency
In retail, comparable store sales in Europe were up 11%
11% revenue increase in brick-and-mortar stores
12% revenue increase in digital commerce.

Asia

Asia revenue in the third quarter increased 1% to $386 million on a reported basis and 16% in constant currency.
Comparable store sales in Asia increased revenue 8%
7% revenue increase in their brick-and-mortar stores
21% revenue increase in digital commerce

Challenges from the last earnings report:

Foreign currency negatively impacted revenue growth by approximately 630 basis points in the third quarter.
Adjusted gross margin was 65.2%, 80 basis points below the prior year on a reported basis but up 80 basis points in constant currency driven by better pricing, product mix elevation, and lower air freight expenses compared to the prior year.
North America
Their brands continued to gain share in the North America wholesale channel, though revenue decreased 2% driven by a roughly 300 basis point headwind from a receipt delay.

Europe