Ralph Lauren Reports Fourth Quarter and Full Year Fiscal 2019 Results

Delivers Better Than Expected Results in First Year of Next Great
Chapter Plan; Board of Directors Approves 10% Dividend Increase

NEW YORK–(BUSINESS WIRE)–Ralph Lauren Corporation (NYSE:RL), a global leader in the design,
marketing, and distribution of premium lifestyle products, today
reported earnings per diluted share of $0.39 on a reported basis and
$1.07 on an adjusted basis, excluding restructuring-related and other
charges, for the fourth quarter of Fiscal 2019. This compared to
earnings per diluted share of $0.50 on a reported basis and $0.90 on an
adjusted basis, excluding restructuring-related and other charges, for
the fourth quarter of Fiscal 2018.

For Fiscal 2019, earnings per diluted share was $5.27 on a reported
basis and $7.19 on an adjusted basis, excluding restructuring-related
and other charges. This compared to earnings per diluted share of $1.97
on a reported basis and $6.03 on an adjusted basis, excluding
restructuring-related and other charges, for the full year of Fiscal
2018.

The Company also announced that its Board of Directors declared a 10%
increase in the regular quarterly cash dividend on the Company’s Common
Stock. The new quarterly cash dividend is $0.6875 per share for a total
annual dividend amount of $2.75 per share. The next quarterly dividend
is payable on July 12, 2019 to shareholders of record at the close of
business on June 28, 2019.

“This year we marked an incredible milestone for our business and our
brands – 50 years of inspiration, passion and innovation,” said Ralph
Lauren, Executive Chairman and Chief Creative Officer. “As we celebrate
our rich history, we are even more inspired and motivated to continue to
build the future for our company, and I am so proud of the work our
teams are doing to deliver for consumers around the world every day.”

“Our Next Great Chapter plan is off to a good start – in its first year,
we outperformed our commitments across key metrics, including revenue,
quality of sales, operating income and EPS,” said Patrice Louvet,
President & Chief Executive Officer. “It has been an exciting year of
progress and continuous learning in our multi-year journey. We returned
to revenue growth one year ahead of plan, average unit retail was better
than we expected across all regions and channels as we continued to
elevate the brand, and we saw particular strength across our
international regions as we invested in product, marketing and
distribution. Looking ahead, we will continue to put the consumer at the
center of everything we do, elevate and energize our brands and drive
operational efficiency to achieve long-term, sustainable growth and
value creation.”

We delivered across the following strategic initiatives in the fourth
quarter and full year Fiscal 2019:

  • Win Over a New Generation of Consumers

    • For Fiscal 2019, increased marketing investments by 13% to last
      year, driven by unique and highly impactful brand building
      campaigns and fashion shows including our 50th
      Anniversary Fashion Show, Ralph’s Café immersive fashion
      experience at our Madison Avenue flagship store and ‘Family is Who
      You Love’ campaign which launched in the fourth quarter
    • Elevated our brand and connected with new consumers through our
      collaboration with UK-based skate brand Palace, Limited Edition
      launches throughout the year and new distribution in key specialty
      retail doors
    • Continued to leverage celebrities, social influencers and cultural
      events that resonate with different segments of the Ralph Lauren
      consumer base, including our most recent Ralph Lauren Romance
      fragrance campaign featuring Taylor Hill
  • Energize Core Products and Accelerate Under-Developed Categories

    • Average unit retail across our direct-to-consumer network was up
      8% in both the fourth quarter and full year Fiscal 2019 driven by
      our ongoing initiatives to elevate the product assortment and
      improve quality of sales
    • Renewed our core styles and focused on our icons which continue to
      be key drivers of improving sales trends
    • Continued to build our high-potential under-developed categories,
      with denim and outerwear sell-out trends accelerating in the
      Fall/Holiday season, driven by an improved product, merchandising
      and marketing focus
  • Drive Targeted Expansion in Our Regions and Channels

    • Momentum in Asia continued with 13% revenue growth and 5% comp
      growth in constant currency in Fiscal 2019, led by over 30% growth
      in Mainland China
    • Europe outperformed our expectations in Fiscal 2019 with 7%
      revenue growth in constant currency, driven by 10% growth in
      wholesale and positive retail comps in the second half of the year
    • Continued to expand our global distribution with 135 new retail
      stores including over 90 stores in Asia, and partnered with over
      20 new digital pure play retailers globally
  • Lead with Digital

    • Global digital revenue grew 11% to last year in constant currency
      in Fiscal 2019, with strength across every region
    • Our directly-operated digital flagships in North America and
      Europe returned to positive growth during the year, supported by
      improvements in functionality, an enhanced consumer experience,
      and higher quality of sales initiatives
    • Expanded our partnerships with key digital wholesale players
      across regions
  • Operate with Discipline to Fuel Growth

    • Adjusted gross margin was up 90 basis points in Fiscal 2019 driven
      by quality of sales
    • Adjusted operating expenses, excluding our marketing investment,
      were below revenue growth in Fiscal 2019
    • Launched our direct-to-consumer shared inventory initiative in
      North America in the fourth quarter, driving increased efficiency
      in our distribution network and a reduced warehouse footprint
    • Increased geographic diversification across our sourcing network
      and delivered strong progress on global lead time reductions

Fourth Quarter Fiscal 2019 Income Statement Review

Net Revenue. In the fourth quarter of Fiscal 2019, revenue
declined 1.5% to $1.5 billion on a reported basis and was up 1.2% in
constant currency. Foreign currency negatively impacted revenue growth
by approximately 270 basis points in the fourth quarter.

Revenue performance for the Company’s reportable segments in the fourth
quarter compared to the prior year period was as follows:

  • North America Revenue. North America revenue in the fourth
    quarter decreased 7% to $708 million. North America wholesale revenue
    was down 10% to last year, including softness in select spring fashion
    concepts and planned reductions in off-price sales. In retail,
    comparable store sales in North America were down 4%, including a 7%
    decline in brick and mortar stores and a 6% increase in digital
    commerce. Excluding the impact of Easter timing, comparable store
    sales in North America were down approximately 1% to last year.
  • Europe Revenue. Europe revenue in the fourth quarter increased
    4% to $435 million on a reported basis and increased 11% to last year
    in constant currency. In retail, comparable store sales in Europe were
    up 5% on a constant currency basis, driven by a 5% increase in brick
    and mortar stores and a 6% increase in digital commerce. Europe
    wholesale revenue increased 4% on a reported basis and increased 11%
    in constant currency.
  • Asia Revenue. Asia revenue in the fourth quarter increased 6%
    to $273 million on a reported basis and increased 10% in constant
    currency, with strong performance across every market, led by
    approximately 30% constant currency growth in Mainland China.
    Comparable store sales in Asia increased 4% in constant currency,
    reflecting growth in both brick and mortar and digital commerce
    operations.

Gross Profit. Gross profit for the fourth quarter of
Fiscal 2019 was $901 million and gross margin was 59.9%. On an adjusted
basis, gross margin was 60.1%, 30 basis points above the prior year.

The increase in adjusted gross margin was driven by initiatives to
improve quality of sales through reduced promotional activity and
improved pricing as well as favorable product, geographic and channel
sales mix. Foreign currency negatively impacted gross margin by 20 basis
points in the fourth quarter.

Operating Expenses. Operating expenses in the fourth
quarter of Fiscal 2019 were $874 million on a reported basis, including
$64 million in restructuring-related and other charges. On an adjusted
basis, excluding such charges, operating expenses were $809 million,
down 2% to prior year driven by cost savings initiatives and lower
marketing investments to last year, as the timing of our full year
Fiscal 2018 marketing spend was significantly more concentrated in the
fourth quarter.

Adjusted operating expense rate was 53.8%, 40 basis points below the
prior year period, excluding restructuring-related and other charges,
driven by cost savings initiatives and timing of marketing spend.

Operating Income. Operating income for the fourth quarter
of Fiscal 2019 was $28 million on a reported basis, including
restructuring-related and other charges of $68 million, and operating
margin was 1.9%. Adjusted operating income was $96 million and adjusted
operating margin was 6.4%, 80 basis points above the prior year,
excluding restructuring-related and other charges from both periods.
Foreign currency negatively impacted operating margin by 30 basis points
in the fourth quarter.

  • North America Operating Income. North America operating income
    in the fourth quarter was $109 million on a reported and $112 million
    on an adjusted basis. Adjusted North America operating margin was
    15.9%, down 150 basis points to last year as gross margin improvements
    were more than offset by higher SG&A as a percentage of sales.
  • Europe Operating Income. Europe operating income in the fourth
    quarter was $98 million on a reported and $103 million on an adjusted
    basis. Adjusted Europe operating margin was 23.7%, 360 basis points
    higher than the prior year period. In constant currency, the adjusted
    operating margin expanded 340 basis points driven by gross margin
    expansion and SG&A leverage.
  • Asia Operating Income. Asia operating income in the fourth
    quarter was $38 million on a reported basis and $39 million on an
    adjusted basis. Adjusted Asia operating margin was 14.3%, down 90
    basis points to the prior year and down 80 basis points in constant
    currency.

Net Income and EPS. On a reported basis, net income in the
fourth quarter of Fiscal 2019 was $32 million or $0.39 per diluted
share. On an adjusted basis, net income was $85 million, or $1.07 per
diluted share, excluding restructuring-related and other charges. This
compared to a net income of $41 million, or $0.50 per diluted share on a
reported basis, and net income of $75 million, or $0.90 per diluted
share on an adjusted basis, for the fourth quarter of Fiscal 2018.

In the fourth quarter of Fiscal 2019, the Company had an effective tax
rate of 10.6% on a reported and 17.5% on an adjusted basis, excluding
restructuring-related and other charges. This compared to a reported and
adjusted effective tax rate of (66%) and 13%, respectively, in the prior
year period.

Full Year Fiscal 2019 Income Statement Review

Net Revenues. For Fiscal 2019, revenue increased 2% to
$6.3 billion on a reported basis and increased 3% in constant currency,
above our guidance.

  • North America Revenue. For Fiscal 2019, North America revenue
    decreased 1% on both a reported and constant currency basis to $3.2
    billion, including our planned reduction in off-price sales, while
    retail comps were flat to last year.
  • Europe Revenue. For Fiscal 2019, Europe revenue increased 5% to
    $1.7 billion on a reported basis. In constant currency, revenue
    increased 6% driven by wholesale and retail growth.
  • Asia Revenue. For Fiscal 2019, Asia revenue increased 11% to
    $1.0 billion on a reported basis. In constant currency, revenue
    increased 13% with double-digit growth in retail and wholesale.

Gross Profit. Gross profit for Fiscal 2019 was $3.9
billion on a reported basis, including $7 million in inventory-related
charges, and gross margin was 61.6%. On an adjusted basis, gross margin
was 61.7%, 90 basis points higher than the prior year, excluding
inventory related charges from both periods. Foreign currency negatively
impacted gross margin by 20 basis points in Fiscal 2019.

Operating Expenses. For Fiscal 2019, operating expenses
were $3.3 billion on a reported basis, including $156 million in
restructuring-related and other charges. On an adjusted basis, operating
expenses were $3.2 billion, up 2% from the prior year. Adjusted
operating expense rate was 50.2%, 10 basis points above Fiscal 2018,
excluding restructuring-related and other charges from both periods.

Operating Income. Operating income for Fiscal 2019 was
$562 million, including restructuring-related and other charges of $163
million. On an adjusted basis, operating income was $725 million and
operating margin was 11.5%, 80 basis points above the prior year period,
excluding restructuring-related and other charges from both periods.
Excluding currency impacts, adjusted operating margin expanded 70 basis
points in Fiscal 2019 compared to last year.

  • North America Operating Income. North America operating income
    in Fiscal 2019 was $683 million and operating margin was 21.3% on a
    reported basis, including restructuring-related and other charges. On
    an adjusted basis, North America operating income in Fiscal 2019 was
    $688 million and operating margin was 21.5%, a 30 basis point
    improvement over last year.
  • Europe Operating Income. Europe operating income in Fiscal 2019
    was $390 million and operating margin was 23.5% on a reported basis,
    including restructuring-related and other charges. On an adjusted
    basis, Europe operating income in Fiscal 2019 was $397 million and
    operating margin was 23.9%, 120 basis points above last year.
  • Asia Operating Income. Asia operating income in Fiscal 2019 was
    $161 million and operating margin was 15.5% on a reported basis,
    including restructuring-related and other charges. On an adjusted
    basis, Asia operating income in Fiscal 2019 was $166 million and
    operating margin was 16.0%, 90 basis points above last year.

Net Income and EPS. In Fiscal 2019, on a reported basis,
net income was $431 million or $5.27 per diluted share. On an adjusted
basis, net income was $588 million, or $7.19 per diluted share,
excluding restructuring-related and other charges. This compared to a
net income of $163 million, or $1.97 per diluted share on a reported
basis, and net income of $498 million, or $6.03 per diluted share,
excluding restructuring-related and other charges, for Fiscal 2018.

For Fiscal 2019, on a reported basis, the Company had an effective tax
rate of 26% as compared to 67% in the prior year. The adjusted effective
tax rate was 21%, excluding restructuring-related and other charges.
This compared to an adjusted effective tax rate of 24% for Fiscal 2018.

Balance Sheet and Cash Flow Review

The Company ended Fiscal 2019 with $2.0 billion in cash and short and
long-term investments and $689 million in total debt, compared to $2.1
billion and $596 million, respectively, at the end of Fiscal 2018.

Inventory at the end of Fiscal 2019 was $818 million, up 7% compared to
the prior year period. The increase reflected planned investments to
support global store expansion and earlier deliveries versus the prior
year to better align with customer demand. Higher inventories also
included increased shipments to our Europe wholesale customers and
factory stores as we continued to restore our product assortment
following significant pullbacks.

The Company had $198 million in capital expenditures in Fiscal 2019,
compared to $162 million in the prior year period, primarily related to
our global retail and department store renovations, new store openings,
and continued enhancements to our global information technology systems.

The Company repurchased approximately $70 million of Class A Common
Stock in the fourth quarter for a total of approximately $470 million in
Fiscal 2019.

Full Year Fiscal 2020 and First Quarter Outlook

The full year Fiscal 2020 and first quarter guidance excludes
restructuring-related and other charges, as described in the “Non-U.S.
GAAP Financial Measures” section of this press release.

For Fiscal 2020, the Company expects net revenue to be up 2% to 3% on a
constant currency basis. Foreign currency is expected to negatively
impact revenue growth by 90 to 100 basis points in Fiscal 2020.

The Company expects operating margin for Fiscal 2020 to increase 40 to
60 basis points in constant currency, driven by modest gross margin
expansion and SG&A leverage. Foreign currency is expected to negatively
impact operating margin by about 10 to 20 basis points in Fiscal 2020.

In the first quarter of Fiscal 2020, the Company expects net revenue to
increase 3% to 5% in constant currency, benefiting from the timing of
Easter. Foreign currency is expected to negatively impact revenue growth
by about 190 to 200 basis points in the first quarter of Fiscal 2020.

Operating margin for the first quarter of Fiscal 2020 is expected to be
up 30 to 50 basis points in constant currency. Foreign currency is
expected to negatively impact operating margin by about 10 basis points
in the first quarter of Fiscal 2020.

The full year Fiscal 2020 tax rate is expected to be about 22%. First
quarter of Fiscal 2020 tax rate is expected to be about 19%.

The Company is planning capital expenditures of approximately $300
million for Fiscal 2020. Consistent with previous guidance, the Company
is planning to repurchase about $600 million of Class A Common Stock
shares in Fiscal 2020. Approximately $630 million remained available
under the Company’s authorized share repurchase program at the end of
Fiscal 2019.

With the expected repurchase activity in Fiscal 2020, the Company’s
Board of Directors also approved additional shares to be available for
future stock repurchase activity, allowing the Company to purchase up to
an additional $600 million of Class A Common Stock shares, subject to
overall business and market conditions.

Conference Call

As previously announced, the Company will host a conference call and
live online webcast today, Tuesday, May 14th, at 9:00 A.M.
Eastern. Listeners may access a live broadcast of the conference call on
the Company’s investor relations website at http://investor.ralphlauren.com
or by dialing 517-623-4963 or 800-857-5209. To access the conference
call, listeners should dial in by 8:45 a.m. Eastern and request to be
connected to the Ralph Lauren Fourth Quarter 2019 conference call.

An online archive of the broadcast will be available by accessing the
Company’s investor relations website at http://investor.ralphlauren.com.
A telephone replay of the call will be available from 12:00 P.M.
Eastern, Tuesday, May 14, 2019 through 6:00 P.M. Eastern, Tuesday, May
21, 2019 by dialing 203-369-3800 or 800-388-4923 and entering passcode
8827.

ABOUT RALPH LAUREN

Ralph Lauren Corporation (NYSE:RL) is a global leader in the design,
marketing and distribution of premium lifestyle products in five
categories: apparel, accessories, home, fragrances, and hospitality. For
more than 50 years, Ralph Lauren’s reputation and distinctive image have
been consistently developed across an expanding number of products,
brands and international markets. The Company’s brand names, which
include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple
Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph
Lauren Children, Chaps, and Club Monaco, among others, constitute one of
the world’s most widely recognized families of consumer brands. For more
information, go to http://investor.ralphlauren.com.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release and oral statements made from time to time by
representatives of the Company may contain certain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include the statements
regarding, among other things, our current expectations about the
Company’s future results and financial condition, revenues, store
openings and closings, employee reductions, margins, expenses and
earnings and are indicated by words or phrases such as “anticipate,”
“estimate,” “expect,” “project,” “we believe,” “can” and similar words
or phrases. These forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from the future
results, performance or achievements expressed in or implied by such
forward-looking statements. Forward-looking statements are based largely
on the Company’s expectations and judgments and are subject to a number
of risks and uncertainties, many of which are unforeseeable and beyond
our control. The factors that could cause actual results to materially
differ include, among others: the loss of key personnel, including Mr.
Ralph Lauren, or other changes in our executive and senior management
team or to our operating structure, and our ability to effectively
transfer knowledge during periods of transition; our ability to
successfully implement our long-term growth strategy; our ability to
continue to expand and grow our business internationally and the impact
of related changes in our customer, channel, and geographic sales mix as
a result, as well as our ability to accelerate growth in certain product
categories; our ability to open new retail stores and concession shops,
as well as enhance and expand our digital footprint and capabilities,
all in an effort to expand our direct-to-consumer presence; our ability
to respond to constantly changing fashion and retail trends and consumer
demands in a timely manner, develop products that resonate with our
existing customers and attract new customers, and execute marketing and
advertising programs that appeal to consumers; our ability to
effectively manage inventory levels and the increasing pressure on our
margins in a highly promotional retail environment; our ability to
continue to maintain our brand image and reputation and protect our
trademarks; our ability to competitively price our products and create
an acceptable value proposition for consumers; the impact to our
business resulting from changes in consumers’ ability, willingness, or
preferences to purchase discretionary items and luxury retail products,
which tends to decline during recessionary periods, and our ability to
accurately forecast consumer demand, the failure of which could result
in either a build-up or shortage of inventory; our ability to achieve
anticipated operating enhancements and cost reductions from our
restructuring plans, as well as the impact to our business resulting
from restructuring-related charges, which may be dilutive to our
earnings in the short term; the impact to our business resulting from
potential costs and obligations related to the early closure of our
stores or termination of our long-term, non-cancellable leases; a
variety of legal, regulatory, tax, political, and economic risks,
including risks related to the importation and exportation of products
which our operations are currently subject to, or may become subject to
as a result of potential changes in legislation, and other risks
associated with our international operations, such as compliance with
the Foreign Corrupt Practices Act or violations of other anti-bribery
and corruption laws prohibiting improper payments, and the burdens of
complying with a variety of foreign laws and regulations, including tax
laws, trade and labor restrictions, and related laws that may reduce the
flexibility of our business; the potential impact to our business
resulting from the imposition of additional duties, tariffs, taxes, and
other charges or barriers to trade, including those resulting from
current trade developments with China and the related impact to global
stock markets, as well as our ability to implement mitigating sourcing
strategies; the impact to our business resulting from the United
Kingdom’s decision to exit the European Union and the uncertainty
surrounding the terms and conditions of such a withdrawal, as well as
the related impact to global stock markets and currency exchange rates;
the impact to our business resulting from increases in the costs of raw
materials, transportation, and labor, including wages, healthcare, and
other benefit-related costs; our ability to secure our facilities and
systems and those of our third-party service providers from, among other
things, cybersecurity breaches, acts of vandalism, computer viruses, or
similar Internet or email events; our efforts to successfully enhance,
upgrade, and/or transition our global information technology systems and
digital commerce platforms; changes in our tax obligations and effective
tax rate due to a variety of other factors, including potential
additional changes in U.

Contacts

Investor Relations:
Corinna Van der Ghinst, 212-813-7868
[email protected]
Or
Corporate
Communications:
[email protected]

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