Ralph LaurenFourth Quarter Fiscal 2016 Balance Sheet and Cash Flow Review

  • Wholesale Operating Income. Wholesale operating income in the fourth quarter of Fiscal 2016 was $255 million, excluding restructuring and other charges, compared with $309 million in the prior year period. Wholesale operating margin decreased 350 basis points to 27.2% driven by proactive measures taken in the U.S. to clear end-of-season inventories related to the Fall season, and negative foreign currency effects.Wholesale operating income in Fiscal 2016 was $828 million, excluding restructuring and other charges, compared with $943 million in Fiscal 2015. Wholesale operating margin for Fiscal 2016 was 25.1% compared to 27.0% in Fiscal 2015. The decline in wholesale operating margin was driven by gross margin pressure, fixed expense deleverage and negative foreign currency effects.
  • Retail Operating Income. Retail operating income in the fourth quarter of Fiscal 2016 was $22 million, excluding restructuring and other charges, compared with $28 million in the prior year period. Retail operating margin declined 100 basis points to 2.4% due to proactive measures taken to clear end-of-season inventories in addition to negative foreign currency effects.Retail operating income was $422 million in Fiscal 2016, excluding restructuring and other charges, compared to $527 million in the prior year period. Retail operating margin declined 260 basis points to 10.7%. The lower operating margin was due to fixed expense deleverage, gross margin pressure and negative foreign currency effects.
  • Licensing Operating Income. Licensing operating income of $35 million in the fourth quarter of Fiscal 2016 increased 9% compared with the prior year period. Licensing operating income of $155 million in Fiscal 2016 increased 2% above the prior year period.

Net Income and Diluted EPS. Net income for the fourth quarter of Fiscal 2016 was $74 million, or $0.88 per diluted share, excluding restructuring and other charges. This compared to reported net income of $124 million, or $1.41 per diluted share, for the fourth quarter of Fiscal 2015. On a reported basis, net income was $41 million or $0.49 per diluted share in the fourth quarter.

Net income for the full year Fiscal 2016 period was $546 million, or $6.36 per diluted share, excluding restructuring and other charges. This compared to net income of $702 million, or $7.88 per diluted share, for Fiscal 2015. On a reported basis, net income was $396 million, or $4.62 per diluted share.

The Company had an effective tax rate of approximately 34%, excluding restructuring and other charges, in the fourth quarter of Fiscal 2016, which compared to an effective tax rate of 28% in the fourth quarter of Fiscal 2015. This was higher than our guidance of 32% due to one-time discrete items. On a reported basis, the effective tax rate was 33% in the fourth quarter of Fiscal 2016.

Fourth Quarter Fiscal 2016 Balance Sheet and Cash Flow Review

The Company ended Fiscal 2016 with $1.3 billion in cash and investments, or $559 million in cash and investments net of debt (“net cash”), compared to $1.2 billion in cash and investments and $620 million in net cash at the end of Fiscal 2015. The fourth quarter of Fiscal 2016 ended with inventory of $1.1 billion compared to $1.0 billion in the prior year period. The increase in inventory reflects investments to support new stores and concession shops.

The Company had $418 million in capital expenditures in Fiscal 2016, compared to $391 million in the prior year period. The Company repurchased approximately 1.2 million shares of Class A Common Stock during the fourth quarter, utilizing $100 million of its share repurchase authorization and bringing year-to-date repurchases to $480 million.

Global Retail Store Network

The Company ended Fiscal 2016 with 493 directly operated stores, comprised of 144 Ralph Lauren stores, 77 Club Monaco stores and 272 Polo factory stores. The Company also operated 583 concession shop locations worldwide at the end of the year. Compared to the end of Fiscal 2015, the Company had 27 net new directly operated stores and 47 net new concession shops at the end of Fiscal 2016.

In addition to Company-operated locations, international licensing partners operated 93 Ralph Lauren stores and 42 dedicated shops, as well as 133 Club Monaco stores and shops at the end of Fiscal 2016.

 

Leave a Reply

Your email address will not be published. Required fields are marked *