EXHIBIT 99.1
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650 Madison Avenue [GRAPHIC OMITTED]
New York, New York 10022 [LOGO - POLO RALPH LAUREN]
Press Release
Investor Contact: Denise Gillen 212.318.7516
Media Contact: Nancy Murray 212.813.7862
Polo Ralph Lauren Reports First Quarter Fiscal 2005 Results
First Quarter Operating Profit Increased 273%; Revenues Up 24% Driven by Lauren
Women's Line and 12.6% Comparable Retail Store Sales; Operating Margins
Increased 230 Basis Points
Company Confirms EPS Outlook for Fiscal Year 2005 in Range of $2.35 to $2.45
New York (August 4, 2004) - Polo Ralph Lauren Corporation (NYSE: RL) today
reported net income of $13.4 million, or $0.13 per diluted share, for first
quarter Fiscal 2005 compared to net income of $5.1 million, or $0.05 per diluted
share, for first quarter Fiscal 2004.
Adjusted net income was $14.0 million, or $0.14 per diluted share, for first
quarter Fiscal 2005 compared to $3.6 million, or $0.04 per diluted share, for
first quarter Fiscal 2004. Adjusted results exclude restructuring charges and
foreign currency gains and losses resulting from certain balance sheet
transactions. For a full analysis of the adjustments, please refer to the table
reconciliation of GAAP results to adjusted results.
"We are executing at every level of our company," said Ralph Lauren, Chairman
and Chief Executive Officer. "With sales in our retail stores outperforming the
industry, we see phenomenal response to our luxury designs. Our Polo brand
continues to lead in the menswear arena, and its performance this spring at
retail has never been stronger. And the new deliveries of our Lauren women's
line have been well received," Mr. Lauren said, adding, "Our company is
financially strong and poised to produce record profits for fiscal 2005."
"This strong performance in our first quarter gives us a good start for the new
fiscal year," said Roger Farah, President and Chief Operating Officer. "Our
retail and wholesale growth initiatives coupled with our more efficient support
operations are beginning to yield the significant sales and margin improvements
we envisioned. Further, with the groundwork substantially complete in Europe we
look forward to renewing our growth in this important market. And we continue to
make strong progress on our long-term goals of better controlling our brand
worldwide, as evidenced by the recent acquisition of our children's business."
RECENT ACHIEVEMENTS
o We completed the acquisition of RL Childrenswear LLC, our licensee for
childrenswear in the United States, Canada and Mexico. The purchase was
a cash transaction for approximately $240 million, plus contingent and
deferred payments not to exceed $20 million. We expect Fiscal 2006
revenues for childrenswear to be more than $200 million, with earnings
per share to be accretive in the range of $0.15 to $0.20.
o Comparable retail store sales were 16.1% at Ralph Lauren stores, 10.4%
at Club Monaco stores, and 11.6% in our outlet stores, with an overall
510 basis point improvement in operating margins. Our store expansion
plan is on track with the opening of the Ralph Lauren Nantucket store
in the first quarter and with plans to open three Ralph Lauren stores
in the second quarter of Fiscal 2005, including our Milan flagship
store, as well as five Club Monaco stores.
o The women's Lauren by Ralph Lauren Summer line was successfully
delivered to approximately 900 department store doors on plan
throughout the quarter, with strong sell-throughs. We continue to
expect approximately $400 million in revenues in Fiscal 2005 with
mid-teens operating margins.
o We have a strong balance sheet and continue to make excellent progress
in managing our inventory levels. We had a 29% sales increase in the
first quarter in our wholesale and retail businesses with 9% less
inventory, excluding childrenswear, than the first quarter of last
year. At the end of the first quarter, inventory was $418.0 million,
including the women's Lauren line and childrenswear this year, compared
to $430.1 million last year. We ended the quarter with $174.9 million
in cash, after paying cash for the acquisition of RL Childrenswear.
FIRST QUARTER INCOME STATEMENT REVIEW
NET REVENUES Net revenues for the first quarter increased 24.1% to $592.8
million compared to $477.7 million in the first quarter last year. Retail sales
grew 16.6% to $296.8 million compared to $254.5 million last year, with
comparable store sales up 12.6%, driven by positive performance in all of our
retail formats. Our wholesale revenues were $239.0 million, up 47.9% over last
year, driven by the inclusion of the women's Lauren by Ralph Lauren line in our
wholesale segment, gains in our European business and increased sales in our
women's collection business. Wholesale revenues also reflect a decrease in the
menswear off-price channel, as we continue to reposition the Polo brand into
more selective department and specialty stores while reducing sales into the
secondary market. Licensing revenues decreased, as planned, primarily because of
the absence of royalty income associated with the previously licensed Lauren
business. The increase in Fiscal 2005 net revenues also reflects the favorable
impact of the strengthening Eurodollar.
GROSS PROFIT For the first quarter, gross profit was $307.1 million, an increase
of $58.3 million, or 23.5%, compared to $248.8 million in the first quarter of
Fiscal 2004. The increased gross profit was generated by the addition of the
women's Lauren line and strong full-price sell-throughs in our Ralph Lauren
stores in the United States and Europe and in our Club Monaco stores. Gross
margin significantly improved in our specialty retail segment and in our
domestic wholesale men's and women's lines. Our overall gross margin decreased
to 51.8% of net revenues compared to 52.1% last year, reflecting the reduction
in licensing revenue and mix of business results. The increase in Fiscal 2005
gross profit also reflects the favorable impact of the strengthening Eurodollar.
SG&A EXPENSES Operating expenses as a percent of revenues were 48.2% this year
compared to 50.9% last year. In the first quarter, SG&A expenses were $285.8
million, an increase of $42.5 million or 17.5%, compared to $243.2 million in
the first quarter of Fiscal 2004. The dollar increase was driven primarily by
the change in business mix as a result of expenses associated with the
operations of the women's Lauren line and increased retail sales. SG&A also
includes $3.0 million to buy back a royalty sharing agreement related to the use
of our trademarks in various countries in Central and South America. The
increase in Fiscal 2005 SG&A also reflects the negative impact of the
strengthening Eurodollar.
FIRST QUARTER FOREIGN CURRENCY GAINS AND LOSSES AND RESTRUCTURING CHARGES
Adjusted first quarter Fiscal 2005 results exclude $0.7 million in restructuring
charges related to operational consolidation efforts in Europe associated with
severance costs and $0.2 million in foreign currency losses. Adjusted first
quarter Fiscal 2004 results exclude foreign currency gains of $2.3 million
primarily related to transaction gains on royalty payments.
STORE COUNT
At the end of the first quarter, we operated 262 stores, with 1.87 million
square feet, compared to 261 stores, with 1.85 million square feet, at the end
of the first quarter last year. Our retail group consisted of 56 Ralph Lauren
stores, 60 Club Monaco stores, 120 Polo outlet stores, 21 Polo Jeans Co. outlet
stores, and five Club Monaco outlet stores. During the first quarter we opened
three stores and closed four.
EARNINGS OUTLOOK
FULL YEAR
The company reiterated that for Fiscal Year 2005 earnings per share are expected
to be in the range of $2.35 to $2.45. These projected results anticipate
mid-teens percent consolidated revenue growth and approximately 140 basis points
improvement in operating margins. The Company expects revenues to reflect
low-thirties percent growth in wholesale sales and mid-single digit percent
growth in retail revenues, partially offset by a low-double digit percent
decrease in licensing revenue as a result of the elimination of the women's
Lauren, Ralph and childrenswear license royalties. The Company reiterated that
it expects the earnings results of each quarter in Fiscal 2005 to exceed the
comparable quarter in Fiscal 2004 with quarterly profit flows similar to Fiscal
2004, with the fourth quarter reflecting the impact of a 52-week year compared
to a 53-week year last year.
SECOND QUARTER
For the second quarter of Fiscal 2005, the Company expects consolidated revenues
to increase high-teens percent. We expect that our wholesale revenues will
increase low-forties percent reflecting the inclusion of women's Lauren and
childrenswear revenues in that segment as we ship our Fall merchandise. We
expect our second quarter wholesale sales in Europe to increase high-single
digits. This will be partially offset by the continuing positioning of our men's
apparel in brand-appropriate channels in the United States. Retail revenues are
expected to increase mid-single digit percent and licensing revenues are
expected to decrease high-teens percent reflecting the absence of royalties
associated with the women's Lauren and Ralph lines and childrenswear license
royalties.
The Company expects operating profits in the second quarter to be the second
largest in the year, with operating margin expansion in both wholesale and
retail businesses. Licensing operating profit is expected to decrease,
reflecting the absence of royalties from the women's Lauren, Ralph and
childrenswear lines. Shares outstanding are expected to increase by
approximately 2 million shares compared to last year.
CONFERENCE CALL
As previously announced, we will host a conference call and live online
broadcast today, August 4, 2004 at 9:00 A.M. Eastern. The dial-in number is
1-973-317-5319. The online broadcast is accessible at HTTP://INVESTOR.POLO.COM.
Polo Ralph Lauren Corporation is a leader in the design, marketing and
distribution of premium lifestyle products in four categories: apparel, home,
accessories and fragrances. For more than 35 years, Polo'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 "Polo", "Polo by Ralph Lauren", "Ralph Lauren Purple Label", "Polo
Sport", "Ralph Lauren", "Blue Label", "Lauren", "Polo Jeans Co.", "RL", "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.POLO.COM.
THIS PRESS RELEASE AND ORAL STATEMENTS MADE FROM TIME TO TIME BY REPRESENTATIVES
OF THE COMPANY CONTAIN CERTAIN "FORWARD-LOOKING STATEMENTS" CONCERNING
EXPECTATIONS FOR SALES, STORE OPENINGS, GROSS MARGINS, EXPENSES AND EARNINGS.
ACTUAL RESULTS MIGHT DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
MATERIALLY DIFFER INCLUDE, AMONG OTHERS, CHANGES IN THE COMPETITIVE MARKETPLACE,
INCLUDING THE INTRODUCTION OF NEW PRODUCTS OR PRICING CHANGES BY OUR
COMPETITORS, CHANGES IN THE ECONOMY AND OTHER EVENTS LEADING TO A REDUCTION IN
DISCRETIONARY CONSUMER SPENDING; RISKS ASSOCIATED WITH THE COMPANY'S DEPENDENCE
ON SALES TO A LIMITED NUMBER OF LARGE DEPARTMENT STORE CUSTOMERS, INCLUDING
RISKS RELATED TO EXTENDING CREDIT TO CUSTOMERS; RISKS ASSOCIATED WITH THE
COMPANY'S DEPENDENCE ON ITS LICENSING PARTNERS FOR A SUBSTANTIAL PORTION OF ITS
NET INCOME AND RISKS ASSOCIATED WITH A LACK OF OPERATIONAL AND FINANCIAL CONTROL
OVER LICENSED BUSINESSES; RISKS ASSOCIATED WITH CHANGES IN SOCIAL, POLITICAL,
ECONOMIC AND OTHER CONDITIONS AFFECTING FOREIGN OPERATIONS OR SOURCING
(INCLUDING FOREIGN EXCHANGE FLUCTUATIONS)AND THE POSSIBLE ADVERSE IMPACT OF
CHANGES IN IMPORT RESTRICTIONS; RISKS ASSOCIATED WITH UNCERTAINTY RELATING TO
THE COMPANY'S ABILITY TO IMPLEMENT ITS GROWTH STRATEGIES OR ITS ABILITY TO
SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES, AS WELL AS THE OTHER RISK FACTORS
SET FORTH IN THE COMPANY'S FORM 10-K, 10-Q AND 8-K REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS TO REFLECT SUBSEQUENT EVENTS OR
CIRCUMSTANCES.
Attached are the Consolidated Statements of Income and Net Revenues and Income
from Operations for the three-month periods ended July 3, 2004 and June 28, 2003
and the Consolidated Balance Sheets as of July 3, 2004 and June 28, 2003.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
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JULY 3, JUNE 28,
2004 2003
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Wholesale Net Sales $ 239,024 $ 161,625
Retail Net Sales 296,784 254,464
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NET SALES 535,808 416,089
Licensing Revenue 56,942 61,642
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NET REVENUES 592,750 477,731
Cost of Goods Sold 285,650 228,979
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GROSS PROFIT 307,100 248,752
Depreciation and Amortization 22,138 21,442
Other SG&A Expenses 263,626 221,784
Restructuring Charge 731 --
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TOTAL SG&A EXPENSES 286,495 243,226
Income From Operations 20,605 5,526
Foreign Currency Losses (Gains) 211 (2,299)
Interest Expense, net 1,630 2,918
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Income Before Income Taxes and Other (Income) Expense 18,764 4,907
Provision for Income Taxes 6,849 1,791
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Income after Tax 11,915 3,116
Other (Income) Expense, net (A) (1,488) (1,939)
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NET INCOME $ 13,403 $ 5,055
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NET INCOME PER SHARE - BASIC $ 0.13 $ 0.05
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NET INCOME PER SHARE - DILUTED $ 0.13 $ 0.05
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Weighted Average Shares Outstanding - Basic 100,481,000 98,377,000
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Weighted Average Shares Outstanding - Diluted 102,802,000 99,544,000
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DIVIDENDS DECLARED PER SHARE $ 0.05 $ 0.05
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(A) Includes Equity Investment Income of $1,988 and $1,950 net of
Minority Interest Expense of $500 and $11 for Q1 FY05 and Q1 FY04,
respectively.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
The following is a reconciliation of Net Income to Net Income Before
Restructuring Charge and Foreign Currency Losses (Gains):
THREE MONTHS ENDED
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JULY 3, JUNE 28,
2004 2003
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Net Income $ 13,403 $ 5,055
Other (Income) Expense, net (1,488) (1,939)
Provision for Income Taxes 6,849 1,791
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Income before Income Taxes and Other (Income) Expense 18,764 4,907
Restructuring Charge 731 --
Foreign Currency Losses (Gains) (B) 211 (2,299)
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Income Before Income Taxes, Other (Income) Expense, Restructuring Charge
and Foreign Currency Losses (Gains) 19,706 2,608
Provision for Income Taxes 7,193 952
Other (Income) Expense, net (1,488) (1,939)
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Net Income Before Restructuring Charge and Foreign Currency (Gains) Losses $ 14,001 $ 3,595
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NET INCOME PER SHARE BEFORE RESTRUCTURING CHARGE
AND FOREIGN CURRENCY (GAINS) LOSSES - BASIC $ 0.14 $ 0.04
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NET INCOME PER SHARE BEFORE RESTRUCTURING CHARGE
AND FOREIGN CURRENCY (GAINS) LOSSES - DILUTED $ 0.14 $ 0.04
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(B) The prior period Foreign Currency gains primarily related to
transaction gains on Royalty payments received resulting from
increases in the Eurodollar rate.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
JULY 3, JUNE 28,
2004 2003
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ASSETS
Current assets
Cash and cash equivalents $ 174,908 $ 287,473
Accounts receivable, net of allowances 262,330 249,997
Inventories 418,049 430,101
Deferred tax assets 24,854 20,493
Prepaid expenses and other 74,593 84,174
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954,734 1,072,238
Property and equipment, net 420,151 352,233
Deferred tax assets 61,495 54,386
Goodwill, net 578,546 330,540
Intangibles, net 18,746 11,070
Other assets 182,679 152,957
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$ 2,216,351 $ 1,973,424
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank borrowings $ 0 $ 50,093
Accounts payable 129,332 188,222
Income taxes payable 40,131 38,015
Deferred tax liabilities 1,821 --
Accrued expenses and other 246,442 147,491
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417,726 423,821
Long-term debt 278,983 265,069
Other noncurrent liabilities 74,888 65,627
Stockholders' equity
Common Stock 1,065 1,035
Additional paid-in-capital 599,284 521,502
Retained earnings 934,412 776,468
Treasury Stock, Class A, at cost (4,156,300 and 4,116,520 shares) (79,344) (78,169)
Accumulated other comprehensive income (loss) 25,599 16,444
Unearned compensation (36,262) (18,373)
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TOTAL STOCKHOLDERS' EQUITY 1,444,754 1,218,907
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$ 2,216,351 $ 1,973,424
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POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
NET REVENUES AND INCOME FROM OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
The net revenues and income from operations for the three months ended July 3,
2004 and June 28, 2003 for each segment were as follows:
THREE MONTHS ENDED
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JULY 3, JUNE 28,
2004 2003
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Net revenues:
Wholesale $ 239,024 $ 161,625
Retail 296,784 254,464
Licensing 56,942 61,642
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$ 592,750 $ 477,731
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INCOME (LOSS) FROM OPERATIONS:
Wholesale $ (18,599) $ (31,049)
Retail 28,374 11,246
Licensing 11,561 25,329
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$ 21,336 $ 5,526
Less: Unallocated Restructuring Charge 731 --
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$ 20,605 $ 5,526
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