EXHIBIT 99.1
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Investor Contact: Denise Gillen 212.318.7516
Media Contact: Nancy Murray 212.813.7862
POLO RALPH LAUREN REPORTS THIRD QUARTER FISCAL 2006 RESULTS
THIRD QUARTER REVENUES UP 10%; OPERATING INCOME INCREASED 24%
New York (February 7, 2006) - Polo Ralph Lauren Corporation (NYSE: RL) today
reported net income of $91 million, or $0.84 per diluted share, for the third
quarter of Fiscal 2006 compared to net income of $75 million, or $0.72 per
diluted share, for the third quarter of Fiscal 2005.
Net revenues for the third quarter of Fiscal 2006 increased 10% to $995 million
compared to $902 million in the third quarter last year. Operating income
increased 24% to $144 million compared to $116 million in the third quarter
last year. Operating income as a percent of revenue improved 150 basis points
to 14.4%.
For the first nine months of Fiscal 2006, net income was $246 million, or $2.30
per diluted share, compared to net income of $167 million, or $1.61 per diluted
share for the comparable period last year. Net revenues for the first nine
months increased 15% to $2.775 billion, compared to $2.403 billion for the same
period last year. Operating income for the first nine months increased 55% to
$401 million compared to $258 million in the same period last year. Operating
income as a percent of revenue improved 370 basis points to 14.4%.
"This is an exciting time for our company as we continue to introduce new
product categories and take more direct control of our brand. The Ralph Lauren
brand has never been stronger as the demand for our luxury products around the
world is accelerating," said Ralph Lauren, Chairman and Chief Executive
Officer. "We look forward to launching our footwear line this year and
developing our denim business now that we have bought back Polo Jeans. We
remain committed to opening new retail stores around the world and are excited
about our newest flagship store opening in Tokyo next month. We believe the
sound fundamentals of our business will allow us to take advantage of the
growing global appeal of the Ralph Lauren brand."
"We have achieved tremendous results in the first nine months of our fiscal
year, including high quality sales and outstanding operating profit
flow-through. We are very pleased with our double digit retail and wholesale
sales growth and continuing strong margin improvement in these businesses,"
said Roger Farah, President and Chief Operating Officer. "Our continued success
is attributed to the consistent execution of our long-term strategy and the
investment of our strong cash flow back into our company. As we look to 2007
and beyond, we believe that the long-term initiatives we have undertaken this
year, particularly in expanding control over our brand, will enable us to
continue to capitalize on the demand for our product around the world."
RECENT DEVELOPMENTS
ACQUISITION OF POLO JEANS LICENSE AND LITIGATION SETTLEMENT On February 3,
2006, we completed the purchase of the Polo Jeans business for men's and
women's casual apparel and sportswear in the United States from Jones Apparel
for a purchase price of approximately $255 million from cash on hand. In Fiscal
2006 the transaction is expected to be dilutive to earnings per share by
approximately $0.05. In Fiscal 2007 the transaction is expected to be neutral
to earnings due to the transition service agreement costs and investments in
the positioning of this business to drive future years' growth. All outstanding
litigation and claims between the two companies have been settled for $100
million from cash on hand. In Fiscal 2005, Polo Ralph Lauren recorded a $100
million charge associated with these claims and litigation.
DISPOSITION OF CLUB MONACO CABAN HOME STORES AND CLUB MONACO OUTLET STORES As
we continue to focus Club Monaco on its core apparel and accessories business,
we intend to dispose of its eight Caban home stores. In addition, with better
managed inventory, the company no longer needs the outlet stores as a means of
disposing of excess merchandise and plans to close all five Club Monaco outlet
stores. In Fiscal 2006, these two actions are expected to be dilutive to
earnings per share by approximately $0.10.
THIRD QUARTER AND FIRST NINE MONTHS FISCAL 2006 INCOME STATEMENT REVIEW
NET REVENUES Net revenues for the third quarter of Fiscal 2006 increased 10% to
$995 million compared to $902 million in the third quarter last year, with a
15% increase in retail sales and a 6% increase in wholesale sales. Net revenues
for the first nine months increased 15% to $2.775 billion compared to $2.403
billion in the same period last year, reflecting strength in all business units
with a 16% increase in retail sales and a 17% increase in wholesale sales.
GROSS PROFIT Gross Profit for the third quarter increased 19% to $531 million
compared to $446 million in the third quarter of Fiscal 2005. Gross margin rate
improved 390 basis points in the third quarter to 53.4% of revenues compared to
49.5% of revenues during the same period last year. Gross Profit for the first
nine months increased 24% to $1.497 billion compared to $1.208 billion in the
first nine months of Fiscal 2005. Gross margin rate improved 370 basis points
in the first nine months to 54.0% of revenues compared to 50.3% of revenues
during the same period last year. Improvements in gross margin for the third
quarter and the first nine months reflect improvements in both our wholesale
and retail segments from increases in full-price sell-throughs and sourcing
efficiencies.
SG&A EXPENSES SG&A expenses were $388 million in the third quarter compared to
$330 million in the third quarter of Fiscal 2005. The expenses were to support
our growing retail business, for ongoing investment in talent, increased
branding support in Europe, the closing of Club Monaco outlet stores and the
planned disposition of the Caban home stores, as well as the inclusion of
footwear expenses. SG&A expenses as a percent of revenues were 39.0% in the
third quarter compared to 36.6% for the third quarter last year. SG&A expenses
in the first nine months were $1.097 billion compared to $949 million during
the same period last year. SG&A expenses as a percent of revenues were 39.5% in
the first nine months of Fiscal 2006 and flat to 2005.
OPERATING INCOME Operating income for the third quarter increased 24% to $144
million compared to $116 million in the third quarter last year. Operating
margin was 14.4% compared to 12.9% in the third quarter last year, an increase
of 150 basis points. For the first nine months, operating income increased 55%
to $401 million compared to $258 million during the same period last year.
Operating margin for the first nine months was 14.4%, an increase of 370 basis
points compared to 10.7% last year.
THIRD QUARTER AND FIRST NINE MONTHS FISCAL 2006 SEGMENT REVIEW
WHOLESALE Wholesale sales in the third quarter were $454 million, up 6%,
compared to $427 million in the third quarter last year. The increase came
primarily from the inclusion of our footwear business and improved performance
in womenswear, our European business, childrenswear and our full-price menswear
business. Wholesale operating income in the third quarter increased 33% to $82
million compared to $62 million in the third quarter last year. Wholesale
operating margin improved 370 basis points to 18.1% in the third quarter
compared to 14.4% in the third quarter last year.
Wholesale sales in the first nine months were $1.369 billion, up 17%, compared
to $1.169 billion during the same period last year. The increase came primarily
from childrenswear, footwear, menswear, our European business and womenswear.
We acquired childrenswear in the second quarter of Fiscal 2005, therefore the
first nine months of Fiscal 2006 reflect the inclusion of childrenswear sales
in all three quarters. We acquired footwear in the second quarter of Fiscal
2006, therefore the first nine months of Fiscal 2006 reflect the inclusion of
footwear in the second and third quarters. Wholesale operating income in the
first nine months increased 71% to $272 million compared to $159 million in the
same period last year with improvement in all product categories. Wholesale
operating margin improved 620 basis points to 19.8% in the first nine months
compared to 13.6% in the same period last year.
RETAIL Retail sales were $479 million in the third quarter, up 15%, compared to
$416 million in the third quarter last year, reflecting increases in all our
retail formats. Total company comparable store sales increased 7.4%, reflecting
an increase of 10.2% at Ralph Lauren stores, 7.1% at Club Monaco stores and
6.3% in our factory stores. Ralph Lauren Media revenues increased 27%. Retail
operating income increased 30% to $64 million compared to $49 million in the
third quarter last year. Retail operating margin improved 150 basis points to
13.3% in the third quarter compared to 11.8% in the third quarter last year.
Retail sales in the first nine months were $1.224 billion, up 16%, compared to
$1.057 billion in the same period last year, reflecting increases in all our
retail formats. Total company comparable store sales increased 7.0%, reflecting
an increase of 7.4% at Ralph Lauren stores, 7.3% at Club Monaco stores and 6.8%
in our factory stores. Ralph Lauren Media revenues increased 33%. Retail
operating income in the first nine months increased 50% to $139 million
compared to $93 million in the same period last year. Retail operating margins
improved 250 basis points to 11.3% in the first nine months compared to 8.8% in
the comparable period last year.
At the end of the third quarter, we operated 297 stores, with 2.325 million
square feet, compared to 278 stores, with 2.155 million square feet, at the end
of the third quarter last year. Our retail group
consists of 67 Ralph Lauren stores, five Rugby stores, 74 Club Monaco stores,
134 Polo factory stores, 12 Polo Jeans Co. factory stores, and five Club Monaco
factory stores.
LICENSING Licensing revenues in the third quarter were $62 million, up 8% from
the third quarter last year, primarily from the strength domestically in our
Chaps for men lines. Operating income was $38 million compared to $37 million
in the third quarter last year. Licensing revenues in the first nine months
were $182 million, up 3% from the same period last year, and operating income
was $114 million, up from $112 million in the same period last year.
THIRD QUARTER FISCAL 2006 BALANCE SHEET REVIEW
We ended the quarter with $644 million in cash, or $383 million cash net of
debt, prior to our payment for Polo Jeans. We continue to carefully manage our
inventory and generated an 11% sales increase in our wholesale and retail
businesses in the third quarter with relatively flat inventory levels compared
to last year.
FULL YEAR FISCAL 2006 OUTLOOK COMPARED TO FISCAL 2005 GAAP RESULTS
o After adjusting for the closing of the Club Monaco outlet stores,
the disposition of the Caban home stores and the effect of the Polo
Jeans acquisition, earnings per share are expected to be in the
range of $2.80 to $2.85 as opposed to $2.85 to $2.92 as we
indicated last quarter. The Club Monaco strategy is expected to be
dilutive by approximately $0.10 for the year and Polo Jeans is
expected to be dilutive by approximately $0.05 in the fourth
quarter. These initiatives are consistent with our effort to reduce
off-price sales, rationalize the distribution channels and focus on
Club Monaco's core apparel and accessories business, and we believe
they are the right long-term decisions for the business.
INITIAL FULL YEAR FISCAL 2007 OUTLOOK COMPARED TO FISCAL 2006 GAAP RESULTS
o Consolidated revenue growth is projected to be low double digit
percent.
o Including the effect of stock compensation expense, operating
margins are expected to be flat compared to Fiscal 2006.
o Earnings per share are expected to be in the range of $3.00 to
$3.10. This earnings projection includes the effect of accounting
for stock compensation expense of approximately $0.15 per share. As
required under the new accounting rules, the Company will record
stock compensation expense beginning in the first quarter of Fiscal
2007. Excluding stock compensation expense, earnings per share are
expected to be in the range of $3.15 to $3.25.
o This outlook includes the impact of the Polo Jeans acquisition
completed on February 3, 2006. We expect sales of approximately
$200 million in Fiscal 2007 as we focus on quality sales and reduce
off-price sales. We expect it to be neutral to earnings due to
transition service agreement costs and our investments in the
future positioning of a global denim business.
o Capital expenditures are expected to be comparable to Fiscal 2006
levels, at approximately $210 million.
CONFERENCE CALL
As previously announced, we will host a conference call and live online
broadcast today at 9:00 A.M. Eastern. The dial-in number is (719) 457-2680. 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 38 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 by Ralph Lauren", "Ralph Lauren Purple Label", "Ralph Lauren",
"Black Label", "Blue Label", "Lauren by Ralph Lauren", "Polo Jeans Co.", "RRL",
"RLX", "Rugby", "RL Childrenswear", "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 CURRENT EXPECTATIONS ABOUT THE COMPANY'S FUTURE RESULTS AND
CONDITION, INCLUDING 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; RISKS ARISING OUT OF
LITIGATION OR TRADEMARK CONFLICTS, AND OTHER RISK FACTORS IDENTIFIED 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.
# # # #
Tables Follow
###
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(In thousands, except per share data)
(UNAUDITED)
THREE MONTHS ENDED
----------------------------------
DECEMBER 31, JANUARY 1,
2005 2005
---------------- --------------
(AS RESTATED,
SEE NOTE A)
Wholesale Net Sales $ 454,008 $ 427,445
Retail Net Sales 479,174 416,194
--------- ---------
NET SALES 933,182 843,639
Licensing Revenue 62,300 57,935
--------- ---------
NET REVENUES 995,482 901,574
Cost of Goods Sold (464,017) (455,498)
--------- ---------
GROSS PROFIT 531,465 446,076
Depreciation and Amortization Expense (36,329) (26,998)
Other SG&A Expenses (351,494) (302,670)
Restructuring Charges -- (218)
--------- ---------
TOTAL SG&A EXPENSES (387,823) (329,886)
Operating Income 143,642 116,190
Foreign Currency Gains (Losses) (577) 400
---------
Interest Income (Expense), net 460 (1,989)
--------- ---------
Income Before Income Taxes and Other Income 143,525 114,601
Provision for Income Taxes (52,368) (40,280)
--------- ---------
Income after Tax 91,157 74,321
Other Income (Expense), net (B) (484) 715
--------- ---------
NET INCOME $ 90,673 $ 75,036
========= =========
NET INCOME PER SHARE - BASIC $ 0.87 $ 0.74
========= =========
NET INCOME PER SHARE - DILUTED $ 0.84 $ 0.72
========= =========
Weighted Average Shares Outstanding - Basic 104,688 101,896
========= =========
Weighted Average Shares & Share Equivalents Outstanding - Diluted 107,780 104,325
========= =========
Dividends declared per share $ 0.05 $ 0.05
========= =========
(A) Restated for change in lease accounting and the consolidation of RL
Media.
(B) FY 06 includes Minority Interest Expense of $1,983, partially offset
by Equity Investment Income of $1,499. FY05 (as restated) includes
Equity Investment Income of $2,607, partially offset by Minority
Interest Expense of $1,892.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
(In thousands, except per share data)
(UNAUDITED)
NINE MONTHS ENDED
------------------------------------
DECEMBER 31, JANUARY 1,
2005 2005
---------------- --------------
(AS RESTATED,
SEE NOTE A)
Wholesale Net Sales $ 1,368,768 $ 1,169,032
Retail Net Sales 1,223,765 1,057,146
----------- -----------
NET SALES 2,592,533 2,226,178
Licensing Revenue 182,275 177,016
----------- -----------
NET REVENUES 2,774,808 2,403,194
Cost of Goods Sold (1,277,370) (1,195,556)
----------- -----------
GROSS PROFIT 1,497,438 1,207,638
Depreciation and Amortization Expense (94,561) (73,919)
Other SG&A Expenses (1,002,031) (873,660)
Restructuring Charges -- (1,846)
----------- -----------
TOTAL SG&A EXPENSES (1,096,592) (949,425)
Operating Income 400,846 258,213
Foreign Currency Gains (Losses) (6,561) 3,334
Interest Income (Expense), net 1,008 (5,658)
----------- -----------
Income Before Income Taxes and Other Income 395,293 255,889
Provision for Income Taxes (146,992) (89,987)
----------- -----------
Income after Tax 248,301 165,902
Other Income (Expense), net (B) (2,716) 1,127
----------- -----------
NET INCOME $ 245,585 $ 167,029
=========== ===========
NET INCOME PER SHARE - BASIC $ 2.36 $ 1.65
=========== ===========
NET INCOME PER SHARE - DILUTED $ 2.30 $ 1.61
=========== ===========
Weighted Average Shares Outstanding - Basic 103,976 101,190
=========== ===========
Weighted Average Shares & Share Equivalents Outstanding - Diluted 106,893 103,566
=========== ===========
Dividends declared per share $ 0.15 $ 0.15
=========== ===========
(A) Restated for change in lease accounting and the consolidation of RL
Media.
(B) FY 06 includes Minority Interest Expense of $7,270, partially offset
by Equity Investment Income of $4,554. FY05 (as restated) includes
Equity Investment Income of $5,783, partially offset by Minority
Interest Expense of $4,656.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
------------------------------------
DECEMBER 31, JANUARY 1,
2005 2005
---------------- --------------
(AS RESTATED,
SEE NOTE A)
ASSETS
Current assets
Cash and cash equivalents $ 643,874 369,523
Accounts receivable, net of allowances 356,677 335,171
Inventories 443,267 440,741
Deferred tax assets 70,392 36,008
Prepaid expenses and other 79,295 104,868
----------- -----------
1,593,505 1,286,311
Property and equipment, net 517,860 477,385
Deferred tax assets 32,932 58,688
Goodwill, net 568,435 597,987
Intangibles, net 103,653 18,377
Other assets 201,074 182,389
----------- -----------
$ 3,017,459 $ 2,621,137
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 158,795 $ 156,257
Income tax payable 55,374 71,828
Accrued expenses and other 397,216 309,166
Current maturities of long-term debt 260,778 --
----------- -----------
872,163 537,251
Long-term debt -- 307,981
Other noncurrent liabilities 169,899 131,964
----------- -----------
Total liabilities 1,042,062 977,196
----------- -----------
Stockholders' equity
Common Stock 1,092 1,068
Additional paid-in-capital 761,737 647,733
Retained earnings 1,317,457 1,072,056
Treasury Stock, Class A, at cost (4,249,230 and 4,177,600 shares) (83,280) (80,027)
Accumulated other comprehensive income 24,593 37,704
Unearned compensation (46,202) (34,593)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,975,397 1,643,941
----------- -----------
$ 3,017,459 $ 2,621,137
=========== ===========
(A) Restated for change in lease accounting, the consolidation of
RL Media and certain other reclassifications.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
NET REVENUES AND OPERATING INCOME
(IN THOUSANDS)
(UNAUDITED)
The net revenues and operating income for the periods ended December 31, 2005
and January 1, 2005 for each segment were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- ---------------------------------
December 31, January 1, December 31, January 1,
2005 2005 2005 2005
----------- ----------- ----------- -----------
(AS RESTATED, (AS RESTATED,
SEE NOTE A) SEE NOTE A)
Net revenues:
Wholesale $ 454,008 $ 427,445 $ 1,368,768 $ 1,169,032
Retail 479,174 416,194 1,223,765 1,057,146
Licensing 62,300 57,935 182,275 177,016
----------- ----------- ----------- -----------
$ 995,482 $ 901,574 $ 2,774,808 $ 2,403,194
=========== =========== =========== ===========
Operating Income (Loss):
Wholesale $ 82,227 $ 61,741 $ 271,615 $ 158,982
Retail 63,855 49,175 138,846 92,870
Licensing 38,125 37,079 113,592 111,563
Corporate (40,565) (31,587) (123,207) (103,356)
----------- ----------- ----------- -----------
$ 143,642 $ 116,408 $ 400,846 $ 260,059
Less: Unallocated Restructuring Charges -- (218) -- (1,846)
----------- ----------- ----------- -----------
$ 143,642 $ 116,190 $ 400,846 $ 258,213
=========== =========== =========== ===========
(A) Restated for change in lease accounting and the consolidation of
RL Media.