RL - Earnings call transcript Q4 2018 | Ralph Lauren Corporation

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren Fourth Quarter and Full-Year Fiscal 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions on how to ask a question will be given at that time. reminder, is a recorded. As Instructions] this being conference [Operator conference to our I like the over would now turn to host, Mrs. Evren Kopelman. Please ahead. go

Evren Kopelman

one for you President open call which Financial and Officer. fourth up Lauren Executive Officer; conference the today joining prepared limit Nielsen, full-year ask per Chief Patrice we you Chief Jane are company’s XXXX caller. me call. questions, remarks, quarter the for Louvet, After to your and fiscal that With Thank and Ralph we will

During laws, today’s be will making some meaning of forward-looking the call, we financial statements the including within federal outlook. securities our

Forward-looking from and those guarantees, forward-looking our materially implied or may in the differ statements are expressed statements. actual not results

to earnings the could current Our materially find to Investor filings And measures discussing expectations to we on refer contain our are risks expectations I and Relations should disclosures uncertainties. non-GAAP that many our financial SEC that Patrice. our from can over and cause found differ and that turn will filings. our release Principal in uncertainties you use detailed now our results of when To results, be this our reconciliations call website. and risks to morning’s SEC

Patrice Louvet

Thank call. you, for morning, thank joining and you Evren. Good everyone, today’s

at full-year We’re a by solid on and to high-end was pleased year. quarter report that our our fourth operating and of both expectations, driven the fourth was fiscal delivered ahead margin results XXXX the quarter plan our the and of commitments. for Revenue quarter

value-creation executing plan, strong initiatives a and the year and our and on our closed an June long-term a Investor key fiscal creation. growth executed look balance journey, strong engaged company X. a financial excellence. get on to Day to a XXXX, progress long-term at We sustainable and the forward growth strategic focused as this In sharing establish strategy outlook team our on we to value foundation on clear on journey to We’re we with made sheet with game healthy and back

and our recent like week; our to the members: review who welcome Board would August. I Mike progress, to Ahrendts, in we us Angela Board agreed Before has and Ralph join George, who last joined new

deep the Angela new to is retail doing little we value her who will time evolving zulily as introduction. very experience bear move We’re HSN, of they transformation. she parent leading Apple’s each bring globally. CEO work and excited CEO Qurate, and to others, bring own experience and is she brings the our QVC, capabilities driving to experiences arm, channels our unique invaluable in growth Mike, company perspective needs retail about successfully will of and Burberry as Board. the and through transforming through creation From

across I fourth, presence; which fourth expanding fiscal progress will distribution and in product; take Now XXXX XXXX productivity full-year let performance. the in fiscal ways include: made cover focus new improving increase you second, new drive consumers; our quarter agility. digital me our four product, elevating we’ve our key initiatives, reach and to and of our shopping brand sales, and marketing experience evolving by first, through with our of the third, of on to and and will international appeal commentary more most my and Jane working results quality

average directly rate in XXXX, with approximately and department operated in In our distribution improved and points every and discount wholesale. our XXXX, store of in in region. and elevating quarter growth XX% distribution fiscal our sales, unit productivity So quality closed we through retail reductions of we quality U.S. starting and of mix. sales close network doors was up brand improving both growth distribution initiative, product. our the direct-to-consumer by with every XX We lower the to continuing retail drove retail off-equity first by stores. X% of fiscal and AUR our across In

our progressively the While off-price will to we channel. penetration in continue complete, are these largely closures reduce

However, significant going in store At we’re as negative XXXX. was reduction fiscal the impacts forward from especially as time, network, these growth. not future where underpenetrated performance be the are the same to it small-format sales with to expanding overall off-price markets, international our our repositioning our in highly stores are deliver productive. we high-quality that new base Combined, are sales actions store will

for solid actions strong every led adjusted quarter. to increases XXX the of margin points these with of gross improvement All basis year

In appeal initiative, on Ralph’s creative our insight product, vision focused of our Moving experience understanding world. iconic and our new combining products. team’s these of marketing consumers. consumers each areas, to key we’re Starting around our brand shopping with with and evolving second on the increase reach with deep and to and

We with continue message improvements in clarity product our to the assortment of discipline productivity. SKU and drive

profit fiscal gross and year. per XX% For XXXX, last revenue SKU increased per XX% SKU was to up

in experienced successes as fall during where our core performance. sales addition Our saw led brought as refreshed the holiday. spring like printing, novelty, and continued through we and the product and brand embroidery trends we fabrics Polo We and improvement functionality. season-to-date excitement our of newness well items, performance in increased

sellers best included double-knit technology-infused men’s Our Polo fabric. modernized featuring a sweatshirt our of version a

take lighter fabrication, area, updated had Outerwear fabrics was in died where functional sell-through both and styles To weekend also a a weight We our good interpretation. growth. with representing with drove casual and Work Classic on garment shirt fresh Wear positive another our Oxford

added and military test in with read consumer new a embroidery program and silhouettes our turnaround added where In T-shirt options, sweater interest. details Lauren, quick graphic jackets, we our multiple women’s was from react button And souvenir shop bestsellers. effective floor. were Polo, like our to iconic addition, jacket In on

within hours quarter collection and XXXX, around our and out became sold draws original the collector’s built successful helped iconic limited excitement pieces brand. Snow collection Stadium Similar to successes Snow introduced in the September, Beach authentic drive of was Snow last and with Beach items. deep edition launch many our The which on to our also in fourth heritage. We January, Beach on our launch our in

talked our Lastly, make in of quarter, our clear on have continued brands. Last categories, out a we that product, basis across research building growth one that also progress we we about win. these to have categories denim where consumer underdeveloped as potential to showed significant

X% the and Our were XX% the by year sales and washes denim fourth fabrications. for up fits, lighter-weight for in quarter, driven updated

fronts consumer you the encouraging seeing. as can So, we we’re pleased see, are response we’re progress multiple across with making product on improving and that

In in fiscal industry we growth with we as by potential to norm. today. most Moving $XXX social assets increased increases our the that to marketing in marketing media, was our matter campaigns XX% driven on to was digital This and spend year fiscal strong significantly full marketing. spend to the for shift better Marketing align with and investment XXXX, to investment consumers channels up million. our the

that consumer consumer-centric Investor key One more investments American presence U.S. drove a completed marketing with order we’ll Day will global of us from in the key groups We a These with weeks. the of is jacket. strategy major enable efficient. of couple how media more impressions major more approach. about effective the of marketing study much provided quarter to elements specific and in our Olympics. several fourth our Olympic consumer Starting recently high-tech you that the events generated important make we extensive brand. adopting for our social with We athletes X Winter engage in insights that sponsorship a media to the We significant heated learnings research outfitting had marketing consumer at precise Team with share engagements billion and the be

integrated We Our anticipation a February successfully iconic limited media this as Chance Polo and event shirt campaign social and on built be show perspective views. key with and Rapper from through with and media live share across such The amplification campaign Instagram on next fashion robust and X.X on global a able campaign stores. impressions. billion Polo Facebook ralphlauren.com Snow million Beach our Instagram, leveraged on featuring influencers our our was global media in Snapchat earnings January lastly, social various to successful edition to Zayn. touchpoints, call. X.X spring our We’ll more white the was And

represented culture included Awards also build influencer to at Emma In coverage, the Globes, sports, Awards. Jay-Z Golden Mandy at and and Awards, other brand parts This influencers and athletic and stars and We siblings Pre-Party artists in in to diverse continued dressing at Jessica Thomas, key of partner Jung Grammy from in various Korea Actors represents Wenwen Woodley spanning with and in X the and we movie aspects Akira Gloria current athletes. different of different season our Han Shailene fourth including Watson ambassador China, continued Screen Academy segments. celebrities and social Moore the arena. including our celebrity Eiza Olympic Awards consumer our in of and Shibutani Guild the the group Polo number the Yara media athletes, Gonzales Shahidi at to golfer world, quarter. Tang in influencers, engages brand the to the Justin Japan and Internationally,

we Finally, in store environments and in our experience, online, world. in invested terms both the stores upgrading our of around shopping

The improved a XXXX North America, consumers enable fresh, product brand as refreshed more and shops product lightning, and core growth items, lighter over This with XXXX easier well in visual aesthetic through experience. our driven and is activities versus trends. these and new categories focused fixturing, refreshed also accelerate XX channels sales and plan For broaden to across store merchandising, margin improved improved as our layout. all provide department globally. like We top we example, in presentation denim. The doors shops control presentation a pretest for fiscal on of has in coherent navigation environment with updated fiscal

international on our our to and key expanding initiative, presence. third Moving digital

On specifically digital growth calls, in in two expansion in spoke commerce. opportunity Asia, detail as the China, about earnings our I in well our last

XXXX, sales on give areas. both me update of XX% you a on those in mainland. fiscal China posting the Let great an year had growth

and format omni-channel in our expansion as JD.com raise to China, We billion in China on $X.X goal in of We net in well. increase digital five XXX years Our small perception. track Greater directly continue our Greater representing to WeChat. awareness year. strategy China, growth the stores, is performing of a of in the with especially stores Tmall, our component are ended year we XX This strong of a and our complemented brand remain operated region prior key concessions on reach versus new and by revenue

Moving on billion including sales value, global were which $X global In piece partners at our to ecosystem of is growth fiscal a XXXX, strategy. both digital our approximately digital, our retail critical business directly and to North our and America complete. our operated as operated fiscal XXXX directly beyond, largely pullback growth e-commerce in digital accelerate the we expect our is businesses. In major

platform for this to functionality America marketing to we first upgrading growth improving revenue similar implemented the directly increasing be fall. return North technology European our We’re quarter, In site’s and will in what our channel. in to operated the we business, e-commerce important last

site process. expect will search, the better including functionality, this and significantly transition We on improve with experience our navigation enhanced checkout shopping

Our in business to wholesale key XXXX, In digital this key retailers drove our and categories. continues gains market in our channel at share grow. we fiscal

on on our and and with closely pure customers. store collaborating department marketing are key We websites both partners targeted initiatives product play

As campaign collaboration shirt polo the effective, in with with tailored the we ways an Europe ASOS that example, different the platform. message consumer as was specifically our on for highly the to wear

let new ways agility. progress significant and initiative, we fourth productivity in fiscal our In Finally, areas. on drive XXXX, me working many touch across made key to

lead including end-to-end with inventory productivity designed business, the start times. initiative, me our faster Let to major efficiencies and drive across

fiscal work couple is our this at of nine-month enabling of to the XX% lead in years make our time a the has Our us in inventory goal on we area XXXX. past having of achieved and products a of over in demand. reduction talk This XXXX end XX% We’ll much our of closer times for Investor We about and initiatives of drive a in to Day. and decisions improvements to area our certain three-month further more that product at towards six-month our consumer important portion plan lead upcoming fiscal this in products. resulted

back get growth as proud last key in progress we year. the the position and to sustainable made company and to work world we fiscal have over year, are execute strong around I So the our to the continue Ralph initiatives value our have done creation. teams of long-term to closing, this

way get it over to forward discussing back urgency move the together our in coming that, focus look on by weeks. your I to and consumer, and more I’ll winning. are prioritize the what We’re most encouraged plan end with you to the matters a us with teams With of questions. to to turn Jane, couple answer her at strategic I’ll detailed to join our

Jane Nielsen

morning, good and Patrice, you, Thank everyone.

expectations our and were quarter full-year continued fourth ahead base. showed Our progress a the results resetting to and business of on healthier

higher flow. quarter was higher on constant gross in holiday X% lower discounts, and turns four reported expanded Easter revenues cash currency. a delivering a significant margins, AURs, strong driven in free by our Our growth X% and inventory are basis guidance, key in initiatives largely declined This above retail. Fourth

to momentum, growth comp in North stores. With the we returned holiday American

this and to so we’ve mix Adjusted and the tailwind During and margin currency, and focused progress to proud in from expanded the throughout this in strengthening XXX product geographic saw notably Polo channel and margin our XXX we gross costs quarter, provided sell-throughs I’m reduced the points have fourth gross fiscal the rates the favorable teams fourth in continue year, and Lower on discount quarter brand constant In points execution. in a brand. made basis do. driving profitability, work strong also quarter. and the on basis and they product of spring our quarter mix. benefiting improved product higher the

While improvement fourth marketing contributed X.X%, In will quarter in gross up was top-end last to the in fourth base year. we in fourth our the on operating for basis saw a XX% the reported XXX basis a the quality drive of coming at year. quarter basis trend. our down to XXX than in in XX% overall the more margin in and Adjusted up significantly expansion year more year become and XXXX, sales points to cost the Planned our points constant we the marketing in margin challenging will down continue stepped product initiatives currency, investment up was guidance. sales of and off low last fiscal quarter,

increase investment growth. progressively Moving our forward, top to accelerate line our is marketing to goal

However, to the through gains achieve increases our objective operating is to majority margin fund expansion. productivity of the

was fourth performance. and improvement as to margin by Starting down were our increased North comps offset was on quarter in Adjusted margin to flat revenue segment the constant last America, currency. year XX% flat was Moving with in operating investment. marketing gross

contributed quarter. all Importantly, fourth the margin gross to in channels improvements

the review across North second, and me our our business. e-commerce results operated wholesale Let business; directly third, stores; America our channels, first,

with improved of points quarter, X.X X% AUR fourth the The comp Our to ahead by quarter in positive traffic stores were a of global comp. in highlight contributed expectations. comp to X.X driven and and total earlier points the our America Easter a timing trends North company

tourist North such have Our our comps sets retail we improvements in and demonstrate of in and marketing level, the At wear monthly results timing be made line including of markdowns. customers foreign with deep some XX% by were XX a preferences. now consecutive of continue with pressured declines. significant initiatives, quarters to the following quarter, of as the in in expectations. our quarter down fourth America across product deliberate sales and newness E-commerce that also macro product, progress initiatives, operational quality reductions sales E-commerce shopping fourth in more we saw floor were better aligned growth

frequency. we work discount to quarter, promotion the rates lower and continued This

our and excluded iconic Additionally, of items promotions. were most from new arrivals

expect to e-commerce in driven America in to XXXX. This be by return North three will We fiscal factors. growth

significant is pullback First, substantially complete efforts fiscal more markdown of deep and be in XXXX sales sales quality moderated. will the

accompanied we elevating site, live are as functionality to all assortment Second, adding and our and and story-telling such better creative. customer conversion-driving reviews by chat, the

pullback not of that pull return quarter. in were by growth strengthening can momentum were impact impacted price X% diminishes. back, with the This confidence up continued which fiscal in to as XXXX, us fourth full we Third, sales, our the gives promotional the

negative, continuation XX% our wholesale. of shifts points-of-sale on decline timing actions, prior of to of stores, The of initiatives, pressure. off-price Similar also shipments last closures strategic negatively reduced to quality sales versus and lower and impacted discounts exits quarters, and of Bon-Ton quarter reflects sellout. at reductions a the revenue improving but Moving is shifts. productivity in Two-thirds Bon-Ton Reduced $XX million created department approximately of timing America fourth brand year stores North to revenue. decline

timing quarter. revenue third was the trend. XX% negatively XX% Finally, quarter off-price in an in in of versus impacted shipments the the a Off-price decline shift fourth down

that to one-third late the trends. Some shipments The our underlying into occur QX quarter QX. remaining related was shifted typically in

some was seeing progress While in improvements our in categories, offset are of non-apparel by we categories. our weakness apparel

at our season know, low orders year was wholesale time, store but trend down down sell-out department is orders quarters. on followed improved trends current over then almost our shipments shown challenging in and orders fall department Clearly, several ago. reflect do, should a you spring sell-out a that XXXX still our to digits mid stores improved As and that work holiday our The was from we be Since single These sell-out have next P&L the has double sell-out collection reflected trajectory. the down mid-teens. digits. an

improvement fiscal wholesale see our an out North we XXXX, Looking to trend. expect America to in

to at than While fiscal in revenue be XXXX. a we expect decline, it should smaller magnitude

our of see have which as environments product and in and continued Some of we teens a play we revenue. represents growth trend a wholesale benefit which the enter business, our sell-out FY XXXX to increasingly of on high side, wholesale evolved the positive refresh the of will digital now total marketing; dynamics our and improvement, shop percent are, mid wholesale at

at off-price, remained, our excess will continue for a lessen closures to some moderate those restore to XXXX. FY in the In XXXX a in from to we more we expect as pressures FY from vehicle The magnitude. as we lessen FY shipments, as we While to them rate, point-of-sale sales. XXXX channel closures balance will but impact anniversary reduce

growth wholesale North growth with In to bankruptcy, Bon-Ton about wholesale channel, channel. fiscal our in fiscal point in partners remains $XX focus the America X.X build a XXXX, America represents North Finally, headwind our represents million the this to high-quality which in of about XXXX.

basis down on reported declined Digital currency and traffic, operating retail in currency, points up increased Moving X% were X% constant basis a Europe. XX our in fourth offset the initiatives, market to quarter. pressured our Adjusted to points, inventory were Revenue on basis challenges in the and e-commerce XXX by margins be improvements but currency in of by Europe gross margin offset revenue sales the line fourth quality business. investments. in constant were stores. assortment underlying down wholesale Europe our with in quarter in challenging Wholesale than constant as trend in continue the currency in increased in outlet ongoing increased declines more stores. constant X% marketing channel, and in the to in expand in European Comps growth share. growth by some were continued Europe and outlet comps post with of of in notably double-digit XX% In

We and improve in in conversion and European traffic to number our implementing of are product changes assortments stores. the a our structures promotion trends

these platform fiscal business in the e-commerce of end will will expect will digitally-operated second-half impact fiscal of negatively as transition impacting Also, start technology we for upgrading Patrice comps the quarter the We first this Europe. XXXX, second the expect at we business e-commerce European and be the our quarter initiatives in mentioned, XXXX. of

to and margin X%, Europe, carefully in progress was discount were average and similar up currency. these our minimize quarter we unit basis XX constant did fourth a points the transitioned manage up impacts KPIs basis points will reported America last challenging what in in on continued. gross to were stores, XXX In basis trends in We rates retails down we our disruption, in when Despite fall. North brick-and-mortar

a XX% market mainland Asia, XX% XX% Japan, basis up and the China, X% in constant reported in every all growth and growth in was on in constant saw XX% growth China in Revenue including Asia. We fourth across quarter. Greater currency performance to in strong in currency. Turning

resonating are Comps the in from with initiatives increase X% in continuing well three marketing first quarter, increased the constant trend are to our and celebrities. and we and and product local in Asia digital the influencers efforts of quarters region continuing in engagement Our the fourth positive year. comp the currency

Asia brand. and the network in our we elevate continue as growth amplify upgrade distribution and comp further to marketing expect to initiatives We

margin up We as discount driven growth in focus unit our down also operating points in margin was our X%, in in basis In Asia of Asia, up expansion retails significantly. margin were last we quarter were XX to to operating and up investments. year largely quarter, continued was Asia. rates XXX average sales margin Adjusted up driving of currency, in constant line expect drive improvement. fourth the quality points we gross leveraging and quality fourth actions top modest gross going by sales on more and completed basis With forward, the

store our to Turning fleet.

retail locations stores improve We network closure adjacencies. new improved underperforming continue through with of and the to opening our

and stores basis. XXX standalone standalone we the XXX concessions. the a standalone We with XX stores full-year, XX closed and and on global For stores XX concessions, opened concessions ending XX year

strengthen currency last making. compared investments, from of balance was Moving year, this X% this billion a on and our constant to million the are and Total at end progress reported $X.X the we the Inventory cash reflecting year. the balance million, fiscal with on year. the end continued $XXX up quarter $XXX sheet. year at ended In in operational $X.X We to year. quarter the and X% in end sheet, with throughout basis we million the of at to the last of debt declined $XXX billion

expenditures investments $XXX we the fiscal year free and million, in flow inventory up below demand. shifted into flows million our cash focus from We We were on prior capital million matching in Capital XXXX. to inventory with the from certain period. $XXX XXXX XXXX will of plan, year, generated $XXX fiscal as continue productivity original for

to quarter Now I’d turn full-year for and XXXX. like first the to fiscal guidance of

will our Day at allocation outlook, including our financial Investor X. our June on provide capital long-term We strategy

a this guidance restructuring related As charges. and reminder, excludes

in currency, a improvement journey digits year For be to growth. low in sequential the constant to return representing our full revenues expect fiscal down to single we XXXX,

XXXX. expected in growth currency Foreign revenue minimal have on to fiscal is impact

impact quarter, in North as both first in outlined and I of America, the We decline America timing earlier. offset to fourth wholesale reflecting will negatively by international dynamics our the the be a as expect the growth business the quarter Easter well North which holidays,

be fiscal margin and XX to will higher-margin by of XXXX as expect expansion, currency. slightly promotions points reduce estimated towards in margin be constant for an This gross to up continue We shift channels driven regions. basis XX and operating to we

Foreign between expected products, guidance the elevate XXXX. of continued high This fiscal a impact growth potential on quality operating and returns. have brand and a to sales in reflects store marketing concepts margin investments to currency and that is minimal in balance initiatives demonstrate for

first For the we be revenue of flat quarter expect down constant slightly XXXX, fiscal currency. to in to

currency growth expected Foreign approximately XXX to by to revenue basis XXX is benefit points in the quarter.

global first be comp impacted in quarter by store be of expect while which Easter, points, negatively comps We sales America X.X the timing fiscal from approximately quarter by points impacted impacted favorably to X the North fourth XXXX. negatively the to of roughly

expect in our full-year margin quarter margin first expand quarter expectations first with in XX in up the to line XXXX. is constant points of Operating slightly gross currency. fiscal to expected XX basis for for be We to the fiscal XXXX

points operating basis margin the to benefit XX in XX estimated to is quarter. by currency Foreign

digital fiscal We XXXX, on expect initiatives in demonstrated rates healthy that marketing. return, capital expenditures consumer-facing proof-of-concept of stores, $XXX including and focused a of approximately and million have

We be of reform. XX%, for effective XXXX the federal as our adjusted tax XX%, our due to a of XXXX lower result rate income primarily tax expect to tax rate rate approximately fiscal fiscal U.S. below

operational our Ralph’s delivering business. initiatives. our at we around estimated are vision strong rate in inspires XXXX enduring world XX%. to fiscal First grow on and they building quarter efficiencies continue and make progress of In to the closing, right the is tax growth our building teams foundation approximately

We early are of signs seeing momentum.

value open are As call the for team, on creation term. focused delivering one quality, up the sustainable your for that, questions. growth long we let’s and With

Operator

the for One question. moment [Operator Instructions] first please

from Credit Our first Michael question comes Binetti from Suisse.

now line Your open. is

Michael Binetti

much thanks our have been guys taking guys, on for very Congrats hard you on know this. I question. – Hey, working

Jane Nielsen

Thank you.

Patrice Louvet

Thanks, Michael.

Michael Binetti

Yes, thanks.

picture, calendar takes like went and and just puts fiscal lot one a really bunch shifts thanks a I exclude Bon-Ton you back of I the XXXX, for reduction? we ask revenue the a pointed detail. the amount. through year if takes can trend puts Jane, off-price of out, pulled expect improve in distribution, you and the the – a you a follow-up all there bigger just and, if lot as to some progresses, can of you in And So big ask Jane, Do

improve. are is hinted Ralph to year-over-year You the that a hint first increase made on starting years. shoots But a product sell-through think, that’s your on margins basis. retailers improve to you the starting to I’m Lauren call, on see that starting on see Are green last guessing I in your the you before order characterize retail still this meaningful and is yet a of book or in increase few to few the any partners over last you a growth? big to better accounts of years at to they point? digesting starting orders, it as Are lot start boxes the we need changes new check the

Patrice Louvet

right. morning, Michael. Good All

– your first part. and Jane cover the second then the question will take I’ll your part So of

Michael Binetti

Thanks.

Patrice Louvet

Short yes. is answer

as see an improvement through to in XXXX. business fiscal we underlying expect We year our trend move

I that And little flow the are really on use sequential of quarterly not that face reasons to really However, you’re numbers, see there can quarterly if make terminology. choppy, a are going to smooth the flow. a going the reported three

in to shift last actually our in in the that addition, wholesale in year revenue we benefiting is in are cadence made we of year going Our going shipments, And off-price after be cadence the one to as right? obviously reduction strategic from our so shipment adjustments pressure the the First shipment wholesale fiscal that’s a in year, this second-half region. more our QX European concentrated back-half. normalize of is

the first that’s one. So

the the foreign impacted by quarter shift. currency. of this second XXXX referred one negatively in is our the remarks, is we The one Easter fiscal are that final of fourth going Easter to and to first timing right? quarter The And be then

you of year. shift, business as on based we benefit in impact go assume off-price see fiscal to the a can will assume Easter a our trends Yes, reported you through exclude in bigger revenue the underlying if the the meaningful will have the we front-half improvement but strategic we So FX today, year. of that what our reductions,

Jane Nielsen

part our to second to improve. your out trends. the two is results One question, on called Michael, of Yes, I are that just you reasons wholesale going improved believe sell-out have

if mid-teens. our So I look spring ago XXXX, year sell-out to was a down

move double strong now range, we low digits. in current through the holidays, sell-out progress And we in saw As is mid-single-digit – there. down our so

natural at retailer to are we based we the also to – see, going reflected XXXX. On a order And increase profitability, in move so books full been improved, overall as made can quarter-by-quarter, so margins the year. was as progressed great win-win as profitability, into wholesalers this have progress segment, situation. our be sell-outs, stronger you has it’s on Our those

your it wholesale, takes you’ve good the with through. while, the improvements. to out following got on coming especially we’re of earn But they’re we’re We’ve sell-out And seeing reset. winning gotten our importantly, a – I think, showing. that way showrooms in because both So feedback

Evren Kopelman

question, Next please.

Operator

Brian question Canada. Thank comes next you. The from of with Tunick Royal Bank

Brian Tunick

I and the congrats will well on my add as Thanks, progress. Great.

Jane Nielsen

Thanks, Brian.

Patrice Louvet

Thank you.

Brian Tunick

I The at question the high be here, guess, an gross Jane. company. my margins for for may I believe all-time

our be Jane, views us? can give the here is us between maybe where Jane share maybe of the go behind And then channels like AURs you or your may maybe, different as geographies. us, it or worst So comfort on rationalization on can where from gross Patrice, margins with some seems inventory

differ those much. can we those even do margins more? Thank North so about maybe America versus expanding faster, how you As very grow the gross business, think

Jane Nielsen

Sure.

take to in Let question pieces. me try your

AUR. on First,

continue going dynamics, well channels as go product to price that’s to see channels, us as to AURs on for higher this and working harmonization AURs harmony. provide assortments by a been value where pricing we’ve that different work differentiated on, So elevation allow going? year and that through of based number in do are and for I

We consumer Lauren Ralph a the opportunity to are assorting higher points, higher strong to has and into very in international. price going of price view The notably into international take brand we’re assort points. that

all And As mix. our Asia, less AURs of see are we mix you the to and on international foundation also a discounting course, that some less AUR we higher, into get of year. promotions markets we benefit through move as the that’s will as balanced notably in where

I that AURs. So see on that’s the expectation

back we as to just largest driven less margins, and coming And – four driver see gross of gross that back a promotions. largely and into quarters, margin will we our we step continue move about – to benefit of we because – That’s and the the that’s benefit gross we is year. the into international I mentioned, look next do on move year. what expansion less higher international. There net as That margins AURs I AURs, be progression been, forward. as across higher the on margin gross margin’s driver look as gross the will As in you margin higher of move talked the into line discounts a from gross I as be benefit, these the as

Asia, are retail gross a we but margins net pullback margin benefit. – we’ve seen. highest doors – at in assortment that and five wholesale build the move our assortment as a that’s believe so wholesale see very we made we’re good across progress we highest lot have But between differentiated total gross across we’ve and we’re that And we the company nice as margins and with globally, look But been years. more and of there as you we of we smaller-format room these As all a carry at in nice have to at progress gross wholesale, off-price, well. retail a the out further, we that especially progress markets, with then making our

this a but margin I think in that last you’ve durable pace move not that year, we the as forward. comfortable as are will gross at it we expand, seen benefit that

Evren Kopelman

Okay.

Next question, please.

Operator

comes Wells next Ike from with Boruchow Fargo. Our question

Ike Boruchow

Good Hi. congrats. my and let me everyone, add morning,

Jane Nielsen

Ike. you, Thank

Patrice Louvet

Good morning, Ike.

Ike Boruchow

e-comm just feel America so a it what out guess, you It of used of remind I more down growth two just like I fiscal wanted today, sounds in sales, e-comm, little years expect QX? if like now of that Is just heard to that, immediately percent of North year. was you’ve quick us rebased, can to right, that I discount, you where it’s on kind follow-up of you channel, we’re to curiosity. kind think XX% rebased a that dig XH I I that say, channel think ago, into America you to now grow North – a is I Jane, I got that And bit. to question guess, starting the my should guess then that begin inflection? next

Jane Nielsen

Sure.

we’re and make, of early make we’re nothing the hearing of things, say digital a So you’re this, our progress signs first digital. year. going all, fiscal happens calendar and me that sequential the digital, on turn tired I’m by to to we’re on like But a encouraged seeing sure of page you are on all when or going business we

we’re of importantly, the XX% overall, by pleased that our progress done we not a XXXX. sold that, or but be this down promotion sequential it’s move we’d markdowns greater. flip, it up as that seen full into look is amount off and is, wasn’t year. We’ve be the pull business affected terms of assortment digital the we’ve we’ve and any penetrate year strongly what FY less where And on So seen most far our really of in through X% a will in products selling, promotion in really highest price story

So quarter fourth up full digits. ended over the that with double selling price we

Evren Kopelman

please. question, Next

Operator

Thank from Patel next Needham The you. Rick & comes question Co. with

Rick Patel

you. morning, parts a Good congrats here, of the progress. moving execution. on and so good There’s Thank lot

Jane Nielsen

you. Thank

Rick Patel

improvement New retail to if Year? sustainability that of expect And tie about in turn to us the should terms in in in stores. return momentum into where positive You the comment a detail strongest year? see give had e-commerce, nice I’m your you little hoping and your positive North performance, this we and products a on America the of had comps sequential categories that thoughts comps can you positive more I

Patrice Louvet

I, team, this Jane on Let’s and tag one.

our progress that First, the at deliver. out progress the that behind in – looking game the comp. starting drivers plan we’ve really It’s the to laid drove

bear we a stronger remarks, key categories, drivers the at of trace our work brand elevating are that examples of to also shift the heard in although you it evolving the it’s the we effort, and both product doing of social improvement perception, and that more on categories I and the high-growth that’s marketing performance really been on traffic, of terms the to doing to prepared seeing. that single those combination very and and quality our that comp digital, the is and the improvement whether the brand having the to outerwear elevation in every the – And therefore, seeing. think, a this earlier through look the more marketing having driving penetration we’re – this towards an brand on expect of then continue of the I we’re you is those activity, behind we’re hard So impact has sales. numbers And towards impact specific on is through we’re denim, to marketing. of product product, this making out an from standpoint continue as

Jane Nielsen

I as and North drivers growth, given America the Rick, across comp strong were our sales initiatives expect which our the two of channels. quality trends traffic Yes. improved really of look AUR at components, you’d all

Now in what saw meaningful is, contrast in we are pickup Europe traffic. we to a tourist foreign seeing

about and quarter this quarter. X% X% down up was it was last it So

was traffic. in We shift meaningful clear, holiday a So a quarter. be this to try

the and flat points But QX. will XXXX. North expect despite that’s we of holidays, will down very North to so sit to the in benefit QX in It on be about to FY we single X.X on America as sit holiday with comp comp, low So, positive comp sort move encouraging. forward, a America, digits

Evren Kopelman

Next please. question,

Operator

with question ISI. next Thank comes you. Saad The Evercore Omar from

Omar Saad

the congrats that. continued Hey, thanks, It’s great progress, on to see

Patrice Louvet

Omar. Thanks,

Omar Saad

something talk to – systems internal more Can P&L. as as Are inventory sales you you been your kind about side? develop really amount promotions, tech, was do on to business inventory talk a on able right matter as the moved Can it the across of have done obviously we’ve around inventory, planning most online that a are think we you of how having of well, little has work and more IT quality impact you an and the Is bit longer-term initiatives of or the Thanks. less being differently allow of already? more should of your a about just levels, medium inventory you inventory managing the channels? that about driver with kind reducing of

Patrice Louvet

Omar. Thanks,

there things on of discipline place a we will we continued guess, couple that as continue this efficient we one. is in One, old to to to – as drive I good possible. are we’re going sure make So just that have that basic

across some historically exciting smartly we’ve managed the more some way of sure I leverage it And of where was you’ll I’m on we’ll we’re perspective attend, channels, relatively which Day, in Investor the siloed channels. in give shifts that During to more got you we’ve particularly projects making inventory, think been inventory. some terms across managing

us area. to see continue you’ll So on this make progress

Jane Nielsen

was that have done as work. at talk leader, a reset shelf moderately to technology SKUs objective we sketch more from huge our inventory our our turns our we’re benefit inventory expect now Investor improve unproductive would to longer-term inventory we say more our Day. very it that is improved we’ll match and factory to using channel to that and really, management. I strong in Halide Yes, been have turns. that inventory to and cutting store, a work were into Hermann, Alagöz return to improved benefit about our differentiated the shared support as process SKUs SKU like technology and planning integrated you’ll have And supply well more RFID has a evolving also chain are I of old-fashioned to we outlook. Valérie with to have AURs. overall the inventory than But across see the that our the did sales would Good

Evren Kopelman

please. question, Next

Operator

you. Thank

Drbul next question Bob Guggenheim. from comes with Our

now is line open. Your

Robert Drbul

you the the refreshing just talked on Can question performance of I you the XX talk those about North business stores. of morning. good about American a wholesale top department had where Hi, any update there an that? that you doing? And department space Thank footage give in on recapturing those you us top you. are more Are you Can XX? of square any are stores?

Patrice Louvet

Sure.

let’s here. down elements different break the So

years, of on for really Some have the than some XX, many, touched focusing been right? we’re first environment, The these not more improving many a decade. doors

to a in consistent So categories from it’s way the also and more ranges a and environment that our more shop more consumers. have ranges lighting, product allocating with creating the more for way engaging, consumers modern fixturing us. really the we business from that is inviting, the about approach want This

We XX seen in period or mean, these – to benchmark strong beyond, relative I and/or lifts pretest have doors. doors

presence. for Ultimately, beginning the us, to vast our impact goal is next over of just as majority the the this our view right? few years So really

our So relevant is we to wholesale, will really, just in shopping approach and that a for channel continue that sure consumer the experience do but to single we’re across make transforming not every is target.

that’s wholesale, in stores, and both that’s that online, true so factory also own in our North in in that’s our America and true true continues And stores globally.

of the far as part second question was? – As

Jane Nielsen

part? remind Bob, second the us, you Can

Robert Drbul

the around Just square like footage…

Patrice Louvet

is more footage space. Square There

Robert Drbul

Yes.

Patrice Louvet

us with – be that’s the a for point. want We space this not honestly, focus the to So we lot at that that’s more efficient have.

foot so opposed per space to some to What in more have present And just potentially adding about the as areas, square need actually, we’re really brand this what appropriately. productivity finding excess is we we relative space. to

that that us. behind work the on actually of harder space seeing the and we’re renovated for in both productivity focusing making stores approach. we’re So wholesale we’ve have in And that really the we benefits, and much significant

Jane Nielsen

in seeing one benefits foot our the even that face well we’re wholesale that the wholesale point-of-sales, the of in that we the channel following as overall of shipment of as square closure GMROI are unproductive in of our declines. sales Yes. would I seeing increase refurbishments Bob, just nicely per add and

assort some of of what So to we’re it’s the space a want have strategy and claim certainly stake more gone the us it period retailers. doing. in it our cases, working And you and for for that’s is actually working pullback, you helps and our that your the GMROI resets productively through

Evren Kopelman

Okay.

question, please. Next

Operator

Thank Research. with Buckingham question next you. from Tracy comes Eric The

Eric Tracy

everyone, execution. my add congrats I’ll great Hi. on Good and morning,

Jane Nielsen

Eric. Thanks,

Patrice Louvet

Eric. morning, Good

Eric Tracy

– first, into two-parter and spend just maybe as a demand XXXX. here. speak creation marketing we should But continued It’s got I’ve we little distinct. move throughout that to levels bit a anticipate

of up of and Maybe being just the level gross Clearly, set beneficial secondly, And pressures. a potential you this where some terms as impact year. this Maybe will you Jane, product give XX% of think, just and Jane, not quantify in got spend again, that I then go? assessment costs dynamic talk we’ve mentioned inflationary through year. sort both margin well? as that

Patrice Louvet

start spend, Eric. marketing with I’ll Maybe Sure. the

spend So of is is around X%. closer right our The X% to industry right? sales, norm now,

to time, to get progress made to brand, we think we we fiscal norm, goal believe need minimum, continue past to back-half industry good over is branding, in we amazing year, an have because We’ve behind of want So the as relative I will to you over commerce, where on marketing invest increases that and vast social digital XXXX again focus growth that’s and rate majority overall deliberate we the similar increase in XXXX. can expect increase media, social that’s our where fiscal With to our fiscal in the year a will go. that. – of the it. the vast this drive And

Jane Nielsen

garment, And I’d is labor cost capacity. One of the product and wage rates. trucking and pressure points twofold. polyester, at we’re that actual factor Eric, is So the cotton even look obviously as are, at then freight looking I in cost, say, other cost

As those pressure that I basis of XX about think I XX on it’s aggregate to gross factors, points margin.

FY happened contrast as what XXXX, benefit. basis was it in that Now about points I to of XX

sure make structural basis to AUR cost that to that XX deals increases also renegotiating initiative, – duty XX productivity of we journey cover cost costs. looking at and to management leveraging scale our We’ll some points. are supply managing to our with So of manage and are with this – a part increases. initiatives pricing obviously Those parts ongoing partners cost cost is our all we

a of I margin a year, make expansion in we handle than significant the a gross think will FY one next factor It saw we it’s on but at XXXX. and is factors rate that So less have it.

Evren Kopelman

Next question, please.

Operator

next Simeon from with Siegel The comes you. question Instinet. Nomura Thank

Simeon Siegel

Good and Thanks. guys, the morning, progress. on congrats

Patrice Louvet

Good morning, Simeon.

Simeon Siegel

the past missed sorry down been Jane, it. years. if couple plan and below The has coming nicely CapEx I in of

planning think, back like you’re looks I up this it it year.

expect meaningful to off-price that And timing-wise that if just your off-price what forward? just on is don’t current about there So go? in there? shipments remind the go there, look could like I thoughts you’d control comment and in you what the decline penetration in the where anything was then any know should us to

Patrice Louvet

Sure, Simeon.

FY as $XXX I spent test-and-learn we million. some would than really context view you a Obviously, But give on me at we we capital. less this Let thought XXXX, year.

So that guidance, some have lot we but we as the in closer the move need it’s in put our a X.X% guideline That we investments caused put about to you’re delay seeing XXXX, from stringent test a so we into marketplace. and forward. sales initiatives of that to see that, to into of we ROI the marketplace, CapEx us for

think our right we that Over CapEx to X.X% of level X% the X%, business. X% to the is long-term, for

at platforms into CapEx as several a to Demandware backup I contrast IT As as eCommerce and that to have the in like invest SG&A take services Salesforce in, don’t service year, Cloud, especially significant you many last advantage CapEx, capital have this if moved stay pay you years, variable it look or investments upgraded. like of but more others, we you technologically

our But we So we don’t really think, it need to we about culture. where total. obviously, know Day. that’s good to ROI go business talk I a on factor a for CapEx the have at we disclose inculcated Investor that We Then, as off-price, we we’ll of more move much percentage that feel and forward. strong

be wholesale will But decreasing... increase penetration to As our our high know, it channel’s so would it this was you if we it very more XX% watermark. objective than disclose as a is into channel,

Patrice Louvet

increasing. Increasing,

Jane Nielsen

Oh, sorry. I’m gosh.

Patrice Louvet

let We anyone hear are don’t increasing that. of instead else –

channel. are We to the decreasing penetration its wholesale

growth So in got should you excess this and we’ve but a that which dramatic into in we a excess growth, It’s channel at of the for pressure as is point obviously penetration. for a us, it to in back point XXXX to it decreasing of a because where is as sale get point be XXXX, retailer. to strategically not saw as future, pressure in generate

Evren Kopelman

take question, last We’ll Okay. please. one

Operator

Thank you.

comes John question final from Cowen. Our Kernan with

Your open. line is

John Kernan

for on Good and Thanks the forward…. Congrats progress looking squeezing in. morning. me

Patrice Louvet

morning. good John,

John Kernan

enhance Asia? on you you. the globally. a not obviously America, what Thank in if going to and Looking touch detail where think you $XXX lot in I in the those just Europe in to see you’ve perspective? Investor guidance Can for revenue future. about you Day. and little could then you what’s the forward but North see Jane, a Asia Europe you million talk talked implied year now businesses And a – the brand, done elevate wondering just China. this potential within and Give about about the us more on

Jane Nielsen

I in this And talk from North more can next less who tell magnitude Kuster to general, our and at In decline expect done, international reflecting than Day, that perspective. a work John, I leaders, you year, we’ve less we’re going the Investor you that’s but and grow lot this our expectation. Howard can about we Yes. directly will America Jeff saw hear year, it give that you, and – Smith, will will

China. international I As we across the in know look underpenetrated we business, are

their into in a grow presence both assortments we’ve building lot a that full-price Europe. store and perception, in opportunity. stores, has The we Our Europe, of brand. have of to done room Across the perception got of XX And we’ve the again, an consumer research in our Chinese in stores has elevated out stores. lot our our

and opportunity fleet, We there. areas, we’re areas. a relatively as underpenetrated to the strong Notably, limited opportunity Germany perceptions have our a consumer and build-out great we where have grow opportunity store Italy those in but of are

Patrice Louvet

Yes.

in we’re in think we a weeks. couple excited those detail in more have share and about will of opportunities the I we growth international

we’re X forward great a Thank Thank of you the going all day. June seeing to for you joining Day Investor We look have call. to it listen, So on here. close the and you. Bye-bye.

Operator

conference you your for does today. Thank that gentlemen, participation. and conclude Ladies for your

now You disconnect. may

Ralph Lauren (RL) 24 May 182018 Q4 Earnings call transcript