Ralph Lauren Corporation — FY2022 Form 10-K
Business context and reporting period. Ralph Lauren designs, markets, and distributes premium lifestyle products through retail, wholesale, and licensing channels. This annual report covers the 53-week fiscal year ended April 2, 2022; the comparable FY2021 period was 52 weeks. The company reports North America, Europe, and Asia segments.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net revenue | $6.219 billion | $4.401 billion |
| Gross profit / gross margin | $4.148 billion / 66.7% | $2.861 billion / 65.0% |
| SG&A / share of revenue | $3.306 billion / 53.2% | $2.639 billion / 60.0% |
| Operating income (loss) / margin | $798.4 million / 12.8% | $(43.6) million / (1.0)% |
| Net income (loss) | $600.1 million | $(121.1) million |
| Diluted EPS | $8.07 | $(1.65) |
| Cash from operating activities | $715.9 million | $380.9 million |
- Revenue rose 41.3% reported and 41.9% in constant currency. Comparable sales increased 40% overall, including 32% for digital commerce and 43% for brick-and-mortar.
- Revenue by segment: North America $2.968 billion, Europe $1.781 billion, and Asia $1.287 billion. Segment operating margins were 22.8%, 24.9%, and 17.8%, respectively.
- Gross margin improved 170 basis points, reflecting better pricing, fewer promotions, product mix, and lower non-routine inventory charges; higher product and freight costs partly offset the improvement. SG&A as a share of revenue fell 680 basis points, mainly from operating leverage.
- Cash and cash equivalents were $1.864 billion and short-term investments $734.6 million. Debt was $1.636 billion, including $499.8 million current debt. Net cash and short-term investments, after debt, were $962.1 million, down from $1.144 billion a year earlier.
- Cash used in investing activities was $717.9 million, including $546.0 million of net investment purchases and $166.9 million of capital expenditures. Cash used in financing was $665.7 million, including $450.5 million of repurchases under the program, $42.1 million of shares withheld for taxes, and $150.0 million of dividends.
- Inventory increased to $977.3 million from $759.0 million. The three largest wholesale customers generated approximately 16% of revenue and represented 31% of gross trade receivables.
Material changes, outlook, and risks
- Results rebounded from pandemic-related store closures and disruption in FY2021. FY2022 revenue also included an extra week, contributing $62.7 million of revenue and $16.5 million of net income. Club Monaco’s sale and the transition of Chaps to a licensed model reduced FY2022 revenue by approximately $66 million and $69 million, respectively, versus FY2021.
- FY2022 net restructuring, asset impairment, and other charges totaled $32.6 million, versus $254.4 million in FY2021. The FY2021 Strategic Realignment Plan had incurred $262.1 million of cumulative pre-tax charges by year-end; total plan charges are expected to reach up to $300 million. Management estimates gross annualized pre-tax savings of approximately $200 million, with some savings reinvested.
- Management expects FY2023 capital expenditures of approximately $290 million to $310 million, primarily for store openings and renovations and information technology. The filing provides no FY2023 revenue or earnings guidance in the information summarized here.
- The $500 million 1.700% senior notes were due June 15, 2022. Management said available cash, operating cash flow, credit facilities, and capital-market access should support foreseeable requirements; the Global Credit Facility had $490 million of remaining availability, alongside $74 million across Pan-Asia facilities and the Japan overdraft facility.
- Management cited continuing uncertainty from COVID-19, Russia’s war in Ukraine, inflation, freight and supply-chain constraints, labor shortages, foreign exchange, and discretionary consumer demand. The company sources approximately 97% of products outside the U.S., including about 19% each from China and Vietnam. These factors may affect availability, costs, sales, and margins.
- The board increased the quarterly dividend from $0.6875 to $0.75 per share in May 2022 and expanded the share-repurchase authorization by $1.5 billion in February 2022. Future distributions remain subject to board discretion and business conditions.
- The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls. Management said pending legal matters were not expected to have a material adverse effect, while noting outcomes can change.
Investor facts to verify
- How much of the revenue and margin rebound persists after the reopening comparison and the extra fiscal week are removed.
- Whether inventory growth, freight and product-cost inflation, and supply-chain delays affect future gross margins, availability, or markdowns.
- The repayment or refinancing of the $500 million notes due in June 2022 and the company’s liquidity after planned capital spending, dividends, and repurchases.
- Progress toward the restructuring plan’s expected savings and the remaining charges and actions.
- Wholesale-customer concentration, receivable collection, and any contingent Club Monaco earn-out proceeds.