Ralph Lauren Corporation, a global leader in the design, marketing and distribution of premium lifestyle products, reported earnings per diluted share of US$2.18 on a reported basis and US$2.29 on an adjusted basis, excluding restructuring-related and other net charges for the first quarter of Fiscal 2022.
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This compared to earnings per diluted share of (US$1.75) on a reported basis and (US$1.82) on an adjusted basis, excluding restructuring-related and other net charges for the first quarter of Fiscal 2021.
“Quality, a sense of timelessness and a feeling of optimism inspire everything we create. I cannot think of a time when these values have felt more essential or relevant as the world looks forward to a future marked by hope and possibility,” said Ralph Lauren, Executive Chairman and Chief Creative Officer.
“Against the backdrop of stronger than expected re-openings across North America and Europe, our teams delivered exceptional performance this quarter,” said Patrice Louvet, President and Chief Executive Officer.
“Our timeless brand is resonating strongly with consumers around the world, and the breadth of our lifestyle portfolio is enabling us to deliver products that meet evolving consumer tastes and demand as we progressively emerge from the pandemic. Even as we continued to manage through COVID-related challenges in select markets and in our global supply chain, we are back on offense and excited about our future growth opportunities,” continued Louvet.
Ralph Lauren reported net revenue increased by 182 percent to $1.4 billion on a reported basis and was up 176 percent in constant currency in the first quarter of Fiscal 2022. Foreign currency favorably impacted revenue growth by approximately 650 basis points in the first quarter.
North America revenue in the first quarter increased 301 percent to US$662 million. In retail, comparable store sales in North America were up 176 percent, with a 278 percent increase in brick -and-mortar stores and a 51 percent increase in digital commerce. North America wholesale revenue increased to US$250 million compared to US$23 million in the prior year period.
Europe revenue in the first quarter increased 194 percent to US$355 million on a reported basis and increased 179 percent in constant currency. In retail, comparable store sales in Europe were up 98 percent, with a 154 percent increase in brick-and-mortar stores and a 23 percent increase in digital commerce. Europe wholesale revenue increased 344 percent on a reported basis and increased 324 percent in constant currency.
Asia revenue in the first quarter increased 68 percent to US$288 million on a reported basis and 61 percent in constant currency. Comparable store sales in Asia increased 43 percent, with a 43 percent increase in our brick-and-mortar stores and a 42 percent increase in digital commerce.
Gross profit for the first quarter of Fiscal 2022 was US$968 million and gross margin was 70.3 percent. Adjusted gross margin was 69.8 percent, 200 basis points below the prior year on a reported basis and down 260 basis points in constant currency due to unusual mix benefits in the prior year period from COVID-19-related store closures across North America and Europe. Compared to first quarter Fiscal 2020, adjusted gross margins expanded 530 basis points on a reported basis on strong average unit retail growth.
Operating expenses in the first quarter of Fiscal 2022 were US$747 million on a reported basis. On an adjusted basis, operating expenses were US$729 million, up 39 percent to last year, primarily driven by higher compensation and rent expense following stores closures and staff furloughs due to COVID-19 in the prior year period, along with increased marketing investments as planned. Adjusted operating expense rate was 53.0 percent, compared to 107.5 percent in the prior year period.
Operating income for the first quarter of Fiscal 2022 was US$221 million and operating margin was 16.0 percent on a reported basis. Adjusted operating income was US$231 million and operating margin was 16.8 percent, 5,250 basis points above the prior year.
North America operating income in the first quarter was US$186 million on a reported basis and US$178 million on an adjusted basis. Adjusted North America operating margin was 26.9 percent, up 5,120 basis points to last year.
Europe operating income in the first quarter was US$95 million on a reported basis and US$94 million on an adjusted basis. Adjusted Europe operating margin was 26.4 percent, up 4,120 basis points to last year. Foreign currency favorably impacted adjusted operating margin rate by 40 basis points in the first quarter.
Asia operating income in the first quarter was US$60 million on a reported basis and US$61 million on an adjusted basis. Adjusted Asia operating margin was 21.3 percent, up 1,390 basis points to last year. Foreign currency favorably impacted adjusted operating margin rate by 130 basis points in the first quarter.
Net income in the first quarter of Fiscal 2022 was US$165 million, or US$2.18 per diluted share on a reported basis. On an adjusted basis, net income was US$172 million, or US$2.29 per diluted share. This compared to a net loss of US$128 million, or (US$1.75) per diluted share on a reported basis, and a net loss of US$133 million, or (US$1.82) per diluted share on an adjusted basis, for the first quarter of Fiscal 2021.
In the first quarter of Fiscal 2022, the Company had an effective tax rate of approximately 22 percent on both a reported basis and an adjusted basis. This compared to an effective tax rate of approximately 26 percent on both a reported basis and an adjusted basis in the prior year period.
The Company ended the first quarter of Fiscal 2022 with US$3.0 billion in cash and investments and US$1.6 billion in total debt, compared to US$2.7 billion and US$1.9 billion, respectively, at the end of the first quarter of Fiscal 2021.
Inventory at the end of the first quarter of Fiscal 2022 was US$803 million, up 4 percent compared to the prior year period.
The Company continues to note the ongoing uncertainty and evolving situation surrounding COVID-19 impacting the timing and path of recovery in each market, including the potential for further outbreaks or resurgences of the pandemic across various markets as well as potential global supply chain disruptions.
For Fiscal 2022, the Company now expects constant currency revenues to increase approximately 25 percent to 30 percent to last year on a 53-week reported basis. Foreign currency is expected to positively impact revenue growth by approximately 30 basis points. The 53rd week is expected to represent approximately 140 basis points of this year’s revenue growth.
The Company now expects operating margin for Fiscal 2022 of about 12.0 percent to 12.5 percent. This compares to operating margin of 4.8 percent in the prior year period and 10.3 percent in Fiscal 2020. Operating margin expansion is expected to be primarily driven by operating expense leverage. Gross margin is now expected to increase 50 to 70 basis points to last year, up from the Company’s previous outlook of a 40 to 60 basis point decline, with stronger average unit retail growth and favorable product mix more than offsetting increased freight headwinds.
For second quarter Fiscal 2022, revenues are expected to increase approximately 20 percent to 22 percent in constant currency to last year. Foreign currency is expected to positively impact revenue growth by approximately 50 basis points.
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Operating margin for the second quarter is expected in the range of 13.0 percent to 14.0 percent driven primarily by operating expense leverage. Gross margin is expected to be flat to up 20 basis points to last year, with average unit retail growth and favorable product mix partly offset by challenging compares over COVID-19-related mix benefits due to store closures from the prior year.
The full year Fiscal 2022 tax rate is now expected to be approximately 24 percent, assuming a continuation of current tax laws. Second quarter Fiscal 2022 tax rate is expected to be approximately 24 percent to 25 percent.