Ralph Lauren Corporation reported revenue increased 1 percent to $1.5 billion on a reported 13-week basis in the fourth quarter of Fiscal 2023, versus a 14-week fiscal period last year. On a 13-week comparable basis, revenue increased 9 percent in constant-currency. Earnings per diluted share was 48 cents on a reported basis in the fourth quarter and 90 cents on an adjusted basis, excluding restructuring-related and other net charges, for the fourth quarter of Fiscal 2023. This compared to earnings per diluted share of 34 cents on a reported basis and 49 cents on an adjusted basis, excluding restructuring-related and other net charges for the fourth quarter of Fiscal 2022.

“As I reflect on the past year, I am inspired by how our teams around the world brought the magic of our timeless vision to life. From our California Dreaming show to sponsoring some of the most iconic moments in sports — it’s their passion and optimism that inspire people to step into their dreams,” said Executive Chairman and Chief Creative Officer Ralph Lauren.

“We made strong progress in the first year of our Next Great Chapter: Accelerate plan, as our teams around the world executed exceptionally well through a highly dynamic global operating environment,” said Patrice Louvet, president and CEO. “Our Fiscal 2023 performance puts us on track with our investor day commitments. We continue to be on offense as we balance growth and operating discipline, investing in our brand while delivering strong shareholder returns.”

Mr. Louvet continued, “Looking ahead, our growth and value creation will continue to be supported by the strength of our brand and multiple growth engines — from recruiting new high-value consumers and driving our timeless core products and high-potential product categories to targeted geographic and channel expansion.”

Fourth Quarter Fiscal 2023 Income Statement Review

Net Revenues: In the fourth quarter of Fiscal 2023, revenue increased 1 percent to $1.5 billion on a reported 13-week basis versus a 14-week fiscal period last year. Foreign currency negatively impacted revenue growth by approximately 370 basis points in the fourth quarter. On a 13-week comparable basis, revenue increased 9 percent in constant currency.

North America Revenue: In the fourth quarter North America revenue decreased 3 percent to $656 million. On a 13-week comparable basis, revenue increased 2 percent in constant currency. Results included approximately 270 basis points of negative impact from a previously reported shift in the timing of post-holiday sales into the third quarter this year compared to the fourth quarter last year. In retail, comparable store sales in North America were down 4 percent, with a 3 percent decrease in digital commerce and a 4 percent decline in brick and mortar stores driven primarily by the timing shift. North America wholesale revenue was up 11 percent to last year, benefiting from more normalized timing of spring shipments compared to the prior year’s supply chain disruptions.

Europe Revenue: In the fourth quarter Europe revenue decreased 1 percent to $461 million on a reported basis. On a 13-week comparable basis, revenue increased 7 percent in constant currency. Similar to North America, results included approximately 120 basis points of negative impact from a previously reported shift in the timing of post-holiday sales into the third quarter this year compared to the fourth quarter last year. In retail, comparable store sales in Europe were up 8 percent, with a 9 percent increase in brick and mortar stores and a 6 percent increase in digital commerce. Europe wholesale revenue decreased 3 percent on a reported basis but increased 3 percent in constant currency.

Asia Revenue: In the fourth quarter Asia Revenue increased 13 percent to $390 million on a reported basis. On a 13-week comparable basis, revenue increased 29 percent in constant currency, supported by strong performance across all markets. Comparable store sales in Asia increased 20 percent, with a 20 percent increase in our brick and mortar stores and a 19 percent increase in digital commerce.

Gross Profit: For the fourth quarter gross profit for Fiscal 2023 was $951 million and gross margin was 61.7 percent. On an adjusted basis, gross margin was 63.0 percent in constant currency, about flat to the comparable 13-week period last year. Gross margins were impacted by increased input costs from raw materials and labor, offset by AUR growth across all regions, lower freight, and favorable channel and geographic mix shifts. Compared to fourth quarter Fiscal 2019 pre-pandemic levels, adjusted gross margins expanded 170 basis points supported by strong AUR growth and brand elevation.

Operating Expenses: In the fourth quarter operating expenses for Fiscal 2023 were $910 million on a reported basis, including $32 million in restructuring-related and other net charges. On an adjusted basis excluding such charges, operating expenses were $908 million in constant currency, up 3 percent on a 13-week comparable basis but down approximately 380 basis points as a percent of sales. Higher compensation and variable selling expenses were partially offset by lower marketing spend due to a more normalized quarterly marketing cadence compared to last year.

Operating Income: For the fourth quarter operating income for Fiscal 2023 was $40 million on a reported basis, including restructuring-related and other net charges of $35 million, and operating margin was 2.6 percent. Adjusted operating income was $98 million and operating margin was 6.1 percent in constant currency, 390 basis points above the prior year on a 13-week comparable basis.

North America Operating Income: In the fourth quarter North America operating income was $68 million on a reported basis and $80 million an adjusted basis. Adjusted North America operating margin was 12.2 percent, compared to adjusted operating margin of 13.1 percent for the 13-week comparable period of the fourth quarter of Fiscal 2022 driven by increased compensation, shipping and other selling expenses.

Europe Operating Income: In the fourth quarter Europe operating income was $89 million on both a reported and adjusted basis. Adjusted Europe operating margin was 20.6 percent in constant currency, compared to 19.0 percent for the comparable 13-week period last year.

Asia Operating Income in the fourth quarter Asia operating income was $55 million on both a reported and adjusted basis. Adjusted Asia operating margin was 16.3 percent in constant currency, compared to 8.2 percent for the comparable 13-week period last year.

Net Income and EPS: On a reported basis, net income in the fourth quarter of Fiscal 2023 was $32 million or 48 cents per diluted share. On an adjusted basis, net income was $61 million, or 90 cents per diluted share. This compared to a net income of $24 million, or 34 cents per diluted share on a reported basis, and net income of $36 million, or 49 cents per diluted share on an adjusted basis, for the fourth quarter of Fiscal 2022.

In the fourth quarter of Fiscal 2023, the company had an effective tax rate of approximately 34 percent on a reported basis and 27 percent on an adjusted basis. This compared to a reported and adjusted effective tax rate of approximately 17 percent and 23 percent, respectively, in the prior year period. The increase in our adjusted effective tax rate was primarily driven by the absence of certain discrete items that benefited the fourth quarter of the prior year.

Full Year Fiscal 2023 Income Statement Review

Net Revenues.
For Fiscal 2023, revenue increased 4 percent to $6.4 billion on a reported 52-week basis versus a 53-week fiscal period last year. Foreign currency negatively impacted revenue growth by approximately 580 basis points in the period. On a 52-week comparable basis, revenue increased 10 percent to last year in constant currency.

North America Revenue.
For Fiscal 2023, North America revenue increased 2 percent to $3.0 billion. On a 52-week comparable basis, North America revenue increased 3 percent to $3.0 billion in constant currency.

Europe Revenue.
For Fiscal 2023, Europe revenue increased 3 percent to $1.8 billion on a reported basis. On a 52-week comparable basis, Europe revenue increased 15 percent to $2.0 billion in constant currency.

Asia Revenue.
For Fiscal 2023, Asia revenue increased 11 percent to $1.4 billion on a reported basis. On a 52-week comparable basis, Asia revenue increased 25 percent to $1.6 billion in constant currency.

Gross Profit.
Gross profit for Fiscal 2023 was $4.2 billion on a reported basis and gross margin was 64.6 percent. On an adjusted basis, gross margin was 66.3 percent in constant currency, approximately 10 basis points lower than the comparable 52-week period last year. Compared to Fiscal 2019, adjusted gross margins expanded 320 basis points supported by strong AUR growth and brand elevation.

Operating Expenses.
For Fiscal 2023, operating expenses were $3.5 billion on a reported basis, including $51 million in restructuring-related and other net charges. On an adjusted basis excluding such charges, operating expenses were $3.6 billion in constant currency, up 9 percent on a 52-week comparable basis but down approximately 70 basis points as a percent of sales.

Operating Income.
Operating income for Fiscal 2023 was $704 million, including restructuring-related and other net charges of $66 million. Adjusted operating income was $935 million and operating margin was 13.7 percent in constant currency, 60 basis points above the prior year on a 52-week comparable basis.

North America Operating Income.
North America operating income in Fiscal 2023 was $543 million and operating margin was 18.0 percent, including restructuring-related and other net charges. Adjusted North America operating margin was 18.7 percent, compared to adjusted operating margin of 22.4 percent for the 52-week comparable period in Fiscal 2022 driven by increased product costs, compensation and selling expenses.

Europe Operating Income.
Europe operating income in Fiscal 2023 was $406 million and operating margin was 22.1 percent on a reported basis, including restructuring-related and other net charges. Adjusted Europe operating margin was 25.2 percent in constant currency, compared to 24.8 percent for the comparable 52-week period last year.

Asia Operating Income.
Asia operating income in Fiscal 2023 was $290 million and operating margin was 20.3 percent on a reported basis, including restructuring-related and other net charges. Adjusted Asia operating margin was 22.0 percent in constant currency, compared to 17.1 percent for the comparable 52-week period last year.

Net Income and EPS.
In Fiscal 2023, net income was $523 million or $7.58 per diluted share on a reported basis. On an adjusted basis, net income was $576 million, or $8.34 per diluted share. This compared to a net income of $600 million, or $8.07 per diluted share on a reported basis, and net income of $623 million, or $8.38 per diluted share on an adjusted basis for Fiscal 2022.

For Fiscal 2023, the company had an effective tax rate of approximately 24 percent on both a reported and adjusted basis. This compared to a reported and adjusted effective tax rate of approximately 20 percent and 21 percent, respectively, in the prior year. The increase in our adjusted effective tax rate was primarily driven by the absence of a one-time foreign derived intangible income deduction and other discrete items that benefited the prior year period.

Balance Sheet and Cash Flow Review
The company ended Fiscal 2023 with $1.6 billion in cash and investments and $1.1 billion in total debt, compared to $2.6 billion and $1.6 billion, respectively, at the end of Fiscal 2022. Inventory at the end of Fiscal 2023 was $1.1 billion, up 10 percent compared to the prior year period reflecting earlier receipts compared to the prior year’s impact from global supply chain delays, increased product costs and continued elevation in product mix.

The company repurchased approximately $42 million of Class A Common Stock in the fourth quarter and approximately $454 million of Class A Common Stock during the full year Fiscal 2023. At the end of Fiscal 2023, the company had approximately $1.2 billion remaining under its total share repurchase authorization, subject to overall business and market conditions.

The company had $217 million in capital expenditures in Fiscal 2023, compared to $167 million in the prior year period. The increase was primarily due to more normalized levels of investment following the pandemic, following unusually low capital expenditures in the prior year period.

Full Year Fiscal 2024 and First Quarter Outlook
The company’s outlook is based on its best assessment of the current macroeconomic environment, including inflationary pressures and other consumer spending-related headwinds, foreign currency volatility, the war in Ukraine and COVID-19-related impacts, among others. The full year Fiscal 2024 and first quarter guidance excludes any potential restructuring-related and other net charges that may be incurred in future periods, as described in the “Non-U.S. GAAP Financial Measures” section of this press release.

For Fiscal 2024, the company expects revenues to increase approximately low-single digits to last year on a constant currency basis. Based on current exchange rates, foreign currency is expected to benefit revenue growth by approximately 20 basis points in Fiscal 2024.

The company expects operating margin for Fiscal 2024 to expand approximately 30 to 50 basis points in constant currency, driven by gross margin expansion. Foreign currency is expected to benefit operating margin by approximately 10 basis points in Fiscal 2024. Gross margin expansion is expected to increase about 50 to 100 basis points in constant currency, with stronger AUR and reduced freight costs more than offsetting continued product cost inflation through the majority of the fiscal year. Foreign currency is expected to negatively impact gross margins by approximately 20 basis points in Fiscal 2024.

For the first quarter, the company expects revenues to be flat to up slightly to last year on a constant currency basis. On a reported basis, including approximately 150 basis points of negative foreign currency impact, revenues are expected to be down slightly to prior year. This outlook includes approximately 220 basis points of negative impact from the normalized timing of spring North America wholesale shipments following last year’s supply chain disruptions, which benefited our fourth quarter of Fiscal 2023.

Operating margin for the first quarter is expected to expand approximately 30 to 50 basis points in constant currency, driven by stronger gross margins. Gross margin expansion is expected to be driven by lower freight costs and continued AUR growth partially offset by increased product costs. Foreign currency is expected to negatively impact operating and gross margins by approximately 50 basis points in the first quarter.

The full year Fiscal 2024 tax rate is expected to be in the range of 24 percent to 25 percent, assuming a continuation of current tax laws. First quarter of Fiscal 2024 tax rate is expected to be about 23 percent to 24 percent.

The company is planning capital expenditures for Fiscal 2024 of approximately $275 million to $300 million.