Ralph Lauren (RL) 8 Nov 232024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren Second Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn over the conference to our host, Ms. Corinna Van Ghinst. ahead. go Please

Jane thank Fiscal and Patrice joining Lauren's Officer; Ralph the Chief Officer Good Officer. Financial Conference you Call. Quarter and Executive Chief XXXX President are Chief With Second Operating company's and morning, and for Nielsen, me Louvet, today

prepared will the open After call which questions, caller. your remarks, X that ask per we we you up for limit to

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press be reported release. including morning's currency in Our can found results, this foreign

be outlook. We statements the also forward-looking will making laws, within meaning some securities federal including of the our financial

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

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

With to that, the Patrice. will I over turn call

Good thank today's and morning, Corey. you joining for you, Thank everyone, call.

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a Greatness to blending experience, fashion, experience exceeded exploration. visitors unique immerses X.X with and unique X Race over players expectations million reaching to stream in live luxury Engagement total gaming the the and million our views. activation

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dresses, outerwear seasonal baby and sweaters, this improved business fall girls sequentially strength by kids with Our quarter, led gifts. across

include our emerging credibility also our categories. foundation core home the establishes These outerwear these in and Together, business. double low increased and potential Our categories the quarter. high-potential high women's, to grow digits

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men's, performance our versatile including our day to was and skirts blazers and shirts, heritage mid- her tweed icons Similar to by full-length night and core sweaters, modern from fabrications. iconic this die garden taking fall, knit and supported

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for Our stunning celebrating is September, Lauren's up Xx limited signature price, Living, hardcover edition and XX reselling in home Ralph to a to years. now which with P-Wing collectors the retail collections book of Rizzoli, over a we together Fortnite Sneaker-Boot, Way launched

assortments Looking addition cities win excitement driving ahead, desirability continue to On to customer we our our in brand leverage to third loyalty. will to ecosystem. the key in create consumer our initiative, of with and and breadth key

elevation and all touch around ecosystems Our key of world city drive our points. channels and through consumer connection the

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long-term engagement continued supported lifetime our the across this with quarter potential both who for and products retail value. luxury loyalty have collections. Polo core momentum consumers and by were strong outsized comps precision Our In

stores our Ralph outlet particularly and in Key While our the around year half encouraged of actions outlet comps also digital us region. sites world, in highly in by every we value-oriented head more and the performance own business. holiday. well staffing optimize we strong from we appealing first in to the Lauren promotions were as improved implemented into changes position were to consumers, our assortment positive targeted

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Our This consumer new quarter. performance this strong by in ahead China was XX% than high-quality remains with our sales a up more of driven momentum and expectations, standout recruitment. brand

Looking with consumers. ahead, drive we our to still see significant global business opportunities Chinese

our And finally, touching enablers. on

and drive app priorities, improved business the capabilities, experience and by strategic digital best-in-class flagship deliver supported key to we enablers. conversion. included our continued this Within helped In personalized highlights to This from search a share analytics be a RalphLauren.com more new capabilities technology and digital few our and our I'll quarter. our navigation our quarter. which enhanced addition X

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of I navigating and a our team's dedication dynamic Ralph and creativity proud environment. closing, while are In progress

on can for control regions second enter and focused deliver we across half we multiple and year, the our we holiday categories. as what growth of As remain we the levers on

times sustainable people of Lauren consistency over into our step opportunities and brand, lifestyle is all continue their enduring dreams. power of desirability, all pricing the and through world which challenging execution, inspire continues to to the to differentiate brand strengthening of Ralph iconic growth underpinning power, our Our

I'll I'll over our Jane and that, to to to hand discuss results, join questions. it answer financial at her the your end With

We that and and strategic business of in in expectations Patrice, while our Thank our the long making term. will to continue investments you, everyone. second quarter drove results support second ahead half morning, the good growth

with growth cost led channels and quarter the Europe, by Gross as quarter of performance driven Asia, better-than-expected operating in headwinds our in Second exceeded also ongoing outlook and guidance levels high by DTC despite planned. momentum in were strategic investments China. our continued North in margins and revenue along above our America

fueled this mix share coupled fiscal cost with of continued in flow, year-to-date. and and dividends productivity we elevation, approximately million our sustainable savings and on cash delivered our long-term $XXX brand form channel focus Our the repurchases shifts, strong favorable our Leveraging investments in geographic to shareholders growth.

the uncertainty. With maintaining We while enablers balance long-term through shareholder holiday that commitments are multiyear discipline, X Chapter inventories. season sheet we Accelerate well we progress of our with entered on plan. Great strategy this are clean of on return the brand our targeted our With clear elevated key proud us pace healthy and our fortress of we times our investments, and serves are making with Next

in while recognizing remain targets, volatile outlook We both and that fiscal a operating we committed 'XX X-year in environment. outlined May highly to our still our back are

me a the through which, X% growth reminder, quarter increased basis. on are in provided by in led you revenues Total as highlights, Asia. Let double-digit take our currency second financial second quarter constant company a

Ralph period, with America last all Notably, the by company timing as X%, X with on both conversion increased led comp stores improved positive North and comps last by impacted with to regions Europe in Revenue traffic slightly outlet our noted delivering our Europe and growth our stabilizing and declined Total digital year, stronger comp in Lauren call. shifts trends.

growth, better and favorable freight our channel company was This basis more expanded lower gross as than to XX points ongoing cotton AUR Total outlook strong pressure and higher from expenses mix costs. geographic than XX.X%. margin adjusted offset

start to as gross We positioned. clean of in stronger remain inventories half expansion year headwinds the to moderate the continue second and and well expect margin cotton

engine in focused to growth elevation. of by increased consumers. more AUR with city promotional launches product driven cadence This driven XX.X% quarter customer new our activity to sales, site operating search strategy driving across key top all XX% marketing, brand digital higher XX% XX% in-store the year's targeted support of our with our growth on investments value-sensitive offset and in service, of regions than our growth year notably increased talent by on last long-term of strategic conversion areas, and channels, ecosystems, long-term expense Adjusted upgrades. this and balanced and

X% X% year. was Marketing last of compared to sales

We marketing around consistent normalized continue X% sales, of guidance, including in to the our at with expect full a long-term second year half. growth more

with to North America. on performance, Moving segment starting

business our offset for in of our stronger ahead a X% wholesale expected declined retail channel. environment in by expectations softer revenue growth quarter Second with the declines

comps every including experience over to strengthen meaningful were interventions X%, representing recent first In from a consumers. outlet, in the benefit North with trends. improvement increased value-oriented to to positive conversion selective quarter Comps started quarter our America our promotions second Retail, drive which customer and channel,

our owned AUR and personalization marketing drive QX at site from DTC XX-point improvement alongside comp Wholesale, revenues continue consumer North mid-single-digit declined align least growth expectations channels to in a carefully year, activations. these manage Comps line with to channel RalphLauren.com last grew as X%, delivered improvements. All X% sell-in and to the we In our America with softer to as in demand. we targeted

targeted doors levels. in pressures, significantly encouraged to While outperforming this related channel are the our following investments we of our challenges experiencing macro inflation some and rest is renovations top also the service are XXX that fleet,

grow, and digits to levels. mid-single continued inventory AUR up mix wholesale our controlled product addition, elevation on In

a remain focused channel aligning levels on we ahead, are Looking inventory and maintaining demand. the cautious on to outlook

Europe. on favorable lapping last the declined Results year's from quarter wholesale earlier allowances. X wholesale of Revenue quarter, timing fall ahead post-COVID and our to 'XX second Moving deliveries into in negative the prior slightly the expectations. included of points of impact

X% Digital year brick-and-mortar and commerce the growth. stores. Retail comps run Lauren up than sites single X% comps quarter. in XX% higher accelerated owned Ralph rate up AUR with were in on high similar comps new full digits increased our Europe digital and as expected increased performance outlet

QX seasonal wholesale approximately Day to comps including We expectations, conversion, to year, Europe the meaningfully points Similar QX. added expect headwinds be to by we promotions Conversely, previously. North items in to drive calendar We America, Boxing X% X targeted negatively sales QX. in digital we benefited noted of a impacted line from to incremental shift with which last declined

negatively X growth QX these and and points, about are XX expected to QX ahead, impact drivers Looking our by respectively.

compare China. increased XX% growth Revenues on than a continued led top XX%, year last Turning again with of sales on Asia. of more to strong XX% by increased China than momentum. brand more

in quarter Second digits. up were Japan double sales low

will Asia other single high second region. licensing results 'XX. rest out transition of digits, part momentum Lauren to declined continue China continued journey with the Within in half The in the decline growth impact our men's remainder of a nonreportable plan. expect license in with in our of the segments, drove elevation our suiting the We the revenue year, of segment of long-term as the for entire fiscal and outpacing our line

to on sheet. the Moving balance

Fortress strong growth to business Our strategic are balance cash allow times. foundation healthy make sheet cash flows while even and and dynamic to in our key enablers through of returning investments our us shareholders

for total line units the outlook Net growth a cautious with billion with and X%, below timing double on receipts revenue America, ended the cash $X.X quarter declined aligned our of digit decreased $X.X investments with billion more teens. short-term second top expectations trend region. our We in debt. and down in North normalized Inventories high in and and inventories

in still growth to Inventories Asia fiscal reflected 'XX below expect while We levels year expected prior in with rates. currency, levels. Europe constant our also inventory strong end declined

outlook our best backdrop as our geopolitical based environment. well macroeconomic as the of ahead, Looking the remains assessment on current

This includes and foreign related spending volatility, inflationary consumer headwinds others. among currency other pressures and

For fiscal expect currency 'XX, X%. range to increase of we digits, to centering still on single low X% a revenues constant

soft. been the outlook has around demand year-to-date wholesale slightly where caution Our embeds channel, increased

points is outlook. due currency European revenues versus both impact Foreign XX now to and prior negatively in our exchange expected Asian by reported about to shifts rates basis unfavorable

first and low Europe. a QX. trends We America expect in Asia, single-digit top half growth led in shifts timing we And single-digit the expect on North followed continue by in in decline wholesale softer low be growth spring based line by to to still

XX expansion XX constant to anticipate to operating approximately continue basis We XX.X%. to points margin in of to currency XX.X%

impact currency XX on operating to have negative year roughly margin. expected Foreign is basis full points

This basis We shifts is range points continued to than inflation. expect DTC XXX and basis full XXX gross offsetting expansion year international previously. from more cotton currency, freight mix in constant of towards about the favorable up AUR, in by more costs, and margin driven growth in XXX points

offset sustainability. is expansion our around when operating basis expansion Relative ecosystem compared about XXX targets. base Day Investor still margin anticipated on strategic to more expansion, we Key digital, City our particularly XX key implies points guidance to margin period, constant operating expenses initiatives, and invest in as 'XX, Gross than with higher track to fiscal to long-term currency of marketing holding

Asia. X% the led quarter, to currency, constant expect X% again For revenues we to by increase third in

Foreign impact cautious currency in negatively offsetting America roughly trends in wholesale DTC. is We expect and similar trends points. with revenues on to stronger XX QX by expected to softness North basis remain

still In year's and favorable by Europe, the of expected allowances. from wholesale negatively lapping are third timing impacted earlier sales shipments fall to be post-COVID quarter last

Excluding low line year more in impacts the these outlook Europe unusual single-digit expect in trends underlying with to our be for full we of region growth.

currency to quarter margin We roughly third foreign operating benefit. in expect flat with XX basis of be currency points about constant

currency points, marketing XXX quarter planned expect by year. third basis second largely of of margin ecosystem gross fiscal XXX constant higher of offset quarter expansion proportion the and to investments in the We a and

Next our consistently with of Accelerate with teams our Chapter along geographies progress led generations, vision desirability teams year-to-date We capital year expected to for expenditures of be third and our the rate performance quarter roughly brand the to lifestyles. and Ralph's In XX% are around Great experiences driving now to XX% around $XXX deliver across plan, world agility XX% expect by range execution, for are the resonate in million. that XX% demonstrates on be to full and the continued and our tax closing, the enduring strong to our products

commitments growth, Fortress strength navigate put continue Even foundation, position as to our creation. with in us drive a long-term engines of our near-term to multiple value deliver we and challenges, of along our

the open for up questions. your call let's that, With

first [Operator Evercore Instructions] comes with Michael The ISI. question Binetti from

Maybe uncertainty remarks. obviously, maintain back beyond, to the the for here? the do here. macro the especially prepared the guys from year, X control factors to, quick ones and in that maintained about you the What commitments think further enabled referred Patrice, outlook as environment you half the in you your you if deteriorates

think side, then And made bit do at the thoughts wholesale inventoried how maybe year in you, fill beyond like you America, your a the the year. both Do but now. on we jump on this North for little this wholesale comments we in bit of all guess, about some particularly year I on And think look beyond is under next calendar opportunity channel how you feel to a the a you the channel do as point? little

Michael, Well, right. for welcome back. Thanks your question. All

execute well continue we for And to quarter Our a choppy think to showed tough deliver can the environment. teams foreseeable I in we're this really on remain commitments. again for planning while once our that things future,

out There and just that, top few the for are call want X. a reasons to I

is is X desirability. First powerful our and our driving we're brand asset, momentum and most

As New sports wearing just to spontaneously prepared Open Week, influencers in York remarks through through and our through the us fashion we variety recently X gaming space, dressing have like show probably X this Ryder in we actually Wimbledon culture from of generations diversified think U.S. of the heard and ranging at cut last celebrities platforms, Beyoncé, programs marketing actually broadest that a appeal most quarter you Fortnite. I across to Fashion with Cup we partnerships, did the

broad a So activities. of range

seeing respond invest that. consumers in to continue and term, to brands for long our we're We the

point, which foundations this shirts, tweet blazers, important is a the actually casual wear second think Oxford quite products jackets, sweaters, core iconic maybe made beautifully really consumers wardrobe. our like us anchor is of during challenging The periods for

where and can this core we growth gravitate deliver are X/X our in know you consumer outerwear. represent timeless remarks, addition they the and we channels through the we women's get of And to to brands channels experience And tend to in opportunities know products And control is cycles heard when then products prepared and products, challenging, best continue back business. point, our things significant trust. in DTC today our -- consumers and these to really that, these third and more have in

across X/X is in you our digital that positive actually, channel, business, with different picture brick-and-mortar every every than few a flooring as and DTC So accelerating ago. And comps of our performance saw, channel region. years across is

operating addition over in agility muscle into model. I we've to an built the So that's also past years think this, few integrated our

think in And this quarter. you I past this saw

fast further delivered play in We made product products leaning even our in conversion staffing customer we changes, into example, numbers. that traffic to in the order the improve and For and stores DTC, retail core to our in saw enhanced assortment improve experience. you out

traffic made both those channels. brand, of number drove changes also we Lauren talk a AVT And our more I if in from didn't to a and Ralph to elevate and relative we this about acceleration, online, pages, standpoint to And conversion personalized which a an wouldn't while AUR. be surge call also continue important

AUR see again play You this standpoint. quarter, up XX% this promotional out relatively intense increased in that's environment a from in an

able close AUR digits more And conversion. we to for double to grow promotional actions consumers and drive while limited deal are value-oriented having the our targeted

a listen, in We that's but world, agility operating offense. our really and to multiple we're think our become growth how stay us uncertain norm. to our navigate muscle drivers this, brand, on iconic know So and help the I very

operational and enable investment the in continued to discipline And have the balance sheet we importantly, growth.

it across and to in going control to So jump win wholesale, continue to ball. we important comes you. at when to these to a what look all can since the the marketplace, I think very marketplace. on differentiators are the When create it's we're focus value you bulging and Over

Even jump can't I very though high.

have and environment just thinking longer consumer on discovery. that we me Let to wholesale us, an term is frame date. Wholesale for for important the

a and hook quality, Ralph Lauren we that work consumer experiences them. consumer can when We know from our buys

an channel that so discovery. for it's and important And consumer profitable important

years, focus that sell-in many management demand something we've is matching what tight on and done inventory from managing to our doing Just we're for today.

to into, to as that we our which serve partners into working with well us along term, into allows core, have consumer those across is that marketing and Our well able consumer resonates think variable needs, our long I that about and inventories continue we to demand think chase we well the have with being lean personalize with future are consumers to something us the to meet controlled will loyal that with something leveraging channels. the our

is where top-tier bifurcation meaningfully And we're created wholesale, growing Top equal. the doors between not markets. a where are There's and across balance that's have then wholesale partners fleet. better investing all in And that Patrice doors top the some in described can importantly, performing of city, greater and do investing environments, are capital we like service working DTC, that our interventions we renovating, make great levels. sure with

that that, resources are know We can works, and place better doors we a ROI. is those where give performing an concentrate and

to a have the evaluate we that looking think we'll strategic for X/X wholesale. Where about we game game every day, where be at and operating back I pull into a continue plan should our future. basis on of in -- plan saw that we do door-by-door we and doors, So good and

The question Bob Guggenheim. Drbul next comes with from

up I just anything is capital differently? allocation to can are balance you Jane, balance And you sheet. allocation We've your some very capital heard uncertain environment, Patrice going what their forward? on how update manage guess, to as peers the doing I strategies. Patrice. of referred early the sheet planning follow strong. sheet balance Are The

that given you've more bit a again. elaborate just Europe or us what the you can outlook don't also, throughout of I terms really you're know, trends country with in seeing And

more volatile. the culture really to even really of plans of performance enables for team, continue the to to it's sheet our us our question. committed through times. makes the agility all our discipline, operating environment drive But through it The Thanks that our the to and tougher Fortress Sure. strong operating current us with of Foundation what critical are things is balance

that strong interested our we capital -- increasingly and just focused to doubling in think the differentiation. our we're on commitment balance manage for and differentiator allocation foundation our and down And we always us a is way interesting and

and shareholders. balance in capital capital is discipline which continue and managing principles, I sheet return think and the about So on going drives short our our we're sticking growth passionate with answer investments to allocation to

not return our we our on principles, commitments about the At at shareholder Investor it's halfway form of that And for billion dividends. with heard words $X it's and producing track about share you allocation the mark, and to results We're talk shareholders. Day. shareholders us in and just repurchases returned capital

strong. cash with historical position, a are Our and is low and those levels our leverage our our remains cash nearing EBITDA to net X position usually leverage. targeted extremely We're levels in Xx

And our inventories clean. are

overall Again, inventories down units expect the down down digits our inventory inventory quarter year double will year, Europe this was mid-single currency X% constant and inventory America in be importantly, end was Our discipline And North down that are we double down with digit. we improving to digits. terms. the as tight exit

So we're that committed on more Just than ever the trends country we're Europe? seeing across

balls. jump that training on I'll

and for regions, there one. give that to the specifics each then I'll apply think observations you all are I few Bob, So a individual

to environment remains the our is resilient, So right? the but is all regions consumer choppy, applied observations core

quarter. that's good seeing less higher true seeing we're consumer regions. core value, our all actually And X We're this also performance nice price-sensitive a and with a really growth consumer, across

it's our of channels regions. the DTC highlights quarter the all in across X think of I the

digital. every growth, channel, every So brick-and-mortar region, comp positive and

our is are and recruit to X Europe, we of in Third continuing continuing we're And area consumers, consumers North general in younger consumers. AUR less and to new metrics all higher America across are value, and recruit up internal regions. ADT and price-sensitive in new consistently Asia, traffic

So those common are elements.

consumers. more outlets our improvement particularly value-sensitive our with in our seen have We

have during have and that quarter. talking I interventions The the been about been past impactful Jane

a our really we're connect encouraged with group, outlet are So that quite by channel but still the they ability and strengthening seen we've to smaller our consumer. in that consumer value-oriented

at Now things if by I region. look

mentioned, more X%. Jane, Jane X% challenged So the across growing and here, beyond. as are high-end we are North in basically down comps of are is differentiation to where where our America, Again, pressure the we highlighted, XXX of kind all we channels. you wholesale. North And the markets the DTC The think DTC partners our top this and then between and it biggest in America, growing are have more doors also right, region, largest of up flattish growing that doors wholesale, world

Jim. action And on if an heard we from X%, you X%. to of that, we're I Europe, actually it, have you In like-for-like, that go actually, do plan up, think, strengthen we're the down face

DTC remove in But QX to we're timing on you grew the here, space challenged, wholesale and seeing take from if in the be take to it. again, in actually a the all wholesale strong the you Europe. Likewise, continues channels of shifts standpoint. wholesale out, If performance timing across shifts

And nice X of in rebound we're partners seeing a our with really largest Europe.

So encouraging Asia, up the the our constant nice for markets, that's future. region a and In currency for up China key both across being Mainland we're on basis, XX%, there, growth us diversified XX% HMT. quite fastest-growing

So feeling we in the continuing have momentum about that region. good really we're

brand is yet executing job the approach return nicely, Japan The resonating. is quarter the delivered connecting product Japan X our and top cities of The from excellent key double-digit is tourism city are a China. group growth, in ecosystem and from an our not offering teams benefiting nice doing with

Asia the and And down the part So Southeast then road solid we've that of balance of seen region. there's the more growth in to growth come across the region.

then commonalities, you a of what's a common gives one... to each sense So hopefully, of a across and bit regions elements the that different lot unique individual of

from comes question with JPMorgan. next The Matthew Boss

direct-to-consumer place, material you've drove could put here on elaborate structural at so you the building acceleration think in today? you blocks maybe which Patrice, the that

to potentially brand for the you of to And to there's you share? the if mid-teens then just And as margins this think Jane, outline could as we And drivers the next to then, how change target take the margin outlook continue raised year? gross in year? operating holiday position see any the

Matt.

So elevation across plan driven strategy, driving by and which our which expanding our overall a X continues from TCD standpoint is and brand the brand to our building, is core to goal, game be product our more pillars: ecosystem. and expanding

we've harder seen resonated that I consumers these short-term on that mentioned have the have leaning as we earlier, during What been DTC of challenging well in in done into times, core gravitating have really towards core interventions work are terms products products. because

shorts product. Ts, less Oxford digital, also of elevated so and product for different for sweaters. search what shirts, week. which fleece with improvement been day capability heat to model well experience driving providing a we're every to an particular, more products, we've traffic, great and and description sure it our staffing has are our seasonal on are brand mix less as iconic ADT that those by the conversion driven make us, -- separate, in comes PDP are for and products, at truly the cable That's jackets, When the items, presentations our relooked as single part both enhanced Lauren consumer Ralph pages, hour of that we outlets implemented And our

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with Patel question The Rick next comes James. Raymond from

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great you a our in joining thank look February. with for third today us So to and we Have you day. sharing results quarter forward

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

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