In a Nutshell: Ralph Lauren continued its efforts to improve its business through better inventory management, a tighter distribution and a more watchful eye over discounting and promotions.
During the company’s fourth quarter and full-year earnings call, it said it can see several signs that its recovery plan is working. Ralph Lauren reported revenue per SKU was up 16 percent in the year and gross profit per SKU increased 22 percent in the same period. Further, the company reported full-price sales increased by double digits online during the fourth quarter.
The brand exited 25 percent of its department store points of sale in the U.S. and shuttered more than 30 of its owned stores in FY18. Ralph Lauren said the worst is behind it in the off-price channel. It’s also looking to expansion overseas as a growth mechanism.
In product, the company focused on freshening up its assortment and adding more novelty to the mix. It also pushed into categories where the opportunity was untapped like denim and in return, it saw sales increase 9 percent in the category during the year.
For FY19, Ralph Lauren anticipates net revenue will decrease in the low single digits. For the first quarter, the company expects net revenue to be flat to down slightly.
Sales: Ralph Lauren reported revenue was down by 2 percent to $1.5 billion in the fourth quarter, which the company explained was largely due to its efforts to make more from each sale, pull back on promotions and retool its distribution. Though down, the performance bested the brand’s outlook.
North America was the hardest hit region, with revenues down by 14 percent to $759 million. Comp sales in this geography were flat, owing to a 6-percent uptick in physical store sales and an 18-percent drop in e-commerce sales.
Europe saw a 13-percent increase in net revenue and comp sales down 6 percent. Asia faired the best with a 17-percent increase in revenue and a 4-percent increase in same store sales. China outperformed with a 25-percent sales increase for the mainland during the year.
Overall, the company was down by 7 percent to $6.2 billion for the year.
Earnings: The company reported adjusted net income of $75 million, or 90 cents per diluted share, for the quarter, which was roughly flat compared to the adjusted net income during the prior-year period.
Adjusted net income for the full year was $163 million, or $1.97 per diluted share.
CFO’s Take: ”I would say that the work that our supply chain leaders, [senior vice president of manufacturing and sourcing] Halide Alagöz and [global brands president] Valérie Hermann, have done to have a very strong and integrated planning process from sketch to shelf has been a huge benefit to our inventory management. Good old-fashioned SKU cutting that were of unproductive SKUs was also a benefit, and now we’re evolving more into differentiated SKUs to support our overall AURs. And we are using technology like our RFID technology in the factory store, as well as shared inventory across channels to improve our inventory work,” said CFO Jane Nielsen.