The operator introduces the Ralph Lauren Third Quarter Fiscal Year 2024 Earnings Call and reminds participants to limit their questions to one per caller. Corinna Van der Ghinst, the host, introduces the company's President and CEO, Patrice Louvet, and COO and CFO, Jane Nielsen. The financial performance will be discussed on a constant currency basis and forward-looking statements will be made. The company's actual results may differ from expectations due to risks and uncertainties. Non-GAAP measures will be discussed and can be found on the company's Investor Relations website. Patrice Louvet thanks everyone for joining the call.

Ralph Lauren's campaigns during the holiday quarter focused on the theme of giving and inspiring people to share their dreams with loved ones. This approach, combined with the brand's elegance and sophistication, resulted in strong financial performance. The company's focus on its timeless brand, direct-to-consumer channels, and operational discipline has led to sustained growth and value creation. This is reflected in the company's progress across its three strategic pillars: elevating and energizing the lifestyle brand, driving the core business, and expanding into key cities with its consumer ecosystem.

In the third quarter, the company focused on elevating and energizing their lifestyle brand through various campaigns and partnerships. These included holiday season activations, a campaign featuring Navajo designer Naiomi Glasses, and outfitting inspiring women for events and fundraisers. These efforts led to the company's strongest quarter for new consumer acquisition and brand affinity since the pandemic, with 1.7 million new consumers added to their direct-to-consumer businesses. Net Promoter Scores also increased, along with positive momentum in brand consideration and purchase intent.

The company saw growth in their social media following, led by platforms like TikTok and Instagram. They also focused on driving their core products, which represent 70% of their business, and saw low double digit growth in this area. The company's iconic styles, such as Mesh Polos and Cashmere Sweaters, continue to be popular with consumers. They also saw growth in high potential categories, including women's, outerwear, and home, with a focus on elevated and sophisticated styles.

In addition to our successful releases of the Polo Country and Element Skateboards Capsule and the Polo ID handbag collaboration, we also had a successful Pink Pony collection supporting cancer care and research. We will continue to focus on our core icons and expand our consumer ecosystem in key cities through our direct-to-consumer channels. We saw strong growth in our Ralph Lauren stores and digital sites, particularly in outlets where we implemented key actions to improve staffing, assortment, and value.

In the past quarter, Ralph Lauren opened new stores in Singapore, the Czech Republic, and North Carolina, as well as launching coffee shops in Paris and the UAE. They also launched their digital flagship site in Canada and saw strong growth in China, with a focus on brand building and a successful Singles Day. The company's enablers, including digital technology and analytics, also continued to support their business.

The company has successfully implemented an artificial intelligence-driven model to improve in-stock availability and drive sales. They plan to expand its use to more categories and markets in the future. They have also been recognized as one of Forbes World's Best Employers. The company's strong holiday season performance is due to their multi-lever strategy, brand power, and team agility. The financial results for the third quarter exceeded their expectations.

In the third quarter, the company saw strong revenue growth and operating margin expansion, despite strategic investments and ongoing challenges. They also returned a significant amount to shareholders and saw growth in all retail channels globally. They then provide a breakdown of their financial highlights, highlighting the success of their DTC strategy and strong performance in Asia and Europe. They also mention their positive comp growth and investments in their digital sites to improve the customer experience.

Total digital ecosystem sales and adjusted gross margin increased for the company, driven by lower expenses and higher average unit retail (AUR) growth. However, there were ongoing cotton cost headwinds and targeted promotions during holiday sales. The company plans to continue driving positive AUR increases through brand desirability, product mix elevation, and favorable geographic and channel mix. Adjusted operating expenses also increased due to shifts in channel and geographic mix, with investments focused on key city ecosystems, marketing, and enhancing the consumer experience. In North America, sales were up high single digits.

In the third quarter, Ralph Lauren's revenue remained flat compared to last year due to a decrease in wholesale sales offset by growth in retail. In North America, retail comps increased by 5% and outlet performance improved with positive comps. The company's own website saw a 4% increase in comps, driven by a strong response to Black Friday and site enhancements. In North America wholesale, revenues decreased by 15%, in line with expectations. In Europe, revenue increased by 6%, driven by strong growth in direct-to-consumer channels. Retail comps increased by 11%, with similar performance in brick-and-mortar and digital sites.

In Europe, there was strong growth in gifting, seasonal sweaters, and outerwear, but wholesale was flat due to unusual impacts and earlier receipts. In Asia, revenue increased 17%, with strong growth in Japan, China, and Korea. The balance sheet remains strong, with $1.9 billion in cash and short-term investments and $1.1 billion in total debt. Net inventory decreased 15%, driven by stronger-than-expected sales and efforts to maintain healthy wholesale inventories. However, there is caution for the fourth quarter and fiscal '25 due to geopolitical and macro conditions in Europe.

The company believes their inventory levels are well positioned for spring and they expect to end the fiscal year with healthy inventories. They are cautious about potential challenges such as inflation, supply chain disruptions, and foreign currency volatility. Their outlook for fiscal '24 includes low single digit revenue growth, operating margin expansion, and gross margin expansion. They expect revenues to increase by about 2% in the fourth quarter, with stronger trends in retail and caution in wholesale. Foreign currency is expected to have a negative impact on revenues.

In the fourth quarter, the company expects modest improvement in North America and slight growth in Europe, while Asia's growth will be in line with the full year guide. Operating margin is expected to expand, driven by gross margin expansion. The tax rate for the full year and fourth quarter is also expected to be lower. The company remains focused on executing its strategic plan and creating long-term value. The call is now open for questions.

Patrice Louvet, CEO of Ralph Lauren, is confident in the company's ability to maintain momentum in a volatile retail market. This is due to their focus on investing in the brand and creating high-impact marketing campaigns, their broad portfolio of iconic products that transcend trends, and their strong direct-to-consumer channels which make up the majority of their business.

The company experienced healthy comp growth in all direct-to-consumer channels, driven by diverse opportunities across categories and regions. This includes double-digit growth in China, Japan, Korea, and Germany, as well as positive comp results in North America. The company's core products and operational discipline have contributed to this success, and they expect to continue navigating volatility with their resilient and differentiated model. They remain committed to their 15% operating margin goal, despite the unpredictable operating environment.

The speaker expresses confidence in their organization's ability to adapt to changes and utilize different growth opportunities. They do not see a 15% decline in North America as a limit and are investing in high potential categories for long-term growth. In regards to specific questions about North America and Europe, the speaker mentions that they are controlling the decline in wholesale and maintaining a cautious approach, but sees potential for convergence in the future. In Europe, they have been planning cautiously and are seeing above expected growth, but are still anticipating a deceleration in the fourth quarter. They provide some context on the underlying growth rate in Europe and mention ongoing pressure in the wholesale market.

The company saw a 15% decrease in sales in North America, but there was a mid-single digit decrease in sell-out and a low single-digit increase in AUR. This was due to intentional sell-in strategies and a focus on core and replenishment items. In Europe, the company performed above expectations with solid growth in all markets except the U.K. due to inflation and consumer pressures. The company remains cautious for Q4 due to inflation and global situations, but expects stable growth in wholesale and low single-digit growth for the year in Europe.

Patrice Louvet, CEO of the company, discusses the volatility in their North America wholesale business and the challenges they face in driving traffic and conversion in their stores. He also mentions their focus on the top 30 cities around the world and their goal to increase their direct-to-consumer business, which currently makes up 2/3 of the company. Despite challenges, they remain enthusiastic about their direct-to-consumer model and the role of quality wholesale in their overall strategy.

During the Investor Day, the company announced plans to open 80 new stores this year and a total of 250 new stores over the next 3 years. The outlet channel showed strong improvement, with increased traffic and targeted promotions during the holiday season. The investments in brand and service are paying off, leading to increased conversion and average unit retail (AUR). The company will continue to focus on elevating its brands and targeting value-oriented consumers. For the fourth quarter, the operating margin is expected to increase by 350 to 400 basis points, mainly driven by gross margins.

Jane Nielsen responds to Laurent's question about the drivers for gross margin in the fourth quarter. She explains that the company has guided for a 350 to 400 basis point increase, largely driven by gross margin. SG&A will be neutral, and there will still be a tailwind from freight. Cotton, which has been a headwind for the company, will become a tailwind at the end of the quarter, reducing pressure. AUR growth will also be a powerful driver, with more efficiency in promotions and less inventory needing to be sold at end-of-season sales. Nielsen clarifies that cotton will still be a slight headwind, but significantly reduced compared to previous years.

The company expects cotton prices to remain stable at about 25% above pre-COVID levels. Operating margins are expected to improve next year as wholesale sell-in improves and DTC sales continue to grow. The company is also on track to deliver $400 million in gross savings over the next year.

Patrice Louvet, CEO of the company, discusses the company's disciplined approach to resource allocation and their investments in growth categories such as women's, home, accessories, and handbags. These categories have shown strong performance and have potential for further growth. The company has not provided specific percentages for these categories but has mentioned that women's, outerwear, and handbags have been particularly successful. The launch of the RL888 handbag has received a positive response.

The company is experiencing continued momentum in various categories, such as the Polo ID bag and partnerships in China and home furnishings. These categories are expected to drive growth in both top line and AUR and margin. The wholesale business in Europe saw stronger results and the company is learning from this to apply in North America. The digital side of the business is also growing, with a mix of AUR growth, new customer activation, and existing customer sales.

Patrice Louvet, CEO of a company, discusses the differences in performance between Europe and other regions, as well as the success of their digital channel. They saw improvements in traffic, conversion, and basket size, and have recruited 1.7 million new consumers. The company is also investing in new capabilities and expects continued progress in this space. They are pleased with the results achieved across all regions and see significant potential for growth in the digital channel. The final question comes from an analyst who congratulates the company on their success.

Jane Nielsen, the CFO of a company, discusses the flow-through of outperformance and how it affects their financials. She explains that they will continue to invest in their business, particularly in digital, their ecosystem, and their brand. The company is seeing positive momentum in their brand and believes that investing in it will pay off in the short and long term.

The speaker, Patrice Louvet, is thanking everyone for joining the call and announces that the fourth quarter and year-end results will be shared in May. The call has now ended and the operator gives instructions for disconnecting.

This summary was generated with AI and may contain some inaccuracies.