The operator introduces the Ralph Lauren fourth quarter and full year fiscal 2024 earnings call, with the President and CEO and Chief Operating Officer and CFO present. The call will include a question-and-answer session and will be recorded. The financial performance will be discussed on a constant-currency adjusted basis and forward-looking statements will be made. The risks and uncertainties of the company's expectations will also be discussed. The call is then turned over to the President for his remarks.

In the second year of their Accelerate Plan, the company has made strong progress in their strategic and financial goals. They have focused on increasing the desirability of their brand, expanding their lifestyle product portfolio, and shifting towards direct-to-consumer channels. These efforts, along with key enablers and operating discipline, have resulted in solid fourth-quarter performance and meeting their targets for the year. The company remains committed to their three strategic pillars, which include elevating their brand, driving core business, and expanding in key cities.

The fourth quarter and year for Ralph Lauren were filled with successful efforts to elevate and energize their lifestyle brand. This included iconic runway shows, partnerships with popular figures and events, and successful campaigns such as the Polo Ralph Lauren Artist and Residence and Lunar New Year activations. These efforts resulted in significant brand reach and positive sales growth, particularly in China.

Ralph Lauren has had a successful year in the world of gaming, with their sponsored e-sports team T1 winning the League of Legends World Championship. They have also outfitted celebrities like Beyonce and Reba McEntire, and have exciting events and partnerships coming up, such as the Olympic Games in Paris. These efforts have led to growth in new customer acquisition and engagement, particularly among younger and female consumers. The company is also focusing on driving core products and expanding into new markets.

Ralph Lauren has a strong and diverse portfolio of lifestyle offerings that appeals to a wide range of customers. Their core products, which make up the majority of their business, experienced single-digit growth thanks to popular items like sweaters, outerwear, and polo shirts. The brand also saw strong growth in high-potential categories such as women's, outerwear, and home. Women's apparel is their biggest long-term growth opportunity and top sellers in this category included sweaters, shirts, and outerwear.

This fiscal year, the company moved its furniture business to a licensed partner and will focus on expanding their handbag business. They also had successful product launches and will continue to drive core icons and expand their brand. The company is also focused on winning in key cities through their consumer ecosystem, which includes direct-to-consumer channels such as stores and digital commerce sites. They saw strong growth in these channels and opened new stores in key cities, primarily in Asia.

Ralph Lauren has opened several new stores around the world, including their first TCD ecosystem in Canada and their first Ralph's Coffee shops in Paris and Dubai. Their growth has been led by Asia, with China being a standout market. The company remains disciplined in their expansion and is focused on key city clusters and utilizing digital technology and analytics. They have also implemented a culture of operating discipline and rigorous inventory management, and are testing a predictive buying model in select stores.

Ralph Lauren's AI-driven model has improved in-stock availability and increased sales, leading to plans to expand its use in international DTC businesses. The company has also received recognition for its focus on citizenship and sustainability. Ralph Lauren's timeless style and multiple drivers of growth have contributed to its success, with a plan that is not reliant on any single channel, geography, or category. The company will continue to invest in strategic priorities for long-term growth and has announced a new Chief Financial Officer.

Ralph Lauren and CEO Patrice Louvet express gratitude for the leadership of outgoing CFO Jane Hamilton Nielsen and welcome new CFO Justin Stead. They are confident in the company's ability to continue strong growth and value creation. Nielsen discusses the company's successful execution of financial and strategic commitments, as well as their focus on elevating consumer experiences and driving efficiencies. They have also returned significant value to shareholders and announced a dividend increase for fiscal '25.

In the fourth quarter, the company's revenue grew by 3%, exceeding expectations due to strong DTC sales and an improvement in wholesale. Asia had the highest sales growth, followed by North America and Europe. The company's gross margin also expanded significantly, driven by AUR growth, lower freight expenses, and favorable channel and geographic mix. Promotions were lower in all regions, and cotton costs had a neutral impact. Adjusted operating expenses increased by 5%, mainly due to investments in talent and marketing.

In the fourth quarter, marketing expenses increased to 7% of sales to support key brand moments and improve brand health metrics. The adjusted operating margin also expanded. In North America, retail sales grew 2% due to strong growth in brick-and-mortar stores and improved outlet performance. Digital channel sales were softer, but average unit retail (AUR) increased. North America wholesale sales declined 2%, but showed improvement from previous quarters. In Europe, fourth quarter revenue slightly exceeded expectations, with a negative impact from the timing of wholesale shipments.

Performance in the fourth quarter was driven by strong retail sales, with double-digit growth in both brick-and-mortar stores and online. Europe wholesale declined due to timing shifts and lower off-price sales, but there was strong growth in reorders. For fiscal year 2025, the company expects low single-digit growth in the channel. In Asia, revenue increased 7% with growth in all markets, driven by strong retail comps and a successful Lunar New Year event in China. The company's strong balance sheet and cash flow allow for strategic investments and returning cash to shareholders.

In fiscal year 2024, the company generated strong cash flow, ending the year with $1.8 billion in cash and $1.1 billion in debt. Net inventory was 14% lower than the previous year, exceeding expectations due to strong holiday sales. The company's outlook for fiscal year 2025 includes low-single digit revenue growth, with DTC outperforming wholesale. However, there are potential challenges such as inflation, supply chain disruptions, and foreign currency volatility. The company expects operating margin to expand by 100-120 basis points, and is on track to meet its 15% target for the year.

The company expects gross margin to increase in the upcoming year due to lower cotton costs, international and direct-to-consumer sales, and higher average unit retail prices. However, there may be some headwinds from labor costs and the Red Sea disruption. Foreign currency is also expected to have a negative impact. Revenues for the first quarter are expected to be slightly higher, but there will be some timing headwinds and negative impact from foreign currency. Operating margin is expected to expand in the first quarter, but there will be higher operating expenses. The company also expects a lower tax rate and plans to invest in multiyear systems implementations.

The company is undergoing a transformation to become more global and DTC-oriented, with initiatives to improve processes and increase efficiency. About half of the project will be capitalized and the non-capitalized portion will not be included in adjusted earnings outlook. The team is executing with excellence and remaining focused on strategic priorities. The current CFO is proud of the team's accomplishments and is confident in the new CFO's ability to continue driving growth and value-creation.

The CFO of Ralph Lauren thanks the financial community for their support and opens up the earnings call for questions. The first question from Jay Sole is about the company's fiscal '24 targets and guidance for fiscal '25, given the challenging global environment. The second question is about the growth of the direct-consumer channel compared to the wholesale channel. The CEO responds by saying that the company's strategy has proven successful in fiscal '24 despite the challenges, and they are confident in their ability to continue delivering growth in fiscal '25. The CFO also thanks Jay for his congratulations and well wishes as she transitions to the COO role.

In the past fiscal year, the company has shown strength in meeting their three-year targets and achieving a 15% operating margin goal. They will continue to execute their successful strategies, including driving brand elevation and heat, pivoting to direct-to-consumer sales, and focusing on multiple growth drivers, particularly in the Asian market. They have seen success with events like the Australian Open and expect continued growth with upcoming events like Wimbledon and the Olympics. Their strong performance in DTC sales and expansion in Asia are expected to lead growth in the coming year.

The paragraph discusses how Europe has exceeded expectations despite challenging macro headlines, thanks to the brand's strong positioning and momentum across channels. The company emphasizes its agility and diversified growth drivers as key factors in navigating market challenges. They also mention their optimistic outlook for direct-to-consumer growth, while remaining cautious about macro trends. In North America, they expect wholesale business to align with the previous year's sell-out trends, while European wholesale is expected to see low single-digit growth with some quarterly volatility.

Jane Nielsen, the speaker, responds to Dana's question about the business and margin opportunities outside of wholesale, which is still experiencing declines but at a moderating rate. Nielsen mentions that they are on track to achieve their 15% operating margin target this year, despite the weaker North America wholesale channel. She also highlights the reduced impact of North America wholesale on their overall business, which now represents only 16% compared to 25% previously. The company is encouraged by their performance in the direct-to-consumer (DTC) channel and expects it to continue leading growth in North America. They also expect a meaningful improvement in wholesale declines and have made investments in the top 100 doors.

The company expects to see benefits from lower cotton costs and improved channel mix in North America, which will drive operating margin in fiscal year 2025. AUR growth has been strong in recent years and is expected to continue in the mid-single-digit range, supported by brand, channel, and geographic mix. The company's outlook and guidance are based on this expectation, with the potential for variability in the future. The questioner congratulates the company on its elevation efforts and asks about the current and future positioning of the brand in the US and Europe.

Patrice Louvet, CEO of the company, discusses the progress they are making on brand positioning and elevation, with strong consumer perception data and increasing brand consideration, purchase intent, and net promoter scores. He also highlights the unique appeal of their broad product portfolio and the ongoing elevation of the brand. The company continues to focus on new consumer recruitment, with over 1 million recruited in the quarter and 5.3 million for the full fiscal year. They also have a strong social media following of close to 60 million, up double-digits.

The company's new consumer recruiting machine is working well in its direct-to-consumer channels, and they plan to continue leveraging their marketing programs to appeal to a younger generation. The company expects SG&A leverage in fiscal year 2025 and a slight decrease in the first quarter due to the fashion show. They have been working on increasing AUR in both DTC and wholesale channels, and when looking at North America, it is important to consider both AUR and units.

The speaker believes that the company's focus on brand elevation, ecosystems, and direct-to-consumer (DTC) sales will drive growth in average unit retail (AUR). They also mention that wholesale AUR is slightly behind DTC, but still saw growth in the past fiscal year and expect it to continue in the next fiscal year.

The speaker explains that the company's product mix and focus on top wholesale accounts will help mitigate pressure on units. They also expect an uptick in North America wholesale and narrowing of the gap between full-price and outlet store growth. Additionally, they plan to expand their full-price store footprint in the US. The speaker also addresses gross margins, expecting a 140-180 bps increase in the first quarter and 50-100 bps increase for the rest of the year. They also mention positive traction with younger consumers.

In Q4, the company saw a significant increase in gross margin, driven by strong AUR growth, favorable channel and geographic mix, and reduced discounts. Freight was also a tailwind, but there was some pressure from FX. Looking ahead, the company expects continued gross margin expansion in FY '25, with lower cotton costs and recapture, AUR growth, and some headwinds from Red Sea pressure, FX, and higher labor and material costs. In terms of new consumers, younger consumers are leading the way in recruiting for the company.

The speaker discusses the company's success in targeting younger consumers and increasing their penetration in this demographic. They mention specific marketing strategies, such as sponsoring gaming teams and partnering with celebrities, and note that their net promoter scores are growing among younger consumers. They also mention the importance of this demographic for the company's long-term success. The speaker then takes a question from an analyst about the company's direct business in Europe, which has seen double-digit growth in the past two quarters, although it is still lower than in North America.

Patrice Louvet, CEO of Ralph Lauren, discusses the company's performance in Europe, where the wholesale channel is facing challenges. Despite this, the company's DTC sales have seen double-digit growth, with plans to expand its store footprint in the region. The team is also focused on driving sales through its own digital channels and has seen recent success with its pure-play partners, such as Zalando. The company has also made strategic adjustments in Spain and the UK for its wholesale business.

The company is optimistic about the performance of their brand in the Asia region, particularly in China. They are aware of challenges such as inflation and wars, but remain confident in their forecast based on current conditions. The team is driving momentum in China and the company expects high-single digit growth in the region. They are proud of their team's execution and sustained momentum in China. A question was asked about marketing expenses, to which the company did not provide specific details.

China now represents 7% of the company's total business, up from 3% before COVID. The company expects China to continue leading growth in the future, despite consumer sentiment being challenged. The team has been successful in connecting the brand with the local consumer, particularly with quiet luxury products like cable knit sweaters and Oxford shirts. The company's core products are resonating with consumers, and the ecosystem in the top six cities is working effectively. The company expects China to return to strong but more normalized growth following the COVID lapses, driven by the brand's momentum and expansion.

In the last question, Jane Nielsen asks Laurent about the expected growth in revenue and marketing expenses for the first quarter. Laurent mentions that they expect double-digit growth in marketing expenses, with a little more in the second quarter due to the Olympics. Patrice Louvet expresses appreciation for Jane's work as CFO and welcomes the new Chief Operating Officer, Justin. They will host a virtual annual shareholder meeting and first quarter results in August.

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