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. James Hurley, Polo Ralph Lauren Corporation, IR . Roger Farah, Polo Ralph Lauren Corporation, Pres, COO . Tracey Travis, Polo Ralph Lauren Corporation, CFO . Omar Saad, Credit Suisse, Analyst . Liz Dunn, Thomas Weisel Partners, Analyst . Robert Durbul, Barclays Capital, Analyst . Robbie Ohmes, Merrill Lynch, Analyst . Adrianne Shapira, Goldman Sachs, Analyst . Evren Kopelman, JPMorgan, Analyst . Kate Mcshane, Citigroup, Analyst
Co. reported 2Q09 net income of $161m or $1.58 per diluted share, off of consolidated net revenues of $1.4b. FY09 diluted EPS guidance is $4-4.10.
A. Key Data From Call 1. 2Q09 consolidated net revenues = $1.4b 2. 2Q09 net income = $161m 3. 2Q09 diluted EPS = $1.58 4. 2Q09 GM = 55.2% 5. 2Q09 opex = $545m 6. Total cash, cash equivalents and short term investments at qtr.-end = $510m 7. 2Q09 stock repurchases = 1.7m shares for $118m 8. FY09 diluted EPS guidance = $4-4.10
S1. Overview (R.F.) 1. 2Q09 Overview: 1. Results exceeded expectations. 2. 10% revenue growth with solid retail comp of 5%. 3. Diluted EPS increased 45% vs. 2Q08. 4. YTD results equally strong. 1. More compelling considering market challenges. 5. Results confirm vitality of brand, relevance of strategy, world-class capabilities of mgt. team, passion of employees around world; all supported by balance sheet strength. 6. Without this combination, wouldn't have achieved high level of performance. 7. Not immune to macro challenges; recent business trends have been affected by global financial crisis that began to unfold in Sept. 1. Impact has resulted in considerable volatility, with customers in all channels of distribution pulling back on spending. 8. RL has one of world's most desirable brands. 9. Business has endured through good and bad times over last 40 years; has emerged stronger from challenges. 10. Has solid strategy to grow shareholder value over long-term. Strategy is focused on elevating brand and is ground in: 1. Growing international presence. 2. Expanding direct-to-consumer reach. 3. New merchandise development and product innovation. 4. These initiatives are primarily focused on creating long-term value for Co.; executing them on daily basis and has reaped some near term benefits which have contributed to strong YTD results. 2. International Expansion Efforts: 1. Assumed direct control of Japanese men's, women's and jeans products last year, and children's and golf apparel this Aug. 1. Now has control over majority of Co.'s Japanese product categories. 2. Has license distribution rights through rest of Asia. 2. Asia has tremendous appetite for global, status-oriented lifestyle brands, given considerable amount of wealth-creation that has happened throughout Asia. 3. Even though Co. has had presence in Asia for many years, it is relatively small and generally reflects only fraction of Co.'s various brands and product categories. 1. In Japan, business has been heavily skewed towards men's casual sportswear. 2. Since assuming control of Japanese business, has begun to elevate Ralph Lauren brand by introducing new labels and focusing on right distribution points. 3. Put transition team on ground to jump start initiatives and integrate Japan into global organizational structure. 4. Along with new, locally based mgt., transition team has helped train new Japanese employees consistent with global operating procedures. 5. Performance of target doors in Japanese dept. stores continues to outpace overall industry trends by several hundred BP. 1. Evidence that direct control of merchandising assortments can have meaningful, near term impact on sales and profits, even as Co. executes long- term strategy. 2. Will continue to expand target door program in Japan and further refine assortment planning on door-by-door basis as it does in US. 6. Progress on merchandising front in Japan supported by: 1. Brand advertising. 2. Public relations activity. 3. As Co. leverages supply chain expertise. 4. Has consolidated three distribution centers into one. 5. Beginning in spring, 2009, will be sourcing product for Japan through Co.'s own global mfg. network, moving away from using third-party trading cos. 6. Strategies being executed in Japan were key ingredients of Co.'s successful development in Europe, a region that has grown five-fold to more than $1b during last six to seven years. 7. Europe business continues to grow nicely across wholesale and retail channels. 1. Achieved double-digit organic growth in 1H08. 2. Opened largest women's only store dedicated to collection in Black Label merchandise on Avenue Montaigne in Paris, a key market. 3. A few weeks ago, opened first Ralph Lauren store in Istanbul through a licensed partner; another important step towards establishing presence in Eastern Europe. 4. Having successfully strong luxury presence in women's wear throughout Europe over last several years, Co. is excited about introduction of Lauren merchandise into selected European wholesale doors for spring, 2009. 5. Believes this is an opportunity to attract new European customers to world of RL with Lauren brand, as has been done successfully in US. 3. Direct-to-consumer Strategy: 1. YTD comp momentum at directly operated stores has been complemented by new store openings and double-digit gain at RalphLauren.com. 2. Retail stores represent best expression of Co.'s lifestyle positioning. 1. Create important halo over all of Co.'s products and channels of distribution. 3. Stores carry widest assortment of luxury product and are highly regarded for exceptional customer service. 4. Resilience of 2Q09 comps achieved on top of several years of good growth, and as overall domestic retail environment continued to deteriorate. 5. Experienced positive early customer reaction to merchandise. 6. In spite of good, initial trends, store traffic slowed toward end of Sept. 7. RalphLauren.com is another focus. 1. Since its launch in 2000, has continued to innovate and invest in business; now benefiting from those critical long-term strategies. 2. Most recent investment is dedicated distribution center; working seamlessly and receiving high customer service ratings. 3. Posting impressive gains as Co. adds new product categories, including successful create-your-own customization feature and energizing site with editorial content. 4. Leveraged Olympic involvement; home to one of widest selections of Ralph Lauren Olympic-related merchandise and had broad Olympic Games content. 5. Launched mobile commerce capabilities during 2Q09. 1. Still small in terms of sales. 2. Customers can shop RalphLauren.com from cell phones using QR codes in ads or in-store windows. 3. First luxury brand in US to embrace this …