Ralph Lauren CFO focuses on takeovers and investments after years of restructuring


Ralph Lauren Corp.

aims to buy back more shares and increase its profit margins as it benefits from strong consumer demand after years of restructuring.

The New York-based luxury retailer said Monday it plans to spend a total of $2 billion on shareholder rewards through April 2025. That’s a 22.8% increase from 1.63 billion it spent on buybacks and dividends over a three-year period through April 2022, filings show.

Ralph Lauren repurchased $234.7 million in stock and paid $48.1 million in dividends during the quarter ended July 2.

The company also aims to increase its operating margin to at least 15% by April 2025. This is more than the 12.8% operating margin it recorded for the fiscal year ended April and up from -1% the previous year, according to filings. . Negative operating margins can indicate financial difficulties for businesses.

To achieve its margin target, Ralph Lauren intends to expand its international operations, including through new stores in North America and Asia, and focus on sales of premium products, said Jane Nielsen, Chief Financial Officer and Chief Operating Officer of the company. “We already have momentum and that’s what gives us confidence,” Ms Nielsen said.

Ralph Lauren said last month it benefits from younger shoppers paying full price for its products, unlike other retailers which have seen demand plummet amid high inflation. The company last month reported net revenue of $1.49 billion for the quarter ended July 2, up 8.3% from the year-ago period. Net income fell 25.1% to $123.4 million from the year-ago period, partly due to the timing of certain marketing expenses, the company said.

“We already have momentum and that’s what gives us confidence.”

— Jane Nielsen, CFO and COO

The company plans to use excess cash flow left over from planned investments to fund shareholder rewards, Ms. Nielsen said. Among these investments is the opening of 250 stores worldwide over the next three years. Ralph Lauren said last month that its cash and cash equivalents totaled $1.46 billion as of July 2, up from $2.6 billion a year earlier.

The retailer could spend a little less on redemptions and a little more on dividends than it otherwise would in response to a new 1% tax on redemptions, Ms Nielsen said. “It might make us rethink dividends versus share buybacks a bit,” she said, adding that the tax shouldn’t affect her overall strategy.

Ralph Lauren, which saw its revenue and profit decline in 2016 partly due to falling sales at department stores and its inflated cost base, has since struggled to turn its business around. It has raised the average price of its direct-to-consumer products by 64% over the past four years, stopped selling items in some department stores and cut promotions, along with other measures.

The next step would be to open more of its own stores, which in turn would boost e-commerce sales, Ms Nielsen said. “When we open stores, we see an improvement in the overall ecosystem, including e-commerce,” she said. The company said digital sales accounted for about 26% of all sales last quarter.

The company’s outlook is unlikely to weaken significantly if the economy continues to slow, said John Kernan, chief executive of financial services firm Cowen. Inc.

“They will be sensitive to the overall consumer environment in North America, Europe and Asia, but have proven they can weather cyclical headwinds,” he said.

Write to Mark Maurer at [email protected]

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