Ralph Lauren Corporation

Welcome to the Ralph Lauren Fourth Quarter and Full Year Fiscal 2021 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a questioning-answer session. Instructions on how to ask a question will be given at that time. If you should require assistance during the call, please press star then zero. As a reminder, this conference is being recorded. I'd now like to turn over the conference to our host, Ms. Karina Vandekens, please go ahead.

Good morning, and thank you for joining Ralph Lauren's fourth quarter and full year fiscal 2021 conference call. With me today are Patrice Louvet, the company's president and chief executive officer, and Jane Nielsen, chief operating officer and chief financial officer. After prepared remarks, we will open up the call to your questions, which we ask that you limit to one per caller. During today's call, we will be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties. Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our Investor Relations website. And now, I will turn the call over to Patrice.

Thank you, Corey. Good morning, everyone, and thank you for joining today's call. As we close out this fiscal year, Ralph and I are proud and inspired by the way our teams have navigated through the pandemic. They have demonstrated their resilience, agility, and ongoing passion for our brand and our consumers in a year unlike any other. Their commitment and execution shine through in our better-than-expected fourth quarter results. Against the volatile backdrop of the past year, we took action that has enabled us to emerge from this period a fundamentally stronger company than when we came into it. This includes, first, across all three regions, we accelerated our work to elevate our brands while also strengthening and simplifying our brand portfolio. We're also engaging more meaningfully with consumers and driving increased marketing to deliver higher brand awareness and purchase intent, coupled with higher AURs. Second, we repositioned each of our channels and reduced our exposure to secularly challenged areas of distribution, particularly in North America. Within wholesale, we focused our brick-and-mortar presence on our healthiest stores and significantly reduced our off-price penetration. Within direct-to-consumer, we accelerated our shift to digital, step-changing profitability by over 1,000 basis points as we added new connected retail capabilities and drove quality of sales. Third, we established a stronger visual infrastructure globally while also ramping up our investments in consumer analytics, personalization, and high-value new customer acquisition. Fourth, within our supply chain, we further diversified across geographies and meaningfully shortened lead times. with approximately two-thirds of our products now in lead times of six months or less, two years ahead of our goal to reach 50%, and compared to just 20% five years ago. And lastly, we created a leaner, more agile cost structure. This operating discipline is enabling us to accelerate growth investments across areas like marketing, digital, and our key city ecosystems. with further expansion in select under-penetrated markets this year. Overall, these actions position our business for healthier, more sustainable growth as we emerge from COVID. And beyond the foundational work we delivered this year, we strongly believe our brand is uniquely positioned to capture share, both during this transitional post-pandemic period and longer term. Ralph has created a lifestyle brand that is inclusive and marked by a spirit of togetherness, optimism, and love. And we believe this is the kind of luxury that people are craving in this moment. The breadth of our lifestyle portfolio means we have the ability to continue meeting consumers' desires for comfort and timeless core items, while also delivering on their increasing appetite to reintegrate elevated dressier styles back into their wardrobes. Over the coming quarters, you will see us progressively evolve our assortments accordingly. Before I speak to our growth drivers, I want to share a few of the highlights from our five strategic pillars this quarter and year. First, on our efforts to win over a new generation. Some of our key campaigns this year included Our Ralph Lauren Bitmoji collection on Snapchat with over 1 billion try-ons to date. Our first of its kind virtual store experience, which now includes five of our iconic flagships globally. Our Spring 21 collection featuring a live performance from Janelle Monae with over 36 million video views and more than 8 billion total impressions. Our limited edition polo collaboration with Edison Chan's cloth brand ahead of the Lunar New Year, which sold out in less than two minutes on our WeChat mini program in China and with over 6 billion total impressions. And our debut sponsorship of the Australian Open, which resonated particularly well across Asia. And more still to come with our summer sports program, including the Tokyo Olympics, starting in just over two months. In all, we added approximately 4 million new consumers to our direct-to-consumer platforms alone this past fiscal year. And our total social media followers exceeded 45 million, led by Instagram, TikTok, Kakao, and Snapchat. This takes me to our priority of leading with digital. Fiscal 21 was a transformational year in digitizing our consumer platforms and experiences, as well as how we work as a company. And we were proud to deliver significant acceleration in digital performance across each of our regions, with total digital ecosystem growth of more than 60% this quarter. We accelerated the rollout of connected retail programs to enable our consumers to interact with our brands in new and more personal ways. Among the many new capabilities we added this year, highlights included digital catalogs, buy online pickup in-store and curbside pickup, mobile checkout, contactless payments, and Klarna payment installments. Connected retail options now represent a high single-digit percentage of our retail revenues in North America and a high Teams percentage in Europe up from low single digits in both regions prior to COVID. We also continued to roll out digital flagships in Japan and Hong Kong while adding new partnerships with influential digital partners around the world like Farfetch. In the fourth quarter, we also rolled out digital ID tagging to 50% of our total products and are on track to reach 100% by end of fiscal 22. These not only enable product authentication and support future circularity, but also provide consumers access to detailed product information. In addition to our consumer-facing enhancements, we made significant strides this year in digitizing how we work as a company. This includes the adoption of virtual showrooms and continuing to expand our 3D digital product creation. touching on our work to operate with discipline to fuel growth. We accelerated key actions this year to realign our cost structure, many of which I outlined at the outset of our call. The third and final stage of our fiscal 21 strategic realignment plan was our announcement last week to sell Club Monaco, expected to close in Q1. This sale, combined with our previously announced action on shifting CHAPS to a licensed model, will enable us to further focus our resources on our core namesake brands. Club Monaco has been an important part of Ralph Lauren for over two decades now. We are proud of the brand's evolution over that time, thanks to the passion and dedication of its talented, experienced, and engaged global team. We believe that this is the right step forward for the brand, and we are confident in the brand's strong future under Regent's stewardship. With this step and the actions we have taken as part of our strategic realignment planning, we continue to progress on our brand elevation journey as we deliver Ross vision in today's dynamic environment, creating value for all of our stakeholders in fiscal 22 and beyond. Importantly, I also want to take a moment to highlight our ongoing work to integrate citizenship and sustainability into everything we do. navigating a highly dynamic global retail environment in the midst of COVID-19, our first priority was to ensure the safety and well-being of our employees, partners, and communities. This year, we donated hundreds of thousands of PPE to frontline workers, 3 million products to frontline workers and families in need, doubling our initial commitment, and $10 million in COVID-19 relief from the Ralph Lauren Corporate Foundation to support our employees, communities, and charitable partners. We were also proud to be named once again one of Forbes 2021 America's Best Employers for Diversity, capping off an important and defining year of employee engagement, roundtables, and learning opportunities for our organization. Within sustainability, We launched our circularity strategy, as well as Color on Demand, a revolutionary platform aimed at delivering the world's first scalable zero-wastewater cotton dyeing system. We are open sourcing the first phase of the platform to the fashion industry. Our hope is that we will see broad industry adoption so that together we can make progress in addressing one of our sector's biggest area of impact. We look forward to sharing our comprehensive progress on our citizenship and sustainability journey in our 2021 Design the Change report this June. Looking to fiscal year 22, though still volatile given ongoing COVID closures and global supply chain disruptions, we are optimistic on a more favorable operating environment ahead. Consistent with the five pillars of our next great chapter plan, We expect top-line growth over the next year to be driven by a combination of continuing to scale digital, which now represents more than 25% of our total sales, expanding our key city ecosystems led by fast-growing markets like China, in addition to our under-penetrated areas in North America and Europe, accelerating marketing investments, including new consumer acquisition, targeting and personalization, and continuing on our brand elevation journey more broadly across our distribution and product assortments, driving further AUR growth coupled with unit growth. Furthermore, we have confidence in a new post-pandemic fashion cycle based on the strong full-price performance of our Spring 21 collections. our consumers are starting to gravitate back to newness, color, and the styles we are best known for, such as our iconic mesh polos, blazers, and denim. This strength comes on top of the continued momentum we are seeing in fleece, tees, novelty sweaters, and other casual styles that have resonated over the past year. With our brand's unique ability to assort compelling products across sportswear, loungewear, and dressier styles, we will meet consumers' growing demand across these categories in the coming season. In closing, Ralph and I want to reiterate how proud we are of the dedication, resilience, and agility our teams have demonstrated as we work through a challenging year on many levels. We enter fiscal year 22 stronger than we came into the crisis, with a stronger go-to-market model a more streamlined cost structure, more resilient supply chain, and an iconic brand well positioned to capitalize on the relaxed but sophisticated style consumers are craving. As we look ahead, we have significant opportunity and a world-class team focused on becoming an even more elevated, more direct-to-consumer, more digital, more global, and more diverse, equitable, and sustainable company. And before I pass it to Jane, a couple of updates regarding our board. Hubert Joly will step into the role of Lead Independent Director, previously held by Frank Bannon, while Frank will continue to serve on our board. In addition, Ralph and I would like to extend our thanks to Joel Fleischman, who plans to retire from our board of directors this July for his leadership, significant contributions to the company, and unflagging support and kindness. With that, I'll turn it over to Jane to discuss our financial results, and I'll join her at the end to answer your questions.