Ralph Lauren Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren fourth quarter and full fiscal year 2023 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions on how to ask a question will be given at that time. If you should require assistance during a call, please press star then zero. As a reminder, this conference is being recorded I would now like to turn over the conference to our host, Ms. Karina Vandergans. Please go ahead.

Good morning, and thank you for joining Ralph Lauren's fourth quarter and full year fiscal 2023 conference call. With me today are Patrice Louvet, the company's president and chief executive officer, and Jay Nielsen, chief operating officer and chief financial officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller. As a reminder, last year's fourth quarter and full year included an extra week in the fiscal calendar. All growth for these periods will be discussed on a constant currency 52-week comparable basis. Reconciliations can be found in this morning's press release. During today's call, we will also 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. With that, I will turn the call over to Patrice.

Thank you, Corey. Good morning, everyone, and thank you for joining today's call. When we met last September here in New York, we outlined our ambition to become the world's leading luxury lifestyle company and build a business that lives up to the potential of our powerful brand. As we close out the first year of our Next Great Chapter Accelerate plan, we are particularly proud of the progress we have made on our strategic commitments in pursuit of this goal. Our teams around the world executed exceptionally well through a highly dynamic global operating environment to deliver another quarter and full year of strong performance. We over-delivered on the top line this year with 10% constant currency growth supported by all three regions. This included positive comps, further AUR growth and brand-accretive ecosystem expansion across our top 30 cities. At the same time, we continue to balance this growth with a relentless focus on productivity and operational discipline. This is enabling us to fuel our long-term initiatives and also grow our profitability on a constant currency basis. As we called out at the beginning of fiscal 23, the global environment has been and continues to be choppy. Throughout this, our teams are demonstrating agility and flexibility to respond to evolving consumer demand and market dynamics. As we continue to drive our strategy of long-term brand elevation across every region and channel, overall our performance this year underscored the general resilience of our core consumer and growing desirability of our brand around the world. This translated to another quarter of double-digit AUR growth globally, even as we took targeted actions to keep our inventories clean and well positioned. We are well aware that a subset of our consumers who are more value-oriented, are increasingly pressured by macro and inflationary headwinds. We expect these trends to persist in the near term, particularly in North America and Europe. While this demographic still represents a relatively high average household income, they are being more choiceful with their apparel dollars and seeking more value. In this context, we believe consumers will look to brands they know and trust and styles that have longevity beyond one season. In this environment, our roots in quality and timeless style are a competitive advantage, and our growing brand desirability and value perception across all demographics support this. Turning to the fourth quarter, our successful performance was guided by our three strategic pillars of long-term growth and value creation. These are First, elevate and energize our lifestyle brand. Second, drive the core and expand for more. And third, win in key cities with our consumer ecosystem. Let me take you through a few of the highlights across each of these strategic pillars. First, on our efforts to elevate and energize our lifestyle brand. We remain committed to investing in our most powerful asset, our timeless, iconic brand. to inspire and engage our consumers and ultimately drive lifetime value. We continue to build our brand desirability with consumers while also growing their value perception of Ralph Lauren. This is enabling us to grow both market share and AUR. Our value perception increased while our lifetime consumer value grew high single digits for both the fourth quarter and full year as we focus on trading consumers in, across, and up within our lifestyle portfolio. In the fourth quarter specifically, we drove a diverse range of brand activations underscoring the unique Ralph Lauren lifestyle. First, we continued to strengthen our leadership in the world of sports with our annual sponsorship of the Australian Open. Now in our third year, We significantly outperformed our plan on both sales and media impressions as we successfully leveraged our on-court presence as well as our authentic partnerships with celebrities and influencers globally. Our Lunar New Year activations across Asia included our successful Polo Bear campaigns with WeChat and Kakao, helping to drive 13% growth in social followers in the region, led by tenfold growth on Douyin. At the Oscars in March, we were proud to outfit social activist and Nobel Prize winner Malala Yousafzai in a custom Ralph Lauren collection silver sequin gown. This iconic moment resonated with consumers, garnering over 8 billion media impressions globally. And as we continue to reinforce our leading position in gaming and the metaverse, we partnered with Web3 community PoolSuite as part of our Miami ecosystem launch this spring. The immersive experience included exclusive digital Ralph Lauren outfits and our first-ever NFTs co-designed with PoolSuite members. Together, these activations are both re-engaging existing customers while also attracting new full-price consumers to our business. In our DTC businesses, we added 1 million new consumers in the fourth quarter. for a total of more than 5 million new consumers this year, consistent with our targets. This continues to skew increasingly toward next generation under 35 consumers, with whom we also drove our largest increase in luxury perception over the past year. We reached 52 million social media followers globally, a high single-digit increase to last year, driven by dynamic content on Instagram, TikTok, Weibo, and other key platforms. And our online search trends continue to significantly outpace our peers across our top markets globally, driven once again by our core categories. Moving to our second key initiative, drive the core and expand for more. Our goal of becoming the leading luxury lifestyle company starts with our unique brand positioning in the market, which stands for so much more than a single product or category. It stands for the dream of a better life. From elevated hybrid dressing to quiet luxury, Ralph and our creative teams are delivering sophisticated, timeless products to serve our consumers across their modern lifestyles. Starting with our iconic core products, which represent about 70% of sales, and remain a consistent driver of our business season after season. Our core grew low double digits in the fourth quarter, led by our spring-ready cable knit sweaters, polos, oxford shirts, chino shorts, relaxed tailoring, and silk blend shirts and day dresses. Our core also establishes the foundation and credibility to grow our high potential categories. These include women's, outerwear, and our emerging home business. Together, these high potential categories increased low teens in the quarter. Women's, our largest long-term opportunity, continued to strongly outpace total company performance. Our Accelerate plan focuses on trading her into the brand, across categories, and up to more elevated styles to drive lifetime value. with women's AUR up more than 20% in the fourth quarter. Our continued strong women's performance was supported by strong growth in handbags, as well as our global launch of women's polo intimates in March, with a particularly strong start on RalphLauren.com. Other special releases this quarter included our Creed III movie collaboration, featuring six limited edition looks worn by Michael B. Jordan in the film, and account-exclusive capsules targeted towards next-gen consumers, including our Retro Varsity release with ASOS, Polo Boxing Club collection with Mushinsa in Korea, and Icons in Madras with Beams Japan. Looking ahead, we will continue to leverage the breadth of our brand and assortments to meet consumers' evolving lifestyles. Switching to our third key initiative, Win in Key Cities with our consumer ecosystem. We continue to invest in our long-term strategy to develop our key city ecosystems around the world with a focus on elevating and connecting all our consumer touchpoints across every channel, starting with digital. Sales for our total Ralph Lauren digital ecosystem, including our directly operated sites, DepartmentStore.com, PurePlayers, and SocialCommerce increased high single digits in constant currency this fiscal year. In the fourth quarter, our Asia digital ecosystem delivered the fastest growth globally, with our owned and wholesale digital channels both contributing to 40% growth in the quarter. We were particularly encouraged by our strong Lunar New Year performance, which significantly outpaced peers. including women's up more than 60% and continued elevation with double-digit AUR growth. As part of our fully connected ecosystems, we also continue to open new physical stores that enable consumers to engage directly with our brands around the world. We opened 21 new stores and concessions, focused on our top cities globally this quarter, with the majority again in Asia, particularly the Chinese mainland. we are strongly encouraged by our continued brand momentum in China following the country's reopening. Through three years of COVID disruptions, our teams worked with agility to build our brand presence in the market. And this year's outstanding performance was a testament to those efforts. We drove full-year China sales up more than 20% in constant currency, including an acceleration in fourth-quarter sales up over 40%. Looking ahead, we expect China to remain one of our fastest-growing markets. We opened two iconic World of Raw foreign stores in Asia this quarter, in Shenzhen's Luho Mall and Pitt Street in Sydney, representing the most elevated expression of our brand to date in Australia. And here in North America, we opened a new store in Miami's Design District, showcasing the modern elegance and exceptional craftsmanship of our luxury collections. All three of these iconic stores are part of the top 30 cities we highlighted at Investor Day. They are designed to anchor our city presence and drive desirability and engagement with consumers. And finally, touching briefly on our enablers, in addition to our strategic priorities, our business continued to be supported by our five key enablers. Some of the achievements we were particularly proud of this year included the launch of our first cradle-to-cradle certified product with our luxury gold cashmere sweater, being part of Fortune's world's most admired companies, moving to number two from number six last year for our sector, and Fast Company's 2022 Brands That Matter list for a collaboration with Morehouse and Spelman Colleges. And finally, the Ralph Lauren Corporate Foundation's $25 million grant to fund five cancer centers in the US, including our newest center in Georgetown, which opened just a few weeks ago. In closing, Ralph and I are inspired by our team's performance this year, putting the company in a position of strength to deliver on our strategic commitments, even through a volatile consumer backdrop. And as the global environment remains highly dynamic, Our focus on offense, agility, and pragmatism remains the backbone of our approach moving forward. This year's progress on our accelerate plan demonstrates that we have the right plan in place even as we face a more pressured environment. We have diversified levers of growth across geography, channel, and category. a broad lifestyle portfolio of products that consumers know and trust, and that we are actively flexing with the consumer's evolving needs, and strong foundational enablers to support long-term growth and value creation, from our talented people, innovative technology and supply chain, to our balance sheet and muscle of operational discipline. And of course, all of this is underpinned by the strength of Ralph's timeless vision and our iconic brand, which continues to invite people all over the world to step into their dreams. With that, I'll hand it over to Jane to discuss our financial results, and I'll join her at the end to answer your questions.