Ralph Lauren Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Ralph Lauren First Quarter Fiscal Year 2024 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 would 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'd now like to turn over the conference to our host, Ms. Karina Vanderkins, please go ahead.

Good morning, and thank you for joining Ralph Lauren's first quarter fiscal 2024 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 for your questions, which we ask that you limit to one per caller. During today's call, our financial performance will be discussed on a constant currency basis. Our reported results, including foreign currency, can be found in this morning's press release. 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'll turn the call over to Patrice.

Thank you, Cori. Good morning, everyone, and thank you for joining today's call. We started year two of our Next Great Chapter Accelerate Plan with continued progress on our long-term strategic commitments. Our solid first quarter performance highlights both the power of our iconic brand around the world and our diversified engines of growth. First quarter results exceeded our expectations on both the top and bottom line in what continues to be a highly dynamic global operating environment. We delivered positive comps, stronger value perception and luxury credentials, and targeted ecosystem expansion across our top cities in the period. Our growing brand desirability also drove double-digit AUR growth on top of last year's strong gains. And we will continue to invest in our product quality and sustainability, selling environments, and authentic brand messaging to sustain our growth and long-term pricing power in the marketplace. At the same time, we continue to balance this growth with a relentless focus on agility and operational discipline to respond to evolving market dynamics. This enables our operating profit and margin expansion, even as we invest for the long term. We continue to be mindful of macroinflationary challenges facing our more value-oriented consumers, particularly in North America. That said, we are more than offsetting softness from this cohort with growth in our full price businesses. Turning to the first quarter, our solid performance was guided by our three strategic pillars to drive 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 highlights across each of these strategic pillars. First, on our efforts to elevate and energize our lifestyle brand. We are investing in our most powerful asset, our timeless iconic brand, to inspire and engage our consumers, drive brand desirability in the market, and ultimately grow lifetime value. We continue to diversify and optimize our marketing across a variety of media and platforms as we deliver a clear, differentiated story to our target consumers in order to trade them in, across, and up our lifestyle portfolio. During the quarter, first we drove some of our highest engagements globally through iconic celebrity dressing moments, This was led by Jennifer Lopez at the Met Gala in May, delivering over 8 billion global media impressions, and her look landed on multiple best-dressed lists across TV, digital, social, and print outlets. Other celebrity highlights included Taylor Swift, spotted on the streets of New York in our Wellington bag and all-white polo ensemble, singer and actress Crystal Young in Cannes, First Lady Jill Biden at the coronation of King Charles. And you may have caught a recent episode of And Just Like That, which features characters Charlotte and Rock outfitted in Ralph Lauren at a fun fictional polo photoshoot, highlighting the multi-generational appeal of our brand. Second, we have worked to reinforce our luxury lifestyle positioning through iconic lifestyle partnerships and activations in key global cities. We paired our recent Milan flagship openings with key campaigns to fuel excitement in this influential fashion capital this spring. This included the return of Men's Purple Label to Milan Fashion Week in June and our second annual participation at Salone del Mobile, part of Milan Design Week, where we showcased our emerging home business. Similarly, across Europe and Asia, we drove brand heat through experiential events like our California Dreaming Key City Takeovers, exclusive private client events, and influencer campaigns to build our presence in both new and existing ecosystems, from Paris to Shanghai, Tokyo, and Seoul. And most recently, we reinforced our leadership in the world of sports with another successful Wimbledon sponsorship, where we delivered our highest ever results on social conversations, on-site merchandise sales, and global PR impressions. Ralph Lauren truly embodies the heritage and tradition of this iconic tournament. In addition to our beautiful on-court presence, we also captured our iconic spectator style on celebrities and influencers like Ariana Grande and David Beckham, which we amplified globally. Together, these activations are both re-engaging existing customers while also attracting new, high-value consumers to our business. In our DTC businesses, we added 1.2 million new consumers in the first quarter, consistent with recent trends. This continues to skew increasingly toward next generation under 35 consumers. And we reached 53.5 million social media followers globally, a high single digit increase to last year, driven by Instagram, Line, TikTok, WeChat, and other key platforms. And our online search trends continue to outpace our peers globally. driven by spring icons and accessories. Moving to our second key initiative, drive the core and expand for more. Ralph and our design teams continue to create sophisticated, timeless products that meet our customers' modern lifestyles, underpinned by the quiet luxury that is a hallmark of our brand. Starting with our iconic core products, which typically represent about 70% of sales, and are a consistent driver of our business season after season. Our core grew mid-single digits in the first quarter, ahead of total company growth, and penetration to total sales increased by 350 basis points, underscoring the importance and resilience of our icons through choppier times. This was led by our iconic cable knit sweaters and cardigans, linen shirts and chinos, double knit sweatshirts, rugby shirts and tailored suit separates. We continue to see evidence that consumers are turning to brands they know and trust and styles that have longevity beyond one season. Our roots in quality and timeless style remain a competitive advantage in this context, supporting our strengthening value proposition. 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 double digits in the quarter. Women's, our largest long-term opportunity, continues to outpace total company performance, supported by our Spring 23 California Dreaming Collection, inspired by the natural beauty, optimism, and glamour of the West Coast, polos, day dresses and lightweight skirts in seasonal florals and silks, newer wide leg bottoms, and encouraging growth in our Polo ID handbags. Other special releases this quarter included the launch of our Polo Mirim sneaker, our first luxury sneaker that is 100% plastic free. Leveraging our investment in natural fiber welding, Mirim is made with an innovative combination of natural rubber, cotton, cork, and plant oil. 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, winning key cities with our consumer ecosystem. We remain committed to developing our key city ecosystems around the world. with a focus on elevating and connecting all of our consumer touchpoints across every channel. At the same time, we are clearly pivoting our business toward direct-to-consumer, which already represents about two-thirds of our sales. Our investments in high-quality new customer recruitment and increasingly elevated distribution are working. Our full-price retail channels led the growth in the quarter, consistent with recent trends. This is helping to mitigate near-term inflationary headwinds facing a subsegment of more value-sensitive consumers. Our positive retail comps were supported by continued momentum in our core polo products and luxury collections, along with improving foreign tourist sales and successful clienteling by our dedicated sales teams. This performance more than offset continued pressure in our outlet comps which were challenged by our more promotional North American market. We opened a select number of iconic World of Raw Foreign stores in the quarter, notably in Amsterdam, Tainan, and Kuala Lumpur, featuring an elevated assortment and prime luxury adjacencies. These stores are designed to anchor our city presence and drive desirability and engagement with consumers. We opened a total of 28 new stores and concessions focused on our top cities globally this quarter, with the majority again in Asia, particularly in China. China sales accelerated to more than 50% growth, with easier compares following last year's Shanghai lockdowns. We were particularly encouraged by our strong 618 performance, which outpaced peers and reinforced our new customer acquisition in the markets. and over 40% of our transactions were generated from new consumers. Looking ahead, we still expect China to remain one of our fastest growing markets. Within our digital businesses, sales for our total Ralph Lauren digital ecosystem, including our directly operated sites, departmentstore.com, pure players, and social commerce were flat this quarter. Strong growth in our international markets more than offset declines in North America, where the digital channel has also become more promotional. This quarter's digital performance was clearly below our long-term targets, and we implemented key interventions during the quarter, which will continue into the fall season. Encouragingly, we started to see improvement in our North America digital trend from June onward, as Jane will discuss in a moment. And finally, touching on our enablers. In addition to our strategic priorities, our business continued to be supported by our five key enablers. I'll share a few highlights from the quarter. As part of our ongoing work to deliver superior operational capabilities, we are implementing process improvements and new tools to streamline our value chain and drive long-term margin opportunities. Our recent work, has resulted in a 25% reduction in our overall spring 24 SKU count, even as we continue to develop our high potential categories. Within citizenship and sustainability, we were proud to be recognized as a top rated ESG performer by Sustainalytics as we work to embed sustainability in all we do. And within our people and culture, We were recently named a Best Company for Women to Advance by Parity.org for the fourth consecutive year. In closing, Ralph and I are energized by our team's solid start to this fiscal year. We continue to focus on offense, agility, and pragmatism in these dynamic times, and we believe Ralph Lauren is firmly in a position of strength to deliver on our strategic commitments. Underpinned by Ralph's timeless vision and the strength of our iconic brand, 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 consumer 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. 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.