Ralph Lauren Corp. (RL)
Q1 2009
August 6, 2008 9.00 AM ET

Executives

Roger N. Farah – President and Chief Operating Officer
Tracey Travis – Chief Financial Officer

Analysts

Omar Sides – Credit Suisse
Liz Dunn – Thomas Wizel
Bob Durbel – Leman Brothers
Robby Owns – Meryll lynch
Brad Stevens – Morgan Keagan
David Glitz – Buckingham Research
Adrianne Chicorer – Goldman Sachs
Jeff Kleinfilter – Hyper Jeffery
Christine Chin – Lederman Company
Kate Mickshane – Citigroup

Presentation

Operator

Good morning and thank you for calling the Polo Ralph Lauren 1st Quarter Fiscal 2009 Earnings Conference Call. As a reminder today’s conference is being recorded. Our lines will be in a listen-only function during the presentation today. At the end of the presentation we will conduct a question-and-answer session, at which time please limit yourself to one question. Instructions will be given at that time. Now for opening marks and introductions I will turn the conference over to Mr. James Hurley. Please go ahead sir.

James Hurley

Good morning and thank you for joining us on Polo Ralph Lauren’s 1st Quarter of Fiscal 2009 Earnings Conference Call. The agenda for today’s call includes Roger N.Farah, our President and Chief Operating Officer who will give you an overview of the quarter and comment on our broader strategic initiatives and then Tracey Travis, our Chief Financial Officer will provide Operational and Financial highlights from the first quarter and in addition to reviewing our expectations for Fiscal 2009. After that we will open up the call for your questions which we would like you to limit them to one per caller. As you know we would be making some forward looking comments today including our financial outlook. The principal risks that could cause our results to differ materially from our current expectations are detailed in our SEC Filing. And now I would like to turn the call over to Roger.

Roger Farah – President and Chief Operating Officer

Thank you Jim and good morning everyone. We are pleased to be reporting 1st quarter results that exceeded our expectations. We delivered a 4% revenue growth with a solid retail comp of 4%, and our diluted earnings per share increased 13% compared to last year. While the first quarter sales growth was in line with our expectations, the margin performance was better than we anticipated. I am proud of the results we achieved considering the fact that the domestic retail environment continues to be challenging. Our first quarter reflects the successful benefits of our long term strategic initiatives. Primarily our commitment to new merchandise development and product innovation, our on going attempts to expand our direct to consumer and our growing international presence. This multi-prong strategy is designed to diversify our businesses, reduce our exposure to any one region of the world or channel of distribution and to give us more direct control over our brands; we believe our strategy positions as well for the future. At the same time we have to focus on our short-term execution, particularly in uncertain environments. I believe our results over the last few quarters demonstrate that we are performing on a very high level.

Our inventories are very well managed; as they are below last year and at the same time our retail sell-through rates have been strong and our profit margins have benefited as a result. Our cash flows have grown with more direct control we now over our businesses and we have made the right decisions in order to deliver a very strong balance sheet with large growing cash balances and very little debts.

Our entire management team has supported and delivered on these key short term operating priorities. Because of this cross functional discipline we are comfortable pursuing our long-term initiatives. Beginning with our international expansion efforts our brand sales through out Europe and Asia continue to grow at a double digit rate. Which is consistent with the trends we have experienced over the last several quarters.

Sales and high profiled apartment stores such as Gallery Lafitte, Harriet or Selfridges are particularly strong, aided by the iconic styling of our spring summer merchandise. We have also seen continued strength in our men’s, women’s and kids businesses across the international platforms. In Japan we continue to see encouraging results from our remerchandising efforts that target doors and we are refining understanding of how to tier our products for specific points of sale.

As you read our Press Release this morning we recently took direct control of our children’s wear and golf apparel businesses in Japan from our former licence in Nigai will continue to hold the licence for our Polo Branded Poshery sale in Japan. This is a major building block as we re-position our brand in this important market. We now directly control product categories that account for approximately 75% of our wholesale volume in Japan.

With respect to our direct to consumer strategy the COM storm momentum at our directly operated stores is being complemented by new store opening and sustained double digit gains at ralphlauren.com. I believe it is worth noting that our comps remain healthy even as the overall domestic retail environment has deteriorated. Something I tribute to the desirability of our brand and products and our growing skills as a retail organisation. As you know we have a few very large store projects in progress in Paris and New York City. We expect these stores will reset the bar for the luxury shopping experience and our important brand statements for us that will likely resonate on a global level. We are also on schedule to launch rugby.com in the next couple weeks in time for the back to school season. And we will leverage the customer fulfilments centre we recently completed for ralphlauren.com to service this exciting new avenue of growth for rugby.

Moving on to the last of long-term strategic initiatives our commitment to new merchandise development and product innovation. New products have been a critical driver of consumer demand for us and the momentum behind our Polo Black Label and Purple Label brands remain strong world wide. We will be opening new points of distribution for our luxury products in the Fall Season in cities such as Paris and Estamble. Domestically the growth in our merging product categories such as footwear, dresses and our expanding Black Label Men Sports Wear merchandise has helped to offset lower shipments for our core men’s, women’s and kids products. While the impact of lower shipments were planned for, our retail sell through during the quarter was very strong. This is particularly true of our men’s and children’s products.

I believe this out performances not only a testimony of the strength vitality of our brands but also function of the fact that we are innovating, executing and merchandising at a higher and better level than ever before.

Speaking of innovation we continue to deliver new and exciting products JC Penny’s American Living. In early July we shipped young men’s assortments in time to capitalize on the back to school season, and we remain very excited about the growth potential for American Living. In addition to assuming more direct control over the design, production and management over our various products over the years our global commitment to investing, advertising, marketing and public relations has helped to elevate our brand and increase it’s desirability around the world. In the past few years we have begun sponsoring high profile sporting events such as Wimbledon and the U.S open.