雷夫·羅倫馬球 (RL) 2015 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Ralph Lauren fourth-quarter and full-year fiscal 2015 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.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mrs.

Evren Kopelman.

Please go ahead.

Good morning and thank you for joining us on Ralph Lauren's fourth-quarter and full-year fiscal 2015 conference call.

The agenda for this morning's call includes an overview of the year and an update on our broader strategic initiatives from Jacki Nemerov, our President and COO, followed by operational and financial perspective on the fourth quarter, and our expectation for fiscal 2016 from Chris Peterson, our President of Global Brands.

After the Company's 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, 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.

The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings.

And now I'd like to turn the call over to Jacki.

Thank you, Evren.

And good morning, everyone.

Fiscal 2015 has been a year of solid accomplishments despite a challenging operating environment and substantial foreign currency headwinds in the back half of the year.

I'm pleased to report that our fourth-quarter results exceeded our expectations, driven by strong demand in North America wholesale and global eCommerce.

While we continue to experience the negative impact of the strengthening US dollar and lower tourist traffic, our product across core and emerging categories was well-received, and we achieved strong sellthrough in most regions.

Revenue growth of 7% in constant currency in the fourth quarter was ahead of our guidance.

We delivered profits above expectation, driven by better topline performance, and the attention to disciplined operational and expense management by our teams.

Now let me turn to some highlights for the quarter.

Our North America wholesale business was the standout performer in the fourth quarter, and achieved record sales and profitability.

Our three largest and most developed businesses -- men's, women's, and children's -- were all up, which speaks to the appeal of our brand and product.

Our design and merchandising teams continued to produce fresh, compelling assortments that resonate with both new and existing customers.

In terms of product category highlights, our dress, accessories, and footwear offerings, and the denim and supply brand, delivered strong growth in stores and online, driven by door expansion and positive consumer response to our unique voice.

We grew market share for the full year in a competitive retail environment, which we believe is due not only to our product but also our steady investment in shop environments and marketing that express the distinction of our brands.

Global eCommerce revenues grew in the high-teens for the fourth quarter, representing strong momentum for one of our most important areas of strategic focus.

Traffic to our website in all regions increased significantly, including a 48% increase in mobile traffic in North America.

Additionally, enhanced site search functionality has led to higher conversion.

We are on track with the design and architecture of our new eCommerce platform, and are confident its capabilities will enable us to achieve our goal of $1 billion in sales in this channel.

Another highlight in the quarter was our luxury business, where we saw strong performance in our men's and women's lines.

We saw higher conversion rates in our retail stores and believe that they are the result of terrific product, as well as a sharp focus on store level execution and new approaches to educating our sales associates.

This offsets some of the challenging traffic trends due to a decline in global travel by the luxury tourist customer.

We are also seeing the positive impact of our SKU reduction initiatives, with sales up on a third fewer SKUs in our women's business.

Speaking to our luxury product highlights in the quarter, the newest addition to our iconic Ricky handbag portfolio, the Drawstring Ricky is already enjoying nice success.

The launch of this new silhouette, supported by a strong advertising and marketing campaign, garnered a great deal of editorial attention in the fashion press and on social media.

And that has translated to an encouraging consumer response.

Our new lightweight cashmere scarf collection was introduced in limited palette, and was expanded to offer a spectacular assortment of bright colors for which Ralph Lauren's brand is so well-known.

We remain committed to the growth of all of our accessory categories, and expect to see their higher purchase frequency bring customers into the store and online more frequently.

Finally, we made the decision to merge our luxury lines in both men's and women's into a single label, Ralph Lauren Collection for Women and Ralph Lauren Purple Label for Men.

We believe this will clarify our luxury message, driving consistent global brand presentation and marketing synergies.

Response to the change from our retail partners and sales associates has been extremely positive, and we are optimistic that this will not only drive strong sales performance, but will also reduce expenses by maximizing productivity and creating focused assortments.

We expect to transition these businesses for the pre-spring 2016 season.

Now I'd like to provide some perspective on sales trends by region.

In the Americas, our largest region, revenues grew 8% in constant currency during the fourth quarter.

This was led by double-digit growth in our North America wholesale business and mid-teen growth in our US eCommerce business.

Retail sales continued to be impacted by lower tourist traffic due to the stronger US dollar.

Our European revenues rose 5% in constant currency during the fourth quarter, led by strong spring wholesale shipments and an increase in reorders.

Our men's apparel business saw especially strong demand at wholesale.

In our own retail stores, we continued to be impacted by lower tourist traffic, especially those coming from Russia and the Middle East who have been most severely impacted by the volatility in both currency and commodity markets.

Generally speaking, we saw the best trends in Northern and Central Europe, where the negative impact of the terrorist -- while the negative impact of the terrorist attacks has continued to challenge France, and the Middle East is, of course, affected by lower oil prices and a decline in Russian tourists.

In Asia, we achieved 1% constant currency revenue growth, with trends varying by country.

Korean sales remained challenging for the apparel sector, especially in department stores, which represent the majority of our distribution.

Hong Kong store traffic remained pressured and Southeast Asia was soft due to travel concerns.

In Greater China, double-digit constant currency revenue growth largely reflects the investment we've made in new distribution.

Highlights in the region included strong sellthroughs on spring product and the continued positive response to women's polo.

I'd like to mention the efforts of our global supply chain organization during the quarter.

This team has done an outstanding job navigating through the extended West Coast port situation and maintaining business continuity with limited incremental expense.

This is a significant achievement, given the breadth and scale of our product portfolio and distribution.

During this time, the team also supported record wholesale shipment volume in the fourth quarter while continuing to manage expenses.

I want to extend my thanks for their extraordinary work.

On our last call, I spoke about the next exciting endeavor for our iconic Polo brand, the global launch of Polo Sport.

Beginning with the introduction of men's and boy's lines for the fall 2015 season, the product will be available for preorder on RalphLauren.com in June, and available in our retail stores and wholesale partners around the world in August.

The latter timing coincides with the dedicated advertising campaign featuring distinctive imagery that will position Polo Sport as authentic modern activewear.

Across the globe, feedback on this product has been terrific, and Polo Sport is seen as a perfect fit with the athletic spirit and sensibility that have always been an important element of the Polo brand.

As you know, the active segment of the apparel market is growing at a rapid rate, and both we and our wholesale partners believe this is a significant long-term market share opportunity.

Finally, I'd like to update you on our progress with the new global brand management structure we first spoke about on our last call.

At that time, I spoke briefly about the factors and opportunities that led us to make the decision to shift from a more decentralized regional and channel structure to a centralized global brand management model.

Today, I want to provide more detail.

Over the nearly 48 years since the Company began, we have grown significantly, with the last dozen years realizing accelerated growth due to the acquisition of the majority of our product licenses and geographic territories.

This gave us greater control of our brand, but led to tremendous organizational complexity.

Our new operating model and processes will allow us to fully leverage the power of each of our brands to ensure the greatest consistency of expression around the world, and drive growth.

We have always believed that our brands are our greatest assets and that will now be reflected in the structure of the Company.

We are not changing who we are; we are changing how we work.

And the opportunities associated with this transformation are very exciting.

As the first step in the transition to the new operating model, last month, we announced changes to our executive leadership, most notably the promotion of Chris Peterson to President of Global Brands.

We will continue to share updates on future calls, and expect to drive significant operating and cost efficiencies that will help support the strong sales and profit growth we expect over the next five years.

Chris will take you through the details of the financial impact of our actions around the reorganization to fiscal 2016 and beyond.

I'm very proud of our ability to focus on and invest in the Company's long-term growth objective while managing day-to-day operations to our exacting standards and, most recently, engage in the discussion and analysis required to set our future structure up for great success.

This speaks to the talent and the experience of our senior leaders, the dedication of our teams across every area, our rigorous attention to operational and expense management, and of course, the desirability of our products and the power of our brands.

And with that, I'll turn the call over to Chris.

Thank you, Jacki, and good morning, everyone.

I would like to start by welcoming Bob Madore who is joining us on the call today.

Last month we named Bob Chief Financial Officer of the Company, reporting to me.

You all have a chance to meet Bob over the next several months, and I know he is looking forward to it.

Now I'd like to turn to a brief recap of the quarter.

On a constant currency basis, revenues increased 7%, better than the mid-single-digit growth rate we guided to in February, driven by strength in the wholesale segment and global eCommerce.

Importantly, this growth was achieved on top of a 14% gain in the prior-year period.

The negative FX impact to revenue growth was 550 basis points, in line with our expectations.

Every geographic region grew in constant currency during the quarter.

On a reported basis, net revenues rose 1% to $1.9 billion in the fourth quarter.

For the full-year fiscal 2015 period, net revenues grew 4% in constant currency and 2% on a reported basis to $7.6 billion.

Gross profit margin of 55.4% in the fourth quarter was 80 basis points below the prior-year period.

The decline in gross profit margin was due to unfavorable foreign currency effects and mix shift impacts.

Operating margin of 10.1% in the fourth quarter was 190 basis points below the prior year, attributable to the negative impact of foreign exchange and incremental investments in the Company's long-term growth initiatives.

Operating margin was better than the outlook we provided in February of 250 to 300 basis point decrease.

The outperformance was driven by better-than-expected revenues and disciplined expense management throughout the organization.

For the full-year 2015 period, operating margin declined 160 basis points to 13.6%, due to investments we made to strengthen the Company's infrastructure and global store network expansion initiatives, as well as negative foreign exchange impacts.

Net income for the fourth quarter was $124 million or $1.41 per diluted share.

Excluding foreign currency impacts, earnings-per-share was $1.69 for the fourth quarter, essentially in line with $1.68 we reported in the prior-year period.

For the full-year 2015, net income was $702 million or $7.88 per diluted share.

Excluding foreign currency impacts, EPS was $8.19 for fiscal 2015 compared to $8.43 in fiscal 2014.

The effective tax rate of 28% in the fourth quarter was lower than expected due to one-time discrete items, and compared to an effective tax rate of 30% in the prior-year period.

Moving on to segment performance, wholesale revenues increased 8% in constant currency during the fourth quarter, which was achieved on top of a 24% gain in the prior-year period.

On a reported basis, wholesale revenues of $1 billion were 2% above the prior-year period.

North America posted double-digit increases, and Europe grew mid-single-digits in constant currency as we gained market share in both regions.

Growth was driven in part by accelerated demand for spring merchandise by our customers, as Easter was two weeks earlier than last year, and strong reorders in Europe.

Wholesale operating margin of 30.7% in the fourth quarter was 60 basis points above the prior-year period, due to improved profitability of core operations, partially offset by foreign exchange impacts.

Retail sales rose 6% in constant currency to $841 million and were roughly in line with last year on a reported basis.

Growth was driven by the incremental contribution from new stores and high-teens growth for global eCommerce.

Comparable-store sales were up 1% in constant currency and declined 4% on a reported basis due to foreign exchange impacts.

Constant-dollar comp trends reflect strong eCommerce performance that was somewhat offset by challenging traffic trends at brick and mortar stores, especially in markets where currency movements impacted tourist traffic.

By region, constant-currency comps increased in the Americas and Europe, while Asia was slightly down.

Retail operating margin in the fourth quarter was 3.4%, 270 basis points below the prior-year period, reflecting investments in new store development and lower profitability in core operations.

Licensing revenue declined 5% and operating income was down 6% in the fourth quarter, primarily due to negative foreign currency effects and the anniversary of the launch of Polo Red fragrance in the prior-year period.

Consolidated inventory was $1 billion at the end of the fiscal year, up 2% year over year, reflecting investments to support anticipated sales growth and new store openings.

We spent $391 million on capital expenditures during the year, mostly to support new retail stores and infrastructure projects.

Company repurchased 3.2 million shares of its common stock during fiscal 2015 at a cost of $500 million, and returned an additional $158 million to shareholders via dividend payments.

In total, the Company returned approximately $658 million to shareholders during the year, which represents an almost 6% effective yield.

Yesterday, the Company's Board of Directors authorized an additional $500 million stock repurchase program.

This amount is in addition to the $80 million available at the end of the fourth quarter of fiscal 2015, as part of our previously authorized stock repurchase program, bringing the Company's total current authorization to $580 million.

We ended the year with approximately $1.2 billion in cash and investments on the balance sheet.

Overall, we are pleased with the better-than-expected fourth-quarter results.

Disciplined planning and day-to-day execution enabled us to offset meaningful foreign exchange and environmental headwinds.

Now I'd like to turn to fiscal 2016.

We expect fiscal 2016 to be a year of significant transformation for the Company.

We will move to the new brand management organization structure, make important infrastructure investments, continue retail store development, and take decisive action to mitigate foreign currency pressures.

Let me take these each in turn.

As Jacki spoke about, we have made meaningful progress on our transition to the new global brand management organization structure.

The most important aspect of this new operating model is that it brings (technical difficulty) disparate functions of design, merchandising, planning, creative, and marketing to form dedicated brand groups.

We are creating six global brand groups, each run by a brand President.

These brand groups will define global design, merchandising, and marketing strategies, and be accountable for the global financial performance of the business.

Brand and business strategies will be developed in concert with the leaders of the regions and channels who understand the critical dynamics and nuances of these specialized areas.

These brand groups will also rely on the strong knowledge and capabilities of our shared services teams.

The new model, processes and single-view visibility to each brand will allow us to be more nimble and responsive to the marketplace, and operate as a truly global business.

This will enable us to maximize growth and achieve meaningful operating and financial efficiencies.

For example, the new structure and processes will enable a significant reduction in SKUs, which will lead to better inventory turns, better gross margins, and SG&A cost savings.

From a timing standpoint, it will take several months to transition to the new operating model.

Overall, we are on track to achieve over $100 million of annual expense savings from this initiative.

Only a modest amount of this will be realized in fiscal 2016, with more significant savings to come in fiscal 2017 and beyond.

We expect to incur restructuring and other one-time related charges of approximately $70 million to $100 million as a result of this reorganization.

From a timing perspective, we expect these charges to be heavily weighted in the first half of the year.

This charge encompasses two elements.

First is the cost of separation associated with employee headcount reduction.

We expect to reduce our full-time workforce by approximately 5%.

The second element is the cost of store and shop repositioning related to providing more clarity across our different brand presentations, including the merging of our luxury labels.

We are very excited about the move to the new structure, as we believe it will create a platform for profitable growth by allowing us to both improve our global brand equities and drive operating efficiency over time.

Moving to store development, we plan to open approximately 40 to 50 directly-operated stores in fiscal 2016 on a global basis.

We expect that our new store investments will be neutral to year-on-year margins in fiscal 2016, as our accelerated store opening pace is now in our base.

On infrastructure investments, our eCommerce re-platform initiative will begin to ramp up in fiscal 2016.

This is a multiyear initiative to significantly improve the Company's omnichannel capabilities and the online customer shopping experience.

Our SAP implementation is substantially complete in North America, and we began SAP implementation for Europe this year.

We expect our infrastructure investments to create a year-on-year drag of approximately 60 basis points on operating margin in fiscal 2016, largely driven by the eCommerce re-platforming initiative.

Moving to foreign exchange, we have taken decisive actions to mitigate the negative currency impacts.

First, we are raising prices in certain markets that have been impacted by currency devaluation, including Japan, Canada, Australia, and Europe.

These pricing actions are generally in the mid to high-single-digit range and will be effective in the back half of the fiscal year.

Second, our supply chain organization has negotiated lower costs across our manufacturing base as a result of lower raw material and oil prices, as well as the strength of the US dollar.

These lower costs will also become effective in the back half of the fiscal year.

Finally, we will reduce operating costs by restructuring the organization.

With that as a backdrop, I'd like to review our detailed outlook for fiscal 2016.

We continue to expect mid-single-digit constant currency revenue growth for the full-year, similar to the view we shared with you in February.

The growth will be supported by significant contributions from the strategic initiatives in which we've invested over the last several years.

These include new product development, new stores, and global eCommerce.

Retail segment revenues are expected to grow faster than wholesale, due to new store development and continued momentum in eCommerce.

Based on current exchange rates, foreign currency will have about a 450 basis point negative impact on fiscal 2016 revenue growth.

Moving on to operating income, on a constant currency basis, we expect an improvement in operating margin from continuing operations in fiscal 2016, which we intend to reinvest in our infrastructure buildout, primarily the new global eCommerce re-platforming and ongoing SAP implementation.

On a reported basis, we expect our full-year fiscal 2016 operating margin to be approximately 180 to 230 basis points below fiscal 2015's level, due entirely to unfavorable currency impacts.

This guidance excludes restructuring and other one-time-related charges associated with our global brand organization -- reorganization.

We continue to expect the negative impact of FX on operating income to approximate $185 million, similar to what we projected in February, based on current exchange rates.

This guidance excludes restructuring and other one-time-related charges associated with our global brand organization -- reorganization.

We continue to expect the negative impact of FX on operating income to approximate $185 million, similar to what we projected in February, based on current exchange rates.

In terms of the sensitivity of our operating income to movements in exchange rates, a change of about a nickel in the euro to US dollar rate would impact our operating income by approximately $20 million on a full-year basis.

Our fiscal 2016 tax rate is expected to be 30%.

We are planning approximately $400 million to $500 million in capital expenditures in fiscal 2016 to support our global direct-to-consumer and infrastructure investments.

For the first quarter of fiscal 2016, we expect net revenues to be flat in constant currency, as retail segment growth is offset by a decline in wholesale revenue, which is impacted by our customers' receipt plans due to an earlier Easter this year.

We estimate the negative currency impact on sales growth in the first quarter to be 600 basis points.

Our operating margin for the first quarter is expected to be approximately 600 to 650 basis points below the prior-year period, due to negative foreign currency effects, the quarterly revenue growth profile, and timing of expense savings initiatives.

Operating margin for the first quarter is expected to be approximately 600 to 650 basis points below the prior-year period, due to negative foreign currency effects, the quarterly revenue growth profile, and timing of expense savings initiatives.

The first-quarter tax rate is estimated at 30%.

We are very excited about the Company's potential for future growth.

We are organizing the Company to drive the power brands, investing in key infrastructure projects, and making strategic decisions to minimize the impact of near-term market realities and maximize shareholder returns over time.

With that, we'll open the call for your questions.

Operator, can you assist us with that?

(Operator Instructions) Omar Saad, Evercore ISI.

Thanks for all the color and information.

I wanted to ask more about a lot of the reorganization activities, both Chris and Jacki touched upon, especially in light of the simplification of the luxury brand segment.

Can you talk more about the six different brand groups?

What are the brand groups?

Does it also include a simplification from the many different sub-brands that have existed within the overall Ralph Lauren halo?

Are the systems now in place to support these new organizational structures?

What's the timeframe do we think this will kind of be executed?

And then I guess, lastly within that, as we think about all the changes going on in the Company this year -- I think you said a year of transformation, Chris -- how should we -- how do we get comfortable with the kind of underlying organic revenue growth rate you have planned for mid-single-digits this year, especially since comps have been a little bit sluggish in North America?

Thank you.

Let's start on the reorganization.

So I think we've provided a little bit more color.

The six brand groups that we are talking about are one that's going to be focused on our luxury business, which will include the Ralph Lauren brand and the RRL brand, which Valerie Hermann will lead as the Brand President.

We will have a brand group focused on Polo.

We'll have a brand group focused on Denim & Supply.

We'll have a brand group focused on Lauren, Chaps and American Living as a group.

We will have a brand group that's focused on the Ralph Lauren Home business.

And finally, Club Monaco will be the sixth brand group.

And that's how we are organizing the brand groups.

Each of the brand groups will have a Brand President and a dedicated leadership team to run the business.

We believe that this is going to lead to simplification over time of many of the sub-brands in terms of how we go to market from a consumer standpoint, because we think that what this is going to allow us to do is focus our resources and our consumer communication more at the master brand level than at the sub-brands.

The only sub-brand that we have announced that we are merging at this point is the -- on the luxury side of the business with the Black Label and Purple Label and women's collection and Black Label business.

Michael Binetti, UBS.

Well, let me -- before we go to the next question, let me -- there were a couple of parts of Omar's question.

From a systems perspective, let me provide a little bit more color on that as well.

I think we feel very good about where we are from a systems standpoint, although there is still more work to do.

The SAP implementation that we've done is now complete with regard to our global manufacturing and supply chain system and complete in the North America order to cash for wholesale.

And what that has allowed us to do is have global visibility to our style count, our SKU count, and it's allowed us to get to a point where we now have global financial data by brand, which we've just been able to implement, which of course is one of the key enablers to moving to the global brands structure.

So I think there's more work to do as we move into the new model.

But I feel good about where we are and where we are headed from a systems standpoint.

And finally, from a transition timing standpoint, I think we expect to form the brand groups over the next month or two.

But of course, as we form the new brand groups, it will take them some time to come up to speed.

And then the first seasons that they will begin to impact because of our development cycle will be probably 12 to 18 months from now.

Michael Binetti, UBS.

Good morning.

First off, congrats to Bob, and good to have you on the call.

And then, Chris, thanks for all the detail on the investment buckets.

First off, I guess the first question would be if you could just help me clarify the guidance a little bit.

It looks like the revenue impact from FX improved by 100 basis points, but the implied operating margin dollars you talked about stayed the same.

I think that leaves the underlying operating margin a little lower than what you mentioned in February, and the Swiss dollar got a little better, I think.

So maybe you could just tell us about what changed from the February update.

And then, a little bit longer term on fiscal 2017 margins is a big focus for the stock recently.

As we talked, you seemed confident that fiscal 2017 would be the year when the investment buckets that we've talked about with you for a while now would start to lift off.

And as you add in the organizational changes that you talked about today and sharpen your strategy around that, are you comfortable at this point talking to us about how you see the long-term margin trajectory beyond the guidance you gave us for 2016 at this point?

Yes, so let me try to take those each in turn.

So the first question, on the update on the FX impact to fiscal 2016, I think when we gave our guidance in February, it was before we had finalized our budgets.

And we had given an estimate in terms of the foreign exchange impact to the top line and the bottom line.

As we finalized our budgets, we also updated our exposure model.

And so, the change in the expected revenue impact from 550 basis points on the top line to 450 was really due to a sharpening of our exposure model.

As we looked at the bottom-line impact, the bottom-line impact was in line with what we thought at the last time.

So, I think it was more a function of finalizing the budgets and updating the exposure model with regard to the change in -- the slight change in the FX guidance for fiscal 2016.

On the second question, in terms of what does it mean for fiscal 2017, I think that there's going to be a couple of different things happening in fiscal 2017, and it's premature for us to give guidance that far out.

But obviously, we would expect to see a full-year impact of the pricing action that we are taking, which would be a positive.

We would expect to see a full-year impact of the cost reductions that we are taking, which would be a positive.

And we would expect to see a ramp-up of the restructuring savings, which would be a positive.

And so all of those would lead to a better operating margin outlook in 2017.

On the negative side, we have hedged our FX exposure.

And so, as those hedges roll off, we will have a year-on-year hedge FX hurt continuing into fiscal 2017 from the portion of the business that was hedged in fiscal 2016.

Premature to talk about how those net against each other, but I think those are the underlying trends.

And I think to your question about sort of the infrastructure investments being at the highest level, I do expect that fiscal 2016 will likely be the highest level of investment on the infrastructure investments in total.

Kate McShane, Citi Research.

My question, Chris, is around higher prices, where you had mentioned that you are raising prices.

They sound fairly aggressive, in the mid- to high-single-digit range.

What's giving you the confidence of the pass-through of these prices?

And are you increasing the price of products across the board on all your products in the country, as you call that, or is it more selective?

Yes, so I think a couple of things.

We are increasing prices across the board on all of the products in the countries I called out.

But the percentage increase will be different by product.

So we are obviously looking at the pricing to hit key price points and so forth, but the numbers I gave you were sort of averages across the line in terms of the pricing actions that we are taking.

Too soon to tell how those pricing actions are going to play out, because obviously it's going to depend on how competitors respond as well in these markets.

But our view is that with the significant impact of foreign currency in these markets, all of the competitors that source product from similar countries should be seeing a similar transactional impact.

And what we're trying to do is price for transactional foreign exchange, but not for translational foreign exchange.

And that's how we came to the price increases that we are looking at here.

Lindsay Drucker Mann, Goldman Sachs.

I just wanted to get maybe some further detail on your US wholesale business, which, as you called out, was up double digits in the quarter.

As I look back, and I know that we don't get all the details, but it seemed like in Q1 through Q3 of fiscal 2014, your US wholesale sales may have been flat or down a little.

And then fourth quarter is obviously very strong, and we are looking for a deceleration in the first quarter of 2015.

Can you help us understand what the underlying sort of sellthrough trend has been for US wholesale and how much of the fourth-quarter benefit was a function of shipping timing versus maybe an acceleration in kind of run rate?

Thanks.

Sure.

I think the way to think about this is that the seasons that we operate in don't match up with our fiscal-quarter reporting periods.

And because of that, sometimes our seasonal flow of inventory from a shipment standpoint isn't really indicative of the underlying trend.

I think we've felt like, for the entire fiscal year, when you look at the fall season and the cruise holiday season and into the spring season, that we had plans that we're growing market share in the US wholesale business pretty consistently.

And sometimes that growth in market share, which has us growing a couple of points faster than the US wholesale industry, doesn't necessarily show up in terms of the shipment pattern because of the way the customer receipt plans fall within our fiscal quarters.

So our underlying view of the business continued to be very positive in terms of the market growth or the market share gains that we've experienced in that channel.

Just to add to Chris's comments, we track our market share very carefully in all of our distribution, and we continue to increase market share.

As Chris spoke to, we also look very carefully at how we are tracking against every key competitor, every key department store.

And as I said, we are very pleased with our results.

All of our core businesses have been quite strong, and we saw a nice acceleration within the spring season.

Many of the products that are smaller parts of our Company have started to gain nice acceleration.

Our footwear business, our accessory business, our Denim & Supply business, the dress business has been very strong, and of course, our core businesses continue as the backbone.

So we are seeing door growth.

We are seeing great sales growth, and we see that strengthening.

As I said, we are also very optimistic about our Polo women's business, which was new to us starting with last fall.

And we are seeing door growth there as well.

And then, of course, we are about to launch our new Polo Sport business, where there is tremendous enthusiasm about that opportunity, because that really puts us solidly into a new area of opportunity.

And we believe that with the credibility that we have in the athletic area with our relationship with the US Open, the Olympics, Wimbledon, etc., USGA, that we have a tremendous amount of credibility with the consumer that we've really never tapped into.

So this really gives us the opportunity to put our great foot forward in a new area of opportunity for the Company.

And of course, we are a couple of months away from that launch, which we are excited about.

Christian Buss, Credit Suisse.

Could you talk a little bit about responsibilities under the new management structure?

Who is responsible for the supply chain and back-office systems under the new architecture?

Sure.

So the supply chain and the back office will continue to be operated as they are today by our shared service group.

So we have a shared service group today that handles global manufacturing and supply chain, that handles finance, that handles HR, that handles real estate, that handles operational capabilities.

And that will continue, because we believe that those groups are better leveraged across the entire enterprise, and we don't intend to disrupt that.

What we're talking about in the new structure is really organizing a lot of the front-end parts of the organization, as we talked about, with design and merchandising and planning and creative and marketing, into dedicated brand groups so that we have a single global face to the consumer on a bi-brand basis.

Joan Payson, Barclays.

Just going back to North America and maybe focusing on the retail business as well, it sounded like the comps -- I think you said the Americas comp increased in constant currency, which I think was better than last quarter.

So maybe could talk a little bit about what changed this quarter, and also how we can think about the overall North American business combined on a go-forward basis.

Yes, we saw strong growth in the US business during the quarter, and I think it was a function of several things.

I think we talked about the wholesale business having very strong shipment growth.

If you looked at the retail business, though, the retail business on a constant-currency basis also improved.

And I think that the outlet channel in the US comp improved versus what we were seeing previously, and that was both a function of traffic trends getting a little bit better than what we saw in the third quarter, as well as improvement in conversion rate that we drove during the quarter in the outlet channel.

We also saw continued a very strong comp-store growth in our e-commerce business that was in the high double digits.

The one channel that was under a little bit of pressure during the quarter was the full-price retail stores, and that was really a function of the slowdown in international tourist traffic, as we talked about, primarily the Russian, Middle East and Brazilian consumers which were impacted.

But overall, an improvement in comp-store sales trends in the Americas, as well as in the wholesale shipment business.

Barbara Wyckoff, CLSA.

Can you talk about how long SAP in Europe will take to be fully implemented?

And then can we assume that Asia and the rest of the world will be an FY 2017 event?

And then on the $100 million in savings, FY 2016 versus 2017, you talked about most of it being in 2017.

Can we assume that 25% to 30% will be in the second half of 2016 and the rest in FY 2017, or is there another ratio we should be thinking about?

Sure.

So on the savings piece, I think 25% to 30% being in fiscal 2016 is probably a reasonable estimate, and obviously a much more significant portion being in fiscal 2017.

So, I think that's a reasonable estimate.

On SAP in Europe, we are starting the program, or we've started the program, a few months ago.

We expect to complete the SAP implementation over the next 12 to 18 months in Europe, and it's going to be in two phases.

I think we are doing the HR implementation first, and then we'll do in the second phase the financials and the order-to-cash part of the process in the wholesale business there.

We don't intend to start the Asia SAP look until after we complete Europe, and so we don't have yet a timeline for when Asia will happen.

But certainly we would intend for it to be after the European implementation.

It may not be in fiscal 2017.

It could be in 2018 or 2019; too soon for us to have that in our planning horizon at this point.

Erinn Murphy, Piper Jaffray.

Could you speak a little bit more about what you're seeing broadly in Europe, both from the fourth quarter and then how you are planning that in fiscal 2016?

I recognize there's a lot of flux in global tourism, but would love any kind of color about local demand versus kind of tourist demand in that region.

Yes, so we were encouraged by what we saw in the fourth quarter.

We continued to drive mid-single-digit constant-currency revenue growth trends, both in the wholesale business and in the retail business, during the quarter.

I think we continue to see the trends being the strongest in northern Europe, both the UK and Scandinavia.

We see Southern Europe, importantly, stabilizing and beginning to get back to a period where we think we can grow from.

And I think Central Europe, France and others, have been a little bit more under pressure.

The biggest impact in Europe that we've seen is the traffic drop from the Russian and Middle Eastern tourists.

And really, the Russian tourist has dropped off more precipitously than the Middle Eastern tourist during that period.

But we continue to see strong influx of Chinese tourists into the region.

And so that's sort of what we are seeing.

I think given our penetration in Europe, we continue to believe that Europe will be a growth market for us for some time to come.

Jay Sole, Morgan Stanley.

Can you talk about, as you went through the budget process this past quarter, what might have changed, and how that could have influenced or impacted the EBIT margin guidance one way or the other?

And then just my second question is on -- with the new operating structure, you mentioned it will help clarify the brand presentation.

Can you give an example of how maybe that brand presentation isn't as clear as you would like it to be, and how that might change, and how that could impact how the consumer would use the brand, and how that might impact their willingness to buy the product?

Okay.

So as we finalized the budget process, I think our view is that the FX impact came in virtually pretty close to in line with what we thought when we had done the initial estimates in February.

So our view on the fiscal-year guidance is that it really is not much changed from what we thought we were going to see in February.

We are seeing the same constant-currency revenue growth, and we are seeing the same underlying operating margin trend that, from the continuing operations, the same investment in the infrastructure and the same operating income impact from foreign exchange.

So we viewed it as pretty close to what we thought in February as the budget process finalized.

So there isn't anything, really, to call out there of significance in terms of difference.

On the --

And on the product presentation, the brand presentation, around the world, what we are really looking at and what we are really focused on is, by narrowing our SKU presentation that we offer through every channel and region, what we'll be able to do is, through that narrowing and through that focus, be able to represent the brand in the same way around the world.

Today, because of the SKU proliferation and the style proliferation that we have, what happens is we actually have less than 10% of common styles that are represented in our presentations around the world.

And what we want to do is have that closer to 60% to 70%, so that the customer, which has the worldview today between how they are traveling and where they are shopping and the online experience, we want that to be the same experience.

And so that's what we are really focused on.

And we believe that that will allow us to not only present our product in a clearer way, but also be able to represent it in marketing in a much clearer way and in a much more focused presentation.

And so that's really what we feel the great benefit will be in terms of that brand presentation.

Matthew Boss, JPMorgan.

Thanks for taking the question.

I was just hoping you could give us an update on your accessories business, how it's doing.

Do you continue to expect this business to grow at a faster rate than the balance, and maybe some of the initiatives you have in this category?

Thank you.

Sure.

So accessories remains an area that we expect to grow faster than the balance of the business.

We've been growing accessories consistently faster than the balance of the business, and it has been increasing as a penetration of the total Company's revenue.

I think there is a number of things that we are trying to do in the accessories space to try to drive that.

Notably, during the past few months, we launched the drawstring bag, as Jackie talked about, under the Ricky franchise in the luxury part of the accessories business, which is off to a very strong start.

I think the other thing that we've been working on is developing and launching, as part of the women's Polo business, a more significant accessories offering under the women's Polo line, which we are very excited about and is coming in the not-too-distant future.

And then I think we continue to be encouraged by the strong results we've seen in the Lauren accessories business.

And so I think we've got a multitiered strategy to go after the accessories business that I think we are confident will allow us to grow that business at an accelerated pace for the foreseeable future.

All right.

Well, thank you very much for joining us on the call today.

I think we are excited about the direction that we are headed.

It is going to be a year of transformation for us.

And we look forward to talking more with each of you about it over the next few months.

Thanks very much.

Ladies and gentlemen, that does conclude your conference for today.

Thank you for your participation.

You may now disconnect.