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Text: 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.
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 challenge areas of distribution, particularly in North America.
Within wholesale, we focused our brick-and-mortar presence on our healthier 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, digital 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 spirit of togetherness, optimism and love.
And we believe this is the kind of luxury that people are creating in this moment.
The breadth of our lifestyle portfolio means, we have the ability to continue meeting consumers desires through comfort and timeless elegance [Phonetic], while also delivering on their increasing appetite to reintegrate elevated Dress Your 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 Experiences, 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 Chen's CLOT 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 through 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 roll-out of connected retail programs to enable our consumers to interact with our brands in new and more personal venues.
Among the many new capabilities we added this year, highlights included digital catalogs, Buy Online-Pick Up 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-teens 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 a 100% by end of fiscal '22.
These not only enabled 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 stride 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 parts of Ralph Lauren for over two decades now.
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've taken as part of our strategic realignment plan, we continue to progress on our brand elevation journey as we deliver Ralph's vision in today's dynamic environment, creating values 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, round tables and learning opportunities for our organization.
Within sustainability, we launched our circularity strategy, as well as Color on Demand, the revolutionary platform aimed at delivering the world's first scalable zero waste water 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 sectors' 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 worked 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 models and more streamlined cost structure, more resilient supply chain and an iconic brand well positioned to capitalize on the relax with 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 Bennack, while Frank will continue to serve our Board.
With the extraordinary efforts of our teams around the world, we closed out the year significantly stronger than we came into it, in terms of both our financial performance as well as our key strategic initiatives.
Our fourth quarter and full year results reflected increased agility across our organization as macro conditions and consumer behaviors evolved, a significant leap forward on our elevation journey as we repositioned our distribution and accelerated our pricing gains, our digital transformation from how we serve our consumers to the way we work and driving digital margin accretion, and a better aligned operational and expense structure overall.
This year, we delivered the highest gross margin in the Company's history.
Even excluding the one-time mix benefits of COVID, our underlying gross margin for fiscal '21 was about 64.2%.
We also strengthened our balance sheet through this year of uncertainty, and are pleased to announce the reinstatement of our dividend in the first quarter of fiscal '22.
And as Patrice mentioned, we announced the final stage of our strategic realignment plan with the sale of Club Monaco, contributing about 40 basis points to 50 basis points to operating margins this year.
These actions set the right foundation and strategic focus for our teams as we enter fiscal '22.
Moving on to our fourth quarter performance.
Our business returned to growth in the fourth quarter.
Total revenues increased 1% compared to an 18% decline in the third quarter.
All regions improved sequentially with positive growth in Asia and Europe on a reported basis, despite continued COVID-related disruptions.
North America also returned to positive comps this quarter, driven by significant digital acceleration.
Global wholesale revenues increased 1% and direct-to-consumer revenues were up 4%.
Total digital ecosystem sales accelerated to more than 60% with double-digit growth in every region, up from mid-single-digits in the first nine months of the year.
And we delivered digital margins that were accretive within every region, and to our total Company rate, expanding more than a 1,000 basis points in the fourth quarter and full year.
We achieved this outstanding result through a combination of higher quality of sales and operating expense leverage.
This was an important step as we work toward our mid-teens Company operating margin target, and continue to drive digital expansion in the years to come.
Total Company adjusted gross margin was 62.9% in the fourth quarter, up 380 basis points to last year.
Gross margin expansion was primarily driven by strong AUR growth, along with favorable geographic and channel mix shifts.
Product costs were also lower as we lapped last year's tariff impacts in North America, partially offset by higher freight costs this year.
Around 80 basis points of fourth quarter and 150 basis points of full year gross margin expansion was driven by unusual mix shifts due to COVID.
Fourth quarter AUR growth of 30% represented our 16th consecutive quarter of AUR gains, as we continue on our brand elevation journey.
Underlying AUR growth of about 20% was driven by a combination of reduced promotional activity, improved full-price selling on our new Spring collections and strategic price increases.
Looking ahead, we remain confident in our long-term target of low-to-mid single-digit AUR growth, supported by the same multi-pronged strategy of product elevation, acquisition of new full-priced consumers and favorable channel and geographic mix, while also ramping up our targeting and personalization efforts.
Operating expenses declined 4% to last year, driven by reductions in compensation, rent and other expenses as we started to realize the early benefits of our fiscal '21 restructuring.
Adjusted operating margins for the fourth quarter was 3.4%, up 680 basis points to last year.
Marketing in the fourth quarter accelerated to 44% growth as we reactivated in-person activities, continue to drive high-impact digital campaigns and personalization, and shifted certain investments from the first three quarters of the year due to COVID lockdowns.
For the full year, marketing increased to 6% of sales, up from 4.5% the prior year.
With sales growth expected to accelerate in fiscal '22, we expect marketing to remain at an elevated level to support our long-term brand building, digital activations and key events like the Olympics, US Open and Wimbledon.
Moving on to segment performance, starting with North America.
Fourth quarter revenue decreased 10% to last year, but continued to improve on a sequential basis, including an earlier-than-expected return to positive retail comps, up 3%.
Comps in our owned digital commerce business were up 25% this quarter, accelerating from 9% in Q3.
Underlying sales to domestic consumers accelerated to over 50% up, from high-teens in Q3, while the sales to international daigou consumers declined double digits to last year, as planned.
We reduced our sitewide promotions by 50 days, compared to the prior year, as we continue to elevate our digital experience driving AUR up more than 40% and gross margins up more than 700 basis points to last year in the channel.
At the same time, we continue to invest in new consumer acquisition, up 78% in the fourth quarter and 45% for the full year.
These new consumers are transacting at higher gross margin rates and larger basket sizes, and represent a higher penetration of consumers under 35.
Stronger sales of new Spring '21 product offering, along with continued investments in connected retailing helped deliver a significant increase in our full-price sales this quarter, which grew more than a 150% to last year.
Brick-and-mortar comps improved sequentially to down 2% in the quarter, with meaningful improvements in AUR, basket size and conversion.
Traffic was down 23%, but inflected to positive growth in the last three weeks of March as we started to lap COVID shutdowns, while foreign tourist sales were down about 75%.
In North America wholesale, fourth quarter revenue declined 22%, as we continue to manage our sell-in carefully through the Spring season.
However, we were encouraged by positive sell-out performance, along with double-digit AUR increases to both last year and LLY.
Our inventories in the marketplace were clean and well positioned at year-end, declining nearly 30% at North America wholesale.
And we expect a meaningful turnaround in our sell-in trends as we enter Q1.
Our sales to off-price were down double-digits as planned, reducing our penetration to the channel by about 450 basis points for the full year.
Overall, we completed our distribution reset plans in North America this year across digital, department stores and off-price, enabling us to enter fiscal '22 with a healthier, more elevated brand positioning.
We ended fiscal 2021 with North America brick-and-mortar full price wholesale penetration at about 10% of total Company revenues, down from mid-teens last year, as we continue to accelerate our wholesale.com, direct-to-consumer and international expansion.
Looking ahead, we are encouraged by the positive momentum in our direct-to-consumer comps, including digital acceleration and quality wholesale improvement.
Moving on to Europe.
Fourth quarter revenue increased 5% on a reported basis, and was down 4% in constant currency.
Europe retail comps were down 45%, with 65% decline in brick-and-mortar stores, partially offset by continued acceleration in our own digital commerce, up 79%.
More than half our stores were fully closed in the quarter, similar to last spring.
Nevertheless, we were able to drive significantly better performance compared to our Q1 lockdown, as strong momentum across digital help to offset brick-and-mortar headwinds.
About 80% of our stores in the region are now fully open versus a little over 50% at the end of Q4.
Strong momentum in our own digital commerce comps was driven by new consumer acquisition and personalization, up 75%.
Europe wholesale revenue increased 29% in constant currency.
COVID-related challenges and brick-and-mortar wholesale were more than offset by stronger performance in our wholesale digital accounts.
This quarter's wholesale performance significantly exceeded our expectations, despite ongoing COVID headwinds, underscoring both the strength of our partnerships as well as our successful pivot to digital in the market.
And while COVID restrictions continue to pressure many of our key European markets into fiscal '22, we are encouraged that the UK, our largest market in the region emerge from lockdowns in mid-April and is showing early signs of pent-up demand.
Underlying macro indicators are also encouraging with an improving pace of vaccination roll-out, high levels of consumer savings, and consumer purchases shifting back toward our pre-COVID categories, this spring.
Revenue increased 35% on a reported basis, and 28% in constant currency in the fourth quarter.
Our Asian retail comps increased 23% with brick-and-mortar stores up 21%, and digital up, 59%.
All of our key markets reported positive growth, led by the Chinese mainland, which was up 145% in constant currency and more than 70% to LLY.
Korea also accelerated to 50% growth.
Japan, our largest market in the region, grew mid-single digits despite COVID restrictions in the first half of the quarter.
We are encouraged that our digital businesses continue to accelerate even as brick-and-mortar trends have strengthened.
This was supported by a successful Lunar New Year campaign with sales up 75% to LLY.
Strong momentum in our new digital flagships in China, Japan and Hong Kong, and powerful partnerships like Kakao and Tmall's Luxury Pavilion, where we became the Number 1 menswear brand this quarter.
Looking ahead, we are watching Japan carefully, due to a new state of emergency imposed in April, which is included in our Q1 guidance.
Nevertheless, we are encouraged that the rest of our key markets in Asia have returned to a more normalized growth trajectory.
And we still see significant long-term growth opportunities in the region, and particularly in China, which now represents about 6% of total Company revenues, nearly double the penetration from a year ago.
Moving on to the balance sheet.
We ended the year with $2.8 billion in cash and investments, and $1.6 billion in total debt, which compares to $2.1 billion in cash and investments and $1.2 billion in total debt last year.
Net inventory increased 3% to support future growth, compared to depressed levels of down 10% at the end of last year as COVID hit.
Looking ahead, our outlook is based on our best assessment of the current macro environment, which includes ongoing COVID-related disruptions to the global supply chain, as well as key markets still operating under government restrictions, primarily in Europe and Japan.
For fiscal '22, we expect constant currency revenues to increase approximately 20% to 25% to last year on a 52-week comparable basis.
We expect double-digit growth in each region, led by Europe and North America, due to the significant COVID-related closures in the prior year.
We estimate the 53rd week will contribute an additional 140 basis points to this year's revenue growth.
We expect gross margins to contract 40 basis points to 60 basis points as we lap last year's unusual geographic and channel mix benefits due to COVID closures.
This implies about a 100 basis point expansion to last year's underlying gross margin ex-COVID.
Gross margins should benefit from product mix, reduced costs following organization reshaping, as well as further improvements in pricing.
We expect these drivers to be offset by duties, significantly higher freight costs, and global supply chain pressures, notably in the first quarter and consistent with the broader industry.
Overall, we are watching a highly volatile and inflationary input cost environment into fiscal '22.
SG&A should grow at a more moderate rate than revenues.
Inflation, along with continued investments in marketing, new stores and digital will be mitigated by continued expense discipline and restructuring savings.
As a result, we expect operating margins of about 11%, expanding approximately 620 basis points to last year, and exceeding our pre-pandemic levels.
As previously discussed, we deliberately exited or reduced several areas of our business in fiscal '21 to accelerate our brand elevation strategy.
These include, transitioning Chaps from an owned to a fully licensed model, exiting more than 200 US department store doors, significantly reducing our off-price business, and shrinking our exposure to international daigou sales on our ralphlauren.com site in North America.
Combined with the sale of Club Monaco, expected to close in the first quarter, these strategic actions represent a little more than $700 million in revenues compared to fiscal '20.
This implies expected fiscal '22 revenues that are roughly flat to pre-pandemic levels on an underlying basis.
For the first quarter, which still includes the operational results of Club Monaco, we expect revenues to increase approximately 140% to 150% in constant currency.
We expect gross margins to decline approximately 575 basis points, as we lap last year's one-time COVID mix benefits due to store closures and from higher freight headwinds in the quarter.
We expect operating margin of 7% to 7.5% with gross margin contraction more than offset by significant operating expense leverage.
We expect to end fiscal '22 with inventories up 12% with higher growth in the first half of the year, as we continue to build back into demand.
We expect capital expenditures of approximately $250 million to $275 million, in line with our pre-pandemic targets, as we continue to focus on building out our key city ecosystems and digital infrastructure.
In closing, in the midst of an unprecedented year, our teams showed tremendous dedication and agility as we fundamentally strengthened our business.
Led by Ralph's enduring vision, we are leveraging the timelessness and authenticity of our core brands, while taking on learnings to evolve with the changing needs of the consumer across our product, platforms and new ways of working.
And while we are still navigating a highly dynamic environment, we are confident we have the right foundation to drive sustainable growth over the coming year and beyond.

user
north america revenue in q4 decreased 10% to $569 million.
for fiscal 2022, expects constant currency revenues to increase approximately 20% to 25% to last year on a 52-week comparable basis.
europe revenue in q4 increased 5% to $370 million.
asia revenue in q4 increased 35% to $289 million on a reported basis.
for q1, revenues are expected to increase approximately 140% to 150% in constant currency to last year.
planning capital expenditures for fiscal 2022 of approximately $250 million to $275 million.
inventory at end of fiscal 2021 was $759 million, up 3%.
for the first quarter, revenues are expected to increase approximately 140% to 150% in constant currency to last year.
qtrly owned digital sales increasing 52% to last year, total digital ecosystem sales up more than 60%.
joel fleishman will not stand for reelection for his term set to expire at end of july at 2021 annual meeting.
ralph lauren - hubert joly appointed to serve as board’s new lead independent director replacing frank bennack.

assistant