Ralph Lauren Corporation (RL) Earnings Call Transcript & Summary

Good morning and welcome to the 2020 Annual Meeting of Stockholders for Ralph Lauren Corporation. I would now like to turn the call over to Ralph Lauren, Executive Chairman. Please go ahead.

Good morning, everyone. I'm Ralph Lauren, the Executive Chairman of Ralph Lauren Corporation. I'm pleased to welcome all of you to our 2020 Annual Meeting of Stockholders, and I call the meeting to order. I'm here today with the director nominees of the corporation, including Angela Ahrendts; John Alchin; Frank Bennack, Jr.; Joel Fleishman; Michael George; Hubert Joly; Linda Kozlowski; David Lauren; Patrice Louvet; Judith McHale; and Darren Walker. We are happy to gather virtually today. This is our second meeting using a virtual format, one that we believe supports shareholder inclusion as well as our focus on leading with digital and sustainability. And thank you for joining us. As you know, not only am I Executive Chairman of this company, but like you, I'm a shareholder. While I'm happy with our performance over the last fiscal year, I would be remiss not to acknowledge the impact COVID-19 has had on the world, our industry and our business. For more than 50 years, through many crises and challenges, we have embraced the idea of timelessness, focusing on what less. It has defined not only our products but our business and our culture. It has helped guide our actions in both the best and the most challenging times. You will shortly hear from our President and CEO, Patrice Louvet, who will share more about our strategy and momentum. But first, let me turn the floor over to Avery Fischer, our General Counsel, who will lead us through the business items on our agenda.

Thank you, Mr. Chairman, and good morning, everyone. My name is Avery Fischer, and I am the Executive Vice President, General Counsel and Secretary of the corporation. Thank you all for joining us today for our second virtual stockholder meeting, which allows for all stockholders to not only hear the meeting regardless of location but to vote and ask questions online, enhancing access and participation. In addition to Mr. Ralph Lauren and our directors, participating today are Patrice Louvet, President and CEO; and Jane Nielsen, COO and CFO; who will be available to answer any of your questions at the appropriate time later in the meeting. Also present are representatives from Broadridge, who are conducting our virtual stockholder meeting, including Tracy Oats, who is acting as inspector of elections, and representatives from Ernst & Young LLP, the corporation's independent registered public accounting firm. The agenda and the rules of conduct that govern this meeting are available on the annual meeting website as disclosed in our 2020 proxy statement, notice of Internet availability of proxy materials and proxy card. We will conduct this meeting in strict accordance with the agenda and rules, and only business matters appropriate for action by stockholders will be considered at this meeting. [Operator Instructions] If there are any matters of individual concern or if a question was not answered, please contact our Investor Relations team at (212) 813-7868. For more information, please see the rules of conduct. Note that this meeting is being recorded, and an audio replay with a list of questions received and the company's answers to those questions will be posted on our Investor Relations website as soon as practicable after our meeting. Please see the agenda and rules of conduct for more information. For technical assistance during this meeting, please contact Broadridge at (800) 586-1548 if you are in the U.S. or at (303) 562-9288 if you are outside of the U.S. Please remember that statements made during this meeting may contain forward-looking statements which are subject to risks and uncertainties. To find out more about the factors that could cause actual results to differ from management's expectations, please see the agenda for today's meeting and our most recent 10-Q and 10-K filings on our Investor Relations website or on the SEC's website. The first order of business is the presentation of Broadridge's affidavit of mailing, which certifies that notice of the meeting was properly given to stockholders beginning on June 19, 2020, based on a record date of June 1, 2020. The affidavit and a list of all the stockholders entitled to vote at the meeting, certified by Computershare, our transfer agent, are available for inspection on our annual meeting website. The affidavit of mailing and stockholders list will be filed with the records of the corporation. I hereby certify that the holders of more than 1/3 of all of the outstanding shares of stock entitled to vote at this meeting are participating via the annual meeting's website or by proxy and that a quorum has been met in accordance with our bylaws, and the meeting is able to duly proceed. The final number of shares voted today will be available on a Form 8-K filed within 4 business days of this meeting. We will now review the items set forth in the proxy statement. [Operator Instructions] If you have any other questions, these will be addressed later in the meeting. The polls are open for voting online during the meeting. If you've already voted by proxy, you do not need to vote now unless you wish to change your vote. The polls will be closed after we have announced the items to be voted upon and address any related questions. The first item on the order of business is the election of directors. At the direction of the Board of Directors, I hereby place in nomination the following individuals, each as set forth in the proxy statement, to hold office until the next annual meeting or until his or her successor has been elected and qualified: Frank Bennack, Jr.; Michael George; and Hubert Joly for election by the holders of Class A common stock of the corporation; Angela Ahrendts; John Alchin; Joel Fleishman; Linda Findley Kozlowski; Ralph Lauren; David Lauren; Patrice Louvet; Judith McHale; and Darren Walker for election by the holders of Class B common stock of the corporation. There being no other nominations made in accordance with the bylaws, I hereby declare the nominations for directors closed. The second item is the ratification of the corporation's independent registered public accounting firm. The Audit Committee of the Board of Directors has appointed Ernst & Young LLP as the corporation's independent registered public accounting firm for our fiscal year ending on March 27, 2021, subject to ratification of the appointment by the stockholders at this meeting. Representatives of Ernst & Young have joined us today and are available to answer any questions that you may have. The third and last proposal is the adoption of a say-on-pay advisory resolution by the stockholders. In our proxy statement, we have described to you our compensation philosophy and practices and outlined key takeaways impacting executive compensation for fiscal 2020 that demonstrate alignment of the intent of our executives with the creation of value and strong returns to stockholders. The Board of Directors recommends a vote for all of the proposals described. If you have not yet voted or if you wish to change your vote, please vote online now. [Operator Instructions] [Voting]

Since we received no proposal-related questions, the polls are now closed. I ask that the inspector of elections tally all votes received. The inspector of elections has certified that the preliminary voting tally has now been completed. The holders of a plurality of the shares of Class A common stock voting have voted in favor of the election of each of the nominees for Class A directors, and the holders of all of the outstanding shares of Class B common stock have voted in favor of the election of each of the nominees for Class B directors. The appointment of Ernst & Young as the independent registered public accounting firm of the corporation for fiscal year ending March 27, 2020, was ratified by a majority vote of stockholders. The compensation of our named executive officers and our compensation philosophy, policies and practices were approved on an advisory basis by a majority vote of stockholders. The final results will be available on a Form 8-K filed within 4 business days of the meeting. We have now completed the business portion of the meeting, and I declare the business portion adjourned. I will now turn it over to Patrice Louvet, our President and CEO.

Thank you, Avery. Good morning, everyone, and thank you for joining us today for our second annual virtual shareholders' meeting. Through this time of change and action, whether related to the coronavirus or the call to systematically address racial injustice, we remain grounded by our purpose to inspire the dream of a better life through authenticity and timeless style. Staying in touch with our purpose, remaining true to who we are while evolving to meet our stakeholders' expectations in the changing world around us is what will enable us to deliver long-term sustainable growth and value creation for all of our stakeholders: our employees, our customers, our extended partners and suppliers, the communities we operate in and our shareholders. Even with the dynamic context around us, we are confident that the 5 strategic priorities in our Next Great Chapter plan remain relevant. They include: one, winning over a new generation of consumers; two, energizing our core products and building high-value underdeveloped categories; three, driving targeted expansion; four, leading with digital; and five, operating with discipline to fuel growth. Since launching our Next Great Chapter strategy 2 years ago, we have done the foundational work to put the consumer at the center of everything we do, to elevate our brands and balance growth and productivity. We believe that these principles, in addition to the strength of our teams and our balance sheet, will give us the opportunity to emerge from this period a more agile and effective organization well positioned to win in the coming years. We're also taking concrete action, which Ralph and I outlined in a public letter on June 10, to address systemic racial injustice in our company, in how we show up externally and in the communities we operate in. This is critical work that he and I are directly involved with. As we drive progress across our business and culture, we are privileged to have one of the greatest assets of all: the strength of our timeless global brand that is rooted in values that are more relevant than ever. These are values like togetherness, respect for individuality, authenticity, hope and optimism that have been at the heart of who we are since Ralph started our company more than 50 years ago. And with that, I'll turn it over to Corinna Van Der Ghinst, Vice President of Investor Relations, so we can answer your questions.

Thanks, Patrice. Good morning, ladies and gentlemen. We will now conduct the question-and-answer. The first question for Patrice is, what is being done to ensure commitment to diversity in leadership? And we've also combined it with another question through the portal, how does the company think about the challenge of diversity generally across the company and particularly racial diversity at the Board level. Patrice?

Thank you, Cory. Diversity and inclusion is a core part of who we are. It is embedded in our brand and how we approach recruiting, selection, talent development, mentorship, sponsorship and advocacy. We're proud of our progress to date with clearly more work to be done. Some of our recent achievements include reaching our target of gender parity at the VP level and above, more than 2 years ahead of plan. Parity.org also recently named us among the best companies for women to advance. And we received a 100% score on the 2020 Human Rights Campaign Corporate Equality index, earning the designation of Best Place to Work for LGBTQ Equality. To support this continued work, we've structured programs to create an environment where we listen, mobilize and act on the feedback and needs of all of our underrepresented communities. We're using this time to take meaningful action to ensure our values are reflected in every person's individual experience at our company and with our brands. Some of the actions we've taken over the past couple of months include: one, we committed to elevate more Black and African American talent into our leadership ranks. We will interview 2 underrepresented candidates for every open leadership role, and we have committed to ensuring that people of color represent at least 20% of our global leadership team by 2023. Two, we're ensuring our Black and African American leaders and people of color are all provided with dedicated mentors. And we've created a Black and African American advisory group to help develop and execute our programs internally. And three, we're instituting a set of diversity expectations for our partners and our vendors around the world to hold our network accountable as well. Now as far as the specific Board question is concerned, in 2018, the Board expanded its size to 14 directors from originally 11 by adding 3 new independent directors and increasing the diversity of skills, background and experiences on the Board to benefit the company. This year, 2 of our long-tenured directors will not be standing for reelection, and we are nominating a new independent director who will bring extensive expertise in citizenship and sustainability to our Board for a total of 12 directors.

Thank you. The next question, which I'll pass to Jane Nielsen, COO and CFO, is, why is the company losing money?