Polo Ralph Lauren Reports Fourth Quarter and Fiscal Year 2005 Results; Company Confirms EPS Outlook for Fiscal Year 2006 in Range of $2.75 to $2.85

Business Wire, June 10, 2005

NEW YORK -- Polo Ralph Lauren Corporation (NYSE: RL) today reported net income of $23.4 million, or $0.22 per diluted share, for the fourth quarter of Fiscal 2005 compared to net income of $76.4 million, or $0.75 per diluted share, for the fourth quarter of Fiscal 2004. For Fiscal Year 2005, net income was $190.4 million, or $1.83 per diluted share, compared to net income of $169.2 million, or $1.68 per diluted share, for Fiscal Year 2004. The Fiscal Year 2004 results presented above have been restated to reflect the accounting for leases as discussed below in greater detail.

Adjusted net income was $85.1 million, or $0.81 per diluted share, for the fourth quarter of Fiscal 2005 compared to $80.4 million, or $0.79 per diluted share, for the fourth quarter of Fiscal 2004. Adjusted net income was $257.2 million, or $2.47 per diluted share, for Fiscal Year 2005 compared to $184.7 million, or $1.83 per diluted share, for Fiscal Year 2004. Adjusted results exclude a litigation reserve, a reserve associated with alleged breach of the company's retail computer systems, the foreign currency effect of certain transactions involving our European operations, an adjustment in accounting for leases, the results of Ralph Lauren Media, and restructuring charges.

The Company reports all financial results in accordance with U.S. Generally Accepted Accounting Principles (GAAP), but management believes that the supplemental presentation of results adjusted to exclude these items provides investors with useful information regarding the Company's core business results. The Company does not suggest that investors should consider adjusted results in isolation from or as a substitute for financial information prepared in accordance with GAAP. For a full analysis of the adjustments, please refer to the reconciliation tables of GAAP results to adjusted results.

"Our results for Fiscal Year 2005 underscore the strength of our unique business, which continues to deliver strong growth and profitability," said Ralph Lauren, Chairman and Chief Executive Officer. "We are successful because we remain consistent to our vision. Our company has never been stronger and we continue to be a leader across all products, regions and customer segments."

"We executed well strategically and financially this year," said Roger Farah, President and Chief Operating Officer. "Our company focus continues to be on generating strong operating cash flow by being in control of the growth of our brands and by fine tuning our global operations."

Fourth Quarter and Full Year Fiscal 2005 Income Statement Review

Net Revenues

Net revenues for the fourth quarter increased 10.2% to $902.2 million compared to $818.8 million in the fourth quarter last year. Our wholesale revenues were $543.0 million, up 10.0% over last year, driven by the inclusion of childrenswear in our wholesale segment and increases in Europe and our womenswear brands. Wholesale revenues also reflect a decrease in our menswear as we continue to strategically reposition the Polo brand into more appropriate distribution channels and reduce sales into the secondary market. Based on a 13-week fourth quarter in Fiscal 2005, reported retail sales grew 12.2% to $291.5 million compared to $259.9 million in the 14-week fourth quarter last year, with comparable store sales down 4.2%. We believe it is more relevant to discuss comparable store sales excluding last year's 14th week and on that basis comparable store sales increased 4.1% in the quarter. Licensing revenues increased 3.5% reflecting the positive performance of our men's Chaps line domestically and strength in our international licensing, which more than offset the absence of royalty income associated with the previously licensed childrenswear line.

Net revenues for the full year increased 24.7% to $3.305 billion compared to $2.650 billion last year. Our wholesale revenues were $1.712 billion, up 41.4% over last year, driven by our womenswear brands, childrenswear and increases in Europe. Wholesale revenues also reflect a decrease in our menswear as we continue to strategically reposition the Polo brand into more appropriate distribution channels and reduce sales into the secondary market. Based on a 52-week year in Fiscal 2005, reported retail sales grew 15.2% to $1.349 billion compared to $1.170 billion in the 53-week year last year, with comparable store sales up 4.4%. We believe it is more relevant to discuss comparable store sales excluding last year's additional week and on that basis comparable store sales increased 6.3% in Fiscal 2005. Licensing revenues decreased 9.0% reflecting the absence of the Lauren and childrenswear lines, partially offset by the positive performance of our Chaps for men line in the United States and strength in our international licensing.

Gross Profit

For the fourth quarter of Fiscal 2005, gross profit was $476.9 million, an increase of 22%, compared to $391.0 million in the fourth quarter of Fiscal 2004. The increased gross profit was generated primarily by the addition of childrenswear and the inclusion of Ralph Lauren Media, as well as strong increases in Europe. Gross profit also reflects improved performance in our Ralph Lauren retail stores, both in the U.S. and Europe. Gross margin improved 510 basis points in the fourth quarter to 52.9% of revenues compared to 47.8% last year, reflecting improvements in both our wholesale and retail segments.